Freelance work has many perks. No wonder the freelance workforce is faster in growth compared to the traditional workforce. The routine is dynamic, the tasks are varied, and the schedule and place are flexible. In other cases, it may even have higher pay than the average 9 to 5. It’s a lucrative and attractive job. Not to mention the luxury of wearing PJs while on the job.
But of course, freelancing is not without its own share of disadvantages. For one, it’s not a regular job. It’s most likely contractual or project-based, with rates varying from the other. This ultimately means that the income might not be as stable as one might like it to be, but that doesn’t have to be a bad thing entirely. Keeping tabs on expenses and knowing how to budget will help keep you afloat while looking for the next project.
Here are some budgeting tips to help safeguard financial freedom and avoid regrets.
Track Your Spending
Given that a salary of a freelancer is irregular, tracking expenses can be an issue. Unlike a regular and stable salary provided by a 9 to 5 job, it’s not easy to budget with inconsistent pay. Keeping track of your expenses can help with that. One way of doing this is by using a spending tracker app; another is by using excel sheets. Meanwhile, others are comfortable doing this on paper. Be it high-tech or analog, it doesn’t really matter. What matters is you know where your money is going.
Have an Estimate of Costs for Needs
If you’ve been paying your bills on your own for a while, then it’s easy to ballpark a figure for this. However, in freelancing, income tax and insurance are things you have to pay on your own. In other words, this will be added to the list of needs and utilities along with groceries, electric bills, phone bills, and the like.
Put a Cap on Wants
Although it’s important to reward yourself, putting some money aside for rainy days is important too. Thinking, “I deserve this” for every purchase you make online will not sweep this fact under the rug. The last thing anybody wants is not having any money saved up, especially during months when there aren’t any projects lined up and there is less money coming in. Be smart and practice self-discipline in spending on wants. Your future self will thank you later.
Have Both Short-Term and Long-Term Savings
Is this necessary? Isn’t one type of savings enough? To answer these questions, think of it this way: a freelancer needs spare funds for when not much money is coming in and separate saving savings to fund plans like payment for home loans, a retirement fund, or a car. It’s important to delineate between the two because if there were only one, that would leave you with zero savings. Living off your savings isn’t a very safe financial decision, but having separate savings put aside for this sole purpose will be one of the best financial decisions you can make
Some Budgeting Methods Worth Trying
There are various ways to go about budgeting. There are even excel templates for this purpose available online. While some people like to use this method, others like taking the calculating into their own hands. A method called 50-20-30 is one of those kinds. This is a famous budgeting method wherein the allocation of your net income goes like this: 50% goes to necessities, 30% to your wants, and 20% goes to savings. This method can be tweaked and adjusted according to salary, goals, and priorities, but it’s a good principle to follow.
Skip Your Credit Card
This isn’t necessarily a budgeting technique, but it’s worth bringing up. If you don’t need it, don’t be so quick to spend money. You don’t have to get it. This is the perfect recipe for getting into debt. The rule of thumb in this scenario is don’t spend more than you earn. Don’t make the swipe, most especially when it’s not out of need. Making wise financial decisions starts with having the discipline to hold back from hasty and impulse buys that will likely be the wrong move later on.
Diversify Your Sources of Income
This is yet another non-budget-related option, but it can help generate more money to stretch your budget even more. One of the anxieties of working freelance is the uncertainty of the flow of work. Having more than one contract at a time will provide a safety net if one of the clients decides to terminate theirs. It’s better to have a little wiggle room than being caught off guard and not having anything else lined up.