How freelancers can manage money like a pro
What's the story
Freelancing comes with the joys of flexibility and independence, but an irregular income can be difficult to navigate.
Without a regular paycheck, freelancers need to adopt smart budgeting strategies to maintain financial stability.
By following effective techniques, freelancers can maximize earnings and maintain a balanced financial life.
This article explores practical budgeting hacks to help freelancers manage finances efficiently, come lean or rich times.
Tip #1
Prioritize essential expenses first
When your income isn't predictable, the first thing you should do is prioritize essential expenses like rent, utilities, groceries, and insurance.
By determining these non-negotiable expenses in the beginning, freelancers can manage their funds accordingly and avoid financial woes.
Listing down your monthly essentials gives an idea of how much money you actually need to meet basic living expenses.
This ensures critical needs are met before splurging.
Tip #2
Build an emergency fund gradually
An emergency fund serves as a financial cushion during lean times or unforeseen costs.
As a freelancer, you should try to keep at least three to six months' worth of necessary expenses in this fund.
Begin by saving a small percentage of every payment you receive until you reach the desired amount.
Regular contributions over time will gradually fill up the fund without straining current finances.
Tip #3
Use separate accounts for business and personal finances
Maintaining separate bank accounts for business and personal finances simplifies tracking income and expenses, while ensuring clarity in budgeting efforts.
This way, the separation will not only aid in accurate tax reporting, but will also help identify areas where spending can be reduced or optimized within the business operations itself, without affecting personal lifestyle choices.
Tip #4
Implement the 50/30/20 rule
The traditional 50/30/20 rule recommends dedicating 50% of income to needs, 30% to wants, and saving/investing the leftover 20%.
However, freelancers might have to tweak these percentages depending on their individual situations owing to the nature of fluctuating incomes across different months/seasons in their industry niche.
Tip #5
Regularly review financial goals
Freelancers must frequently assess financial goals for appropriate alignment with current conditions and adjusting strategies if needed due to circumstance shifts.
This applies when setting those goals in the first place during career journey planning phases.