How To Manage Your Finances As A Freelancer: 3 Smart Tips
It’s challenging to manage your money life as a full-time freelancer. I’ve 3 tips to make things easier.
I’m a newbie freelancer and am in connection with many freelancing friends who are doing the thing full-time. They are earning decent, but since I know them personally, I can sense one thing: managing your monthly expenses and making investments with your freelancing work is pretty hard (even with regular work).
Most of the time, freelancers work on short-term contracts and are paid work/hour basis. This messes with their financial goals and investment plans.
Don’t worry; I’m about to reveal three smart tips to make managing your freelancing income easier. Let’s get right into it:
Tip #1: Pay Attention To Your Bills. They Are Consistent!
Predicting your monthly, quarterly and annual expenses is very important as it can help you figure out how much you should earn (considering that you can choose how many gigs you want to work in a month) to save the amount you want.
This sounds counterintuitive because you must have seen your parents saving the amount left out after meeting expenses. And that’s because they did a full-time job and not freelancing.
As a freelancer, this should be your budgeting mantra:
- Calculate your expenses and savings goal
- This will give you an estimate of the income you need to earn to cover your present and future needs
- Now you can start finding gigs and assignments to meet your income estimate
With this backward process, you’ll stay on top of your expenses and do as much work as your savings goal asks you to.
Read more about budgeting here 👇
Tip #2: An Emergency Fund Is A Must
This tip applies to every earning individual, but for freelancers: it’s a MUST.
There will be months when you struggle to find enough work despite relevant skills or experience. It can be because of a recession (we are already in one!) someone spreading lies about you hurting your reputation, low demand for the skill you offer (AI can do everything) or sheer bad luck.
So in order to save yourself from a dry period, you should create an emergency fund for a minimum of two months of your expenses. You have already calculated your expenses in the first tip, so this should be easy for you.
💡Bonus: Practice mindfulness. A clean mind doesn’t crave unnecessary expenses :)
Tip #3: Plan For Your Retirement
Yes, making a retirement plan is possible, even as a freelancer is possible. And the best retirement plan is to start your own business and use your skills for your own good.
If you are a freelance writer (like me), you can start your own blog in the niche you are an expert in and monetize it via ads or affiliate links. The same goes for any skill you offer at your work.
I know it’s difficult to work for your clients and your business simultaneously, but it can pay you well financially. Even if you fail, you will know all the facets of the skills you offer, not just what your past clients needed.
If you run your blog, you will learn about keyword research, content optimization, promotion and many other things which you may not have known when you worked as a writer.
You’ll gain more expertise in your freelancing skills.
You can also start an Individual Retirement Account (IRA) and contribute upto $5.5K annually for a monthly pension. The limit increases to $6.5K/year if you start from age 50. The money you put in an IRA is tax-free, so this is a clever way to plan your taxes (present) and retirement (future) at once.
So here you have it, 3 smart personal finance tips for freelancers.
Now, I would like to hear from you.
Which tip will you try out first? Is it creating an emergency fund or starting an IRA?
Let me know by leaving a comment below right now! Follow me to know about crucial personal finance lessons schools failed to teach you.
Have a good day, readers!
