3 Budgeting Tips To Secure a Stable Freelance Career
By: Eglė Račkauskaitė
Tags: Financial Planning, Budgeting, Freelancing, Finance, Tips

Let’s talk about budgeting! But first, think about your budgeting habits. Do you feel financially secure at the end of the month, or do you just make ends meet?

A lot of people come to Medium searching for tips on how to earn six figures writing. Many of them struggle with money, but not because they don’t make enough (which can also be the case), but because people don’t know how to deal with money.

Freelance writing is a dynamic field that requires you to adjust to make money. Earning six figures can be your goal, but it isn’t easy to establish a stable career without learning to minimize the impact of the everchanging industry.

Budgeting should become one of your top priorities, especially during a recession. Freelance earnings might vary from a few thousand to a few hundred per month.

If you don’t have emergency funds or savings, you might find yourself stressing over your future, lowering your rates, and taking on every opportunity that comes your way. And that’s far from earning 6-figures.

The problem with budgeting

It’s simple — we don’t learn how to deal with money. What we learn in school is the economic theory that only a few use it in real life. It can be intimidating to start working on financial literacy, when you weren’t taught to budget, invest, and allocate our funds.

Why is budgeting crucial for freelancers?

We aren’t prepared for the worst

According to Forbes, 44% of Americans don’t have enough money to cover a $400 emergency, and almost half have little to no money saved for their retirement.

We aren’t ready for emergencies or retirement. It should alarm freelancers because most of these costs depend on us.

The COVID-19 pandemic showed how poorly prepared freelancers are. The recent study on freelance work amid the pandemic showed that half of the surveyed workers are considering quitting, and a similar amount of freelancers admit that they lost 60% of their income.

The current freelance landscape may seem grim, but the reality is that freelancing has always been unstable if you don’t learn to stabilize it. Budgeting can alleviate negative consequences and give you time to get back on your feet while the job market is stale.

You have to pay your taxes

Too often, I’ve made a similar mistake — I enjoyed paycheck after paycheck, forgetting to put aside taxes. When the day to return taxes came, I was unprepared and in stress. You can compare it to gambling, but the only difference is that not setting aside taxes can only end badly.

You have to earn more to cover more expenses

Despite monthly and annual taxes, freelancers also have to ensure to save enough money for health care, retirement, emergencies, and working space.

In-house employees have most of it covered by the company, but we don’t have this luxury. The solution is that professional freelancers tend to earn more than their in-house counterparts. But it’s important to remember that the extra money you make has to go to savings and taxes.

44% of Americans don’t have enough money to cover a $400 emergency, and almost half have little to no money saved for their retirement.

What actions can you take today?

Track your finances

Before you take any drastic action, evaluate your financial situation. Take a notebook or download a mobile app where you can register your spendings and income.

For it to work, you have to commit to writing down every purchase, transaction, or subscription.

Most of the online banks nowadays have a budgeting option, but if you have more than one account, it’s better to have a separate platform to record this information.

Personally, I use the iSaveMoney app for Android. It’s easy to use and has all the features I need. App stores are full of options, here’s the Investopedia list on the top budgeting apps.

Identify your money leaks

It can be as small as a few euros subscription you’ve never used or unplanned shopping sprees. I’m not saying that you should cut on your daily coffee cup to save up your dream income, but often, even though people earn a lot of money, their spending habits cause them to lose most of it.

If you’re a compulsive shopper, try to identify what makes you go nuts and spend money you don’t have. Even 50 euros a month can turn into a few hundred if instead of spending it on another movie streaming service, you invest it or put it into your savings account.

Prioritize

It’s challenging to keep your money disciplined when you get a fat paycheck, especially if you had a low season before. But don’t waste it just yet because you’ll end up in the same situation you were before the paycheck.

Prioritize where your money goes, no matter how small your income is, it’s important to allocate it strategically.

Let’s take a basic list of a single person’s expenses: taxes, debt, emergencies, savings, monthly expenses such as food, rent, transportation, and leisure.

If you have debt, I would recommend dealing with it first. Then, of course, setting aside money for freelance taxes, followed by emergencies and savings.

Savings can be together with emergencies if you’re not saving for anything specific. However, I would recommend diversifying this account by putting money into a bank account and investing it.

Another income part should go for monthly expenses such as food, transportation, and accommodation. If you’re struggling with money at the moment, basic monthly expenses might become your priority, and that’s okay until you have enough money to put into saving and emergency accounts.

What’s left is for leisure. It’s for expensive coffee, shopping sprees, and dinners at restaurants. Budgeting shouldn’t be only about survival, you should also reward yourself with some money left for your pleasure.