5 tips to budget and save money as a freelancer
December 18, 2019
Feast or famine.
It’s a phrase that best sums up the financial situation of many freelancers.
As most seasoned freelancers know, the feast or famine cycle is an all-too-real situation in the freelancing world. It’s what happens when a ton of work comes in all at once, and when it wraps up, you’re left with no projects and no income. It’s the bane of a lot of freelancers.
While it’s not always easy to break this cycle, there are ways to ride it out. Here are a few tips to help you save money and budget wisely to maintain a balance amid the extremes of freelance work.
Being caught in the feast or famine cycle of freelancing means your income can fluctuate a lot from month to month. And that requires some planning to stay on top of your finances.
Your first step should be creating a new budget every month that will allow you to keep track of your payments and necessary expenses. Having an idea of what your budget situation looks like at the start of every month will help with being careful about overspending.
If the idea of creating a budget every month has you breaking out in a cold sweat, you can rest easy because there are loads of resources available that take the headache out of budgeting. A convenient way to maintain a monthly budget is with cloud accounting software, such as QuickBooks Self-Employed, which keeps records of your income and expenses, while helping organize receipts, along with other benefits.
There are also tools, such as Mint, that assist with identifying budget goals based on cash flow and expenditures and then ensure you stay on track.
While many financial planning tools are subscription-based, the savings that come from using these resources often far exceed the cost. You pay a little to save a lot. Plus, freelancers can claim those subscriptions as a tax-deductible business expense.
Speaking of taxes, make sure your budget includes setting aside some funds to cover what you owe come tax time.
Create an emergency fund
Right after setting a monthly budget, creating an emergency fund should be next on your savings to-do list. What if you get sick and aren’t able to work? Or the car breaks down? Or the air conditioner decides to quit on the hottest day of the year?
Those unforeseeable events can happen to anyone. But when they happen to freelancers, those unexpected situations can be all the more pressing in the absence of a steady income.
Make it a habit to allocate a portion of your monthly income for savings. It’s ideal to set a couple of months’ pay aside for emergencies. Keep your emergency fund in a dedicated savings account so that you can access it when needed. A separate account will also help ensure you’re not tempted to dip into your emergency stash.
Avoid coffee shops
A lot of freelancers are drawn to the appeal of working from home, but getting out of the house from time to time is very important.
The financial problem here is that many freelancers will turn to coffee shops as a place to get work done outside of their home. But those outings can add up quickly. Especially if you find it difficult to resist ordering your favorite sugar-free vanilla latte with soy milk, no foam, an extra shot, and served at exactly 120 degrees.
Instead of heading to your go-to coffee shop to work, consider checking out the local library. It’s quiet, most likely has wifi, and, best of all, it’s completely free to use!
Another option is to scope out the coworking spaces in your area. Though it’s an expense, the cost often comes with benefits. Prices for coworking spaces vary widely, so search around for one with a plan that suits your budget, and don’t forget that a membership can be claimed as a business expense.
Reduce discretionary spending
Remember those pre-freelance days? When you earned a regular paycheck that already had your taxes and retirement contributions deducted before you even saw it. When having shopaholic tendencies had little, if any, impact on your financial situation.
As a freelancer, those days are no more.
While it’s okay to treat yourself now and then, buying too many non-essential or luxury items could land you in financial hot water. It’s best for freelancers to get in the constant habit of limiting discretionary spending. Even if you have extra cash available now, you may not in a month or two, so rather than spend it, stash it away in savings.
Wondering how to cut down on spending? Here are a few ways to get started:
- Make cooking your new hobby! Buy groceries based on meals you’ve planned for the week.
- Limit how often you eat out. Meal planning will go a long way to help with this one.
- When you do eat out, consider going out for lunch instead of dinner. At many restaurants, menus between the two meals are similar but at different price points.
- Get into the habit of comparison shopping to make sure you’re getting the best price available.
- Resist impulse purchases. If you receive a lot of emails promoting flash sales, unsubscribe from those mailing lists so you won’t be tempted.
- Check to see if there are discounts available through any associations that you’re a part of, like professional groups or alumni.
Get your payments in order
When it comes to budgeting as a freelancer, it’s important to ensure that receiving payments isn’t hindering your cash flow.
Waiting for a check or wire transfer to finally arrive is beyond frustrating, and can also mean having to dip into your emergency funds while you wait.
But you don’t have to rely on slow and outdated ways to get paid. Online payment providers, like Veem, simplify the process for freelancers to receive payments from around the globe by making it faster and more affordable than ever before. With Veem, you can send invoices and receive payments in your local currency with exchange rates that always beat the banks. That means you’re never blindsided by the hidden fees that come with wire transfers.
What’s more, Veem takes the hassle out of chasing an invoice payment by sending automated reminders and providing real-time tracking, so you know where your money is at all times.
As a bonus, making the payment process easy and convenient for your clients can lead to an even better working relationship. And that can mean more freelance work and less time coping with the “famine” aspect of freelancing.
The key to smart budgeting as a freelancer is to be diligent with money-saving habits. But don’t just wait until your monthly income is low to make saving money a priority. Instead, it should be a regular practice throughout the year. Being disciplined with finances will ensure you’re able to reap all the benefits that freelancing offers.
Simplify your business payments with Veem.