Freedom is said to always come at a cost. This is untrue for freelancers. The freelancing business allows you to control your life and time, as you are accountable to no one but yourself. You have access to midday naps, can take a long vacation, and take a break in the middle of work as much as you please. These and more are the perks that come with being a freelancer.
However, freelancing is not without its disadvantages, and it mostly revolves around money. For instance, the freelancing does not offer a regular or steady income that can be planned upon. This implies that you must not have your tax deducted automatically or seamlessly plan your finances. You have to deal with issues such as not having a retirement account set up for you at work or not being eligible for certain insurances. In the worst-case scenario, you might not be making enough money from your freelancing business or be able to get on track.
This then begs the question, how can you make the most of your freelancing business? How can you take charge of your freelancing business and get it back on track? A simple budget has been known and proven to help you make the most out of any business, and this article will show you just how your freelancing business is no exception. While we all have our money troubles, the issue is a lot more serious for a freelancer, making dealing with your finances just as important as attending to a deadline.
Here are some tips on how a simple budget can help grow your finances:
Be Aware of What You Are Spending: Spending less than you earn is the basic principle that has helped people grow their wealth over time. Whether you are a freelancer, employer, or employee, you must be able to track what you spend. What better way to get this done other than through budgeting. Through budgeting, you will know what has been spent for what and by how much as well. You can always track your spending through a notebook, spreadsheet, an invoice generator, or through programs and applications such as Mint. You can estimate how much you spend every month and spread them across necessities such as transport, food, shelter, healthcare, eating out, and education. This way, you will plan your budget based on much you are earning and how much you are likely to be earning soon.
Develop a baseline Budget: After tracking your expenditure for a few months, it is important to know your average income for a few months. You could calculate this by taking the average of your earnings in the last three months. After knowing your average income, you could simply plan your budget as you wish and consistently. For instance, you could allocate 50% of your income for basic needs, 30% towards taxes, and the rest towards savings or the repayment of debts.
Develop your dream budget: The steps discussed earlier are specifically for those making a lot from freelancing. What then happens when you are not? This means you have to have a new budget tailored to suit your expenses and fund the lifestyle you want to lead. If the income doesn’t match your lifestyle, pay your taxes, or leave you with enough savings, you have to take some steps. These steps will help you plan your rate and how much you charge a client for a job, and your hours of availability within a week. You could also learn some more high-income skills to be able to earn more to fund your lifestyle.
Cut Unrealistic Dream budget: Often, when planning your dreams’ budget, you might have so much that your income can’t afford. The truth is that maintaining such a budget is likely to get you into debt. When this happens, you have to cut down your cost and ensure that you get the best from your limited resources. For you to achieve this, it is important to ask the necessary questions such as “are you visiting the gym enough to justify the monthly cost?”, “do you need that much grocery, and how do you preserve food, so it doesn’t get worse?” The simple trick to doing this is to scrutinize every penny spent and what they are spent for.
Implement the 50 30 20: The rule states that 50%, 30%, 20% of your income must be allocated to your needs, wants, and savings or debt, respectively. The 50 30 20 rule is a great rule that has helped countless people save and plan their finances. Therefore, it is a rule that every freelancer should implement to gain control of their finances and stay away from debt.
Ultimately, your finances are your responsibility and no one else’s. Therefore, as a freelancer, you alone can get your finances and your business back on track, and a simple budget is a great way to start.