When it comes to freelancing, the income of freelancers is always in a fluctuating mode. As a freelancer, since you are the responsible for most of the activities related to your job, you will be handling the finance department as well. You can be sure of your expenses but you can never be sure of your income so it is better to learn money management so that you are never out of money even if you are out of work.
Ascertaining your cash flow might be difficult but it is not something impossible. If you really want to handle your budget, you do not have to make serious changes in your life style. All you need to do is change a few habits here and there and you would be making and saving money. Following are a few smart money management tips for freelance designers:
Do Not Overestimate
I have often seen freelancers overestimating because they think they have a lot of projects lined up and they will be able to pay their bills and other dues very easily. However, things often don’t go the way we have planned and by the time we realize it, it is too late and the last thing we know is that there are no savings. This is something that can happen with the best freelance designers in town. Freelancers at times do not make as much money as they were expecting.
So, if you really want to manage your money the first thing you need to do is avoid overestimating. You need to keep and calculating things on average. Expecting too much can lead to disappointment so it is wise to only consider invoices which are sure to reach you so that you can plan accordingly.
Track Your Expenses
Mostly freelancers do get to earn a little more than they expect which is exactly why they spend it without even thinking. Tracking your expenses is very important because you do not want to spend your hard earned money in malls. Since taxes and other things are not deducted from pay cheque freelance designers can end up feeling richer than they actually are. Always keep a check on your spending habits and keep a track of when and how your money is spent. Later on, you can take out time to analyze it.
Once you will analyze it you will realize that a lot of expenditures were not really needed. If you really want to save, you need to make sure that you are spending more on your needs and less on your wants.
Be Particular About Your Spending
You need to compare advantages of being a freelancer with advantages of traditional jobs. In traditional jobs a person is normally getting health insurance and other benefits as well. As a freelancer you are only getting a cheque that looks and sounds a lot. You need to get real and understand that you need to take care of all your needs with this one cheque so you cannot start spending like anything. As mentioned earlier, if you get realistic, you will be able to differentiate between your needs and your wants.
Priorities the Expenditure
You will have all the time in this world to spend on luxuries. If you really want to spend sensibly, you need to start spending on your priorities first. Now, when I talk about priorities, obviously everyone will have different priorities. But mostly you should be giving more importance to utility bills, rent and debts if any.
You need to stop sending freely just because you have a lot of money in your account this month. You might not be able to earn this much in the next month because freelancers never have a stable income which is exactly why they should be more focused towards saving money.
Get Rid of Debt or Avoid It Altogether
If you are already under debt your first priority should be getting rid of it. The only way to do this is by spending wisely and by saving money. While spending, make sure you are spending on things which are really important and necessary so that you can save money to pay for your debt. If you are not under debt, you should save money so that you do not have to take loans in future. Freelancers tend to get a little unrealistic about things, which is not right.
Taking Care of the Taxes
Since you won’t be working for a proper company, you do not have to suffer the tax deductions in your pay cheques. But, this does not mean that there will be no tax deductions as you will be responsible for it. So, you will be paying for taxes yearly so be prepared for it and save money.
Anything can go well if you have a plan for it. Same goes for money. If you have not planned the ways to spend it, you will be spending it uselessly. So you need to really focus on budgeting and giving some structure to your income. Make comparisons of expected income with expected expenses. This can help you a lot in analyzing your situation if you will be able to deal with expenses or if you need to cut on your expenses.
Also, life is much unexpected and anything can happen anytime. You should always have some backup money to handle the good and bad situations of life.
Credit Reserve or Cash
These two things can play a very important role in your money management. As a freelancer, till the time you are working, you will be getting money. The minute you fall sick or go for a vacation, you won’t be working so you won’t be getting any pay cheques. For instance, if you fall really sick you won’t be able to work for weeks and this can have a negative impact on your cash flow. In such situations you won’t be able to pay your bills. To be able to handle such situations, credit reserve or cash can definitely be of great help.
You should always be organized when it comes to knowing your income streams. You should have a sure shot idea of when and how you will be getting paid for your work so you can structure things accordingly. You can receive money every week or month as it depends on your project and situation. If you are aware of income stream you will be able to plan and budget things in a proper way.
As a freelancer, you will have a lot of ways to save money. Since freelancers are used to being a free bird, they like to spend money like a free bird as well. Doing what you want to do can sound great in general but it is not very practical. One should always think and plan for future which is exactly why money management is very important for freelancers.
All of you will agree that stability and job security lacks in freelancing. You obviously would not want to spend your life full of debts. This does not mean that you should be making money for priority but for a good living you need to save it and this can be done only if you are good at money management. Hoping that tips mentioned above can help you in dealing with your money problems.