Freelancing is becoming more and more popular as people realize that the standard nine to five is disappearing, and job stability isn’t really there anymore – they might as well work for themselves and enjoy the benefits that freelancing brings.
Of course, there are downsides to this way of working and one of them is that you can never be entirely sure when you’ll be paid or how much might be coming in each month. That’s why it’s so important for freelancers to budget properly so they can make the most of the money they have and ensure they don’t get into difficulties. With that in mind, here are some useful budgeting tips for freelancers to help you get on the right financial path and stay there.
3 Budgeting Tips For Freelancers
Make a Budget
The first budgeting tip we’ll talk about is perhaps the most important because without this, you won’t be able to do much else, and you’ll never be fully sure of what your financial position really is. The tip is to make a budget.
Start by calculating your monthly expenses, which would include your rent or mortgage, utilities, food, transport, insurance, and any debts you have to pay back. Plus, you can add in any variable costs like entertainment and clothes too – if you pay for it, it needs to be included. Once you’ve done that, you’ll have a clearer picture of what you need to make each month and what would be left over.
It might be that you have to make some changes to your lifestyle to fit with your budget, and it’s vital to do that sooner rather than later. It could be that your current car is too expensive, so you need to think about finding the right affordable used car instead. Or maybe you need to cut down on how much food you buy. Perhaps you need a cheaper place to live. It’s only by working out your budget that you’ll know and can make these necessary changes.
Have Lots Of Small Clients
It’s exciting to have one or two big clients who pay the majority of your income, but what would happen if you lost one or all of them? How would you cope? Even if you’re doing a great job, nothing else lasts forever, and it could be that in a week, a month, a year, or whenever, they decide not to use your services anymore. If that happened, you’d be in real financial difficulty.
That’s why it’s better to have lots of smaller clients rather than one or two larger ones. Of course, that doesn’t mean you should turn down large clients when they come, but you mustn’t rely on their income to live on. Instead, it’s a better idea to put any money you make from these clients (minus tax, of course) into a separate account so it can be a useful contingency fund for leaner times.
Plan For Retirement
There are definitely pros and cons to being a freelancer and one of the issues is that there isn’t an employment-based retirement fund to use when you want to stop work. That doesn’t mean you have to keep working even when you want to stop, however, as long as you’ve budgeted well in the last.
If you can explore options like individual retirement accounts (IRAs) and put a certain amount of your income aside each year for your retirement, you’ll have a much more stable future to look forward to.