Managing money. It’s a topic that we seldom speak about, but it must be done. As a freelancer, this can be quite difficult. It’s a stressful task as is, and piled on top of everything else, it can get overwhelming. Unlike a regular 9-5 job, those who work for themselves may earn way more one month, and barely anything the next. Basically, it’s always a surprise and you have to be ready to embrace it — whether it’s good or bad. Personally, I’ll admit that working for myself is no easy feat. Not only do I have to manage my own schedule and be able to pick up tasks that need to be done on a whim, I also have to track my own finances. Since my earnings are not the same every month, it’s extremely crucial for me to make sure I always have a good amount of savings. Trust me, there is nothing worse than nearing the end of the month and realizing that you can’t afford next month’s rent! After freelancing full-time for almost a year, I’m sharing some tips for managing money wisely as a freelancer that have worked well for me. If you’re looking for some basic guidance, I hope you’ll find these pointers helpful! 🙂
1. Stay on top of it.
Yes, thinking about money is a dreadful task, especially if you think you might be digging into the negatives (hopefully savings). But, if you stay on top of it regularly, the chances of you running into this problem are a lot slimmer. Personally, I like to evaluate my finances on a monthly basis. When it’s time to pay monthly rent, it’s time to make sure I can afford it, right? All jokes aside, I keep an organized record of all my invoices and place them in monthly folders on my computer so that I can easily access them. This way, if I need to revisit one to address a missed payment for whatever reason, it’s quick and easy. If you’re more of a pen and paper kind of person, I’d recommend printing out the invoices and storing them in a way that’s easiest for you to find. Keeping a clean record of all your earnings and expenses can really help not only to reduce stress in day-to-day life, but also tax season… when that rolls around. I also keep a notebook that details my monthly earnings and spending so I am able to see the leftover monthly balance. This balance ideally goes into my savings/emergency fund. Managing money is an obligatory duty like going to the dentist. The longer you put it off, the more trouble you might be in later. Start now!
2. Maintain a safety net.
Freelancing is extremely rewarding. You get to work for yourself and do what you enjoy (hopefully), rather than helping someone else’s bottomline while abandoning your own dreams. However, it can also be challenging at times, especially if you don’t have a good amount of savings already. I was able to transition into freelancing because I had a good amount of savings in my bank account already to back me up in case things went down the drain. Since I began freelancing, I’ve just been watching my safety net and making sure that I don’t dip below a certain amount I’ve set for myself. By doing this, I never have to worry about money, even when unexpected expenses arise. Things do happen. For example, my car broke down last week and I needed to replace the starter right away. That was $300 I didn’t expect to spend, but thankfully I had money stashed away for emergencies like this!
3. Spend wisely.
This might sound like a given, but surprisingly, there are a lot out there who have horrible spending habits. So, I’m going to go ahead and say it… being frugal can be a great habit to have. Growing up in a traditional Asian family, I have been raised to be extremely careful with my money. My parents have helped me realize how easy money goes and how hard we have to work to earn it! As a result, I naturally try not to overspend. Instead of eating out everyday, I’ll cook whenever I can. Rather than going out shopping for new clothes constantly, I always evaluate each purchase to make sure that I’ll be wearing it more than once. Basically, I’ll do what I can to live below my means, so that I can save up for other important things in the long run. Housing in California is not cheap, but I definitely want to look into putting a down payment into my first house soon. It’s no fun to rent forever! A good way to look at spending is: Do you need or want it? You’ll realize that most of the time, it’s “want.” In such instances, I fight the temptation to buy and just walk away. It only gets easier with practice, I promise. 😉
4. Limit the socializing.
It gets expensive. I would know this, even from minimal socializing. People make fun of me all the time because I’m in my mid-twenties and yet, am such a massive hermit. Instead of going out and having drinks with friends every Friday night, you’ll most likely see me at home planning out next week’s blog posts while sipping on lemonade. Call me a lame work-a-holic, but I’ve saved a ton of money by just not going out all the time. Don’t get me wrong — I do love the occasional hang out with my friends and will spend generously every now and then. However, I do my best to limit spending whenever and wherever possible. The costs associated to going out to eat, partying, and attending events can add up quickly. Luckily, a lot of my friends are freelancers, so they totally get it! We’ll even plan to just meet for a quick coffee sesh, rather than eating at an expensive restaurant. In this case, it’s more about the quality time spent with my friends over extravaganza.
5. Set financial goals.
If you’re a freelancer, I’d hope that you’re a goal digger! And if you are, this one should be a no-brainer. Setting financial goals is so important to me because it not only keeps me in check financially, it also helps me grow as a freelancer. Nobody wants to be stuck at a certain income level, and one of the biggest perks of freelancing is that you can essentially create your own salary. Of course, if it were up to me, I’d be a billionaire right now… but I’m still working on it. Every month, I’m learning new things and gaining new clients. With all these fresh work opportunities, I also take the chance to experiment with my rates and see how I can grow on a steady basis in the long run. For example, speaking in simple terms: If I made a grand total of $8,000 in June, I might set a feasible goal of $8,500 for July. An extra $500 is doable, and if you’re able to sustain an additional $500 every month, imagine where you’d be by the time December rolls around! 😉 Keep in mind that meeting these financial goals will not be a piece of cake. You might not even meet your goals every month, and that’s okay. To achieve your goals, you may have to employ new techniques in your pitches and marketing. You might have to go network more to gain exposure. The challenges are endless, but they certainly keep our work and lives interesting! Meeting monthly goals is always a great feeling, and going beyond them feels even better! My big tip is to set reasonable goals, even if they are small. Progress is progress, and it’s important to never forget that!
6. Don’t let the setbacks get to you.
It’s inevitable that some time in your freelancing career, you’ll encounter a few setbacks. They are no fun to endure, but they definitely help us stay humble, grow, and learn. For example, this year, there was two months I had with little to no work, and it was hard to not stress about it… but I always had a roof over my head. Sure enough, things picked up again after that. The lesson learned is that there are no ups without downs! I’ve found it productive to use “down” moments to figure out how to improve as an entrepreneur, catch up on “me time,” partake in creative projects, and so much more. With that said, it’s not all too bad… if you have been doing a great job maintaining that safety net!
Are you a freelancer? What are some tips for managing money wisely that have worked well for you?