Depending on how long you have been a freelancer and the number of steady projects you get, you may have a regular and dependable income. On the other hand, you may be having a dry season where your income is irregular and you struggle to pay bills. As a freelancer you will need to budget your money carefully — here is how to do it.
Write down your regular expenses
The first thing you should do is write down your everyday expenses such as rent, groceries, utilities and miscellaneous items. Then collect all bank statements, check stubs and 1099 forms, because this gives you an idea of the income you receive. Cut out unnecessary expenses from your budget and spend less than you earn.
Emergency savings are a must
Freelancers with irregular income often worry about having enough money when unexpected events happen. They should use part of their income to establish emergency savings so that they will not have to take out loans just to survive the lean times.
Don't forget retirement savings
Even freelancers have to save money for the time when they will no longer work. Since your clients will not offer a traditional retirement plan like major companies do, you can open an Individual Retirement Account. With this kind of account you can contribute up to $5,500 per year. By doing this you reduce your dependence on Social Security benefits as a primary source of retirement income.
Find bargains wherever you can
Sometimes you need to make purchases related to your job but you are on a limited income. In this case you will need to find bargains wherever you can. I found an inexpensive mini laptop for under $100 on eBay, and I purchase most of my business stationery from the dollar store.
Be on the hunt for new clients
There will be times when your longtime clients might not need your services anymore, and as a way of budgeting as a freelancer, you need to constantly seek new clients so that you will have a steady stream of income. You can look for new clients through social media networks, recommendations by loved ones and at trade shows. The key is to promote yourself effectively.
Get serious about collecting what you're owed
When budgeting your income, look over the payments you're owed. Contact your clients and remind them of what they owe you as stated in your contract. Give them adequate time to pay you, but if things are not worked out, do not offer your services to them anymore. In some cases you might need to take legal action.
Freelancers work hard to give their clients the best projects, and you need to be financially savvy if you want to profit from your hard work. Talk to other freelancers and get additional tips on how you can budget your expenses. Most importantly, be proud of the independence you get to experience as a freelancer.