Money Management Tips for Freelancers
Money management is normally not a simple task and less for freelancers whom for example do not get taxes deducted out of their paychecks every month. Freelancers can incur in debt if they do not manage their money properly.
Journaling expenses, budgeting or having an emergency fund are some of the strategies to improve money management. Moreover, you will stop worrying about finances and will be able to enjoy more your free time.
Save money and don’t die trying – Money Management
Track your cash entries and exits – It’s worth it
Keeping track of your income and spendings is important, so you can figure out what your revenue and expenses are and therefore know your profit. There are useful tools for this task, for example Mint, that allows you to pay your bills, gives you your credit score and creates budgets.
Talking about budgets, that is the second point we will discuss. Budgeting is a elementary way to keep track of your finances and to avoid overspending. Some of the areas that you should plan well ahead in your budget are:
- Taxes: be ready to meet your deadlines so you don’t incur in any debt, avoiding interests.
- Housing: rent (in case you are renting) is a fixed expense, therefore you know the quantity and the deadline what makes budgeting easier.
- Food: before setting a budget, make an analysis of your average spending in food. This exercise could be useful to cut off some unnecessary expenditures.
- Other recurrent expenses: such as office tools, subscriptions to office package or equipment. This expenses are variable, what means they depend on the month, so making an estimation on average will simplify things. Some months it will be enough and other months with extra charges will be higher but they will compensate.
Save for emergencies (or just for the future)
Normally freelancers do not have a recurring and stable income, unless they are very lucky and have long term contracts for some projects. Therefore, a percentage of the income they receive must be saved to avoid surprises in the future. Regarding the amount, the average savings are three to six months expenses. Saving for something that is not due, such as taxes, can be hard. Somehow, in case something goes wrong or there is a period with less projects you will appreciate your cautious prevision.
Money Saving Life-Hacks for Freelancers
A freelance is self-employed and normally does work for several companies and projects. Therefore there are several types of freelances: artists, writers, developers, designers…
For example, in case of being an artist or a photographer there are some tricks to spare some money on non-essential issues such as:
–Low-cost photoshoot: instead of paying for a space (if it is not a key aspect) the photoshoot can take place on a public space such as a park or a lake. Then, you will have natural lightning what could reduce the lightning equipment costs as well.
–Amateur models: in case a model is required for a painting or a photoshoot you can contact an amateur model. The fact that they are amateur does not imply they cannot perform their job perfectly. Simply they have less experience than professional ones and therefore lower fees.
–Rent equipment: quality equipment is not cheap normally. Therefore renting is a great solution, you can have the latest equipment and choose different devices for each project. In case is a recurrent device you essentially need, it is a better solution if you buy it. Before buying it make sure you make a good analysis of the possible choices and choose high quality/price devices.
Make the most out of every paycheck
To be organized and manage your money properly does not imply staying at home and not enjoying leisure time. Obviously resting and having fun is an essential part of our life and it affects our work productivity. Therefore, money management must be a way to have money (in case you need it), to enjoy your free time travelling, eating out, going to events or museums…. you choose it!
Avoid unpaid projects – Set the rules from the beginning.
Determine your freelance rate (follow our social media accounts to check on our next article about How to set your rate as a freelance) and say it clear from the beginning. Your rate has to be competitive but is really important that is proportional to your experience and the quality of your job. Do not underprice yourself, make yourself valuable.
In order to set the “rules” of each of your projects both parts have to sign a contract with all the points clear. Some of the problems freelancers face are unpaid projects, therefore to avoid these problems ask for 50% of the fee in advance and try not to send any final archive before receiving the final payment. This might seem a little suspicious but is better than not being paid.
Hope the article was useful! Check our related article Work-Life Balance about the best strategies for freelancers.
Feel free to comment with your own tips and strategies!