How to Budget When You’re Freelance

*This is a sponsored guest post, not written by me*

Life as a freelancer can be incredibly rewarding. You’re able to choose your own hours, work from anywhere in the world and choose who you work with. Having the ability to step away from work for a while if you’re having a bad day is a game changer and it’s so refreshing to feel like you’re in charge of your own life rather than being beholding to an employer or a big company. Having said that, one of the more difficult challenges to master is managing your money. You can bend over backwards to make a client happy, you can do everything they’ve asked, give them 1000 ways to pay and send repeated reminders when the invoice is close to being due, but sometimes a client just doesn’t pay you on time for whatever reason. As a freelancer you have monthly subscription services to pay for, your insurance, any business loans and you have to make sure you’re setting money aside for tax, so when a client doesn’t pay on time it really piles on the pressure and puts you off working freelance. It really is worth the stress in the end though, so here’s a few ways to prepare yourself and take care of a bad month at the office.

  1. BUDGET!!!

I’m not one for shouting in all-caps but this needed it. If you want to be a freelancer you need to learn to budget and stick to it. Work out all of your monthly expenses, for both yourself and your business - anything like Netflix or groceries go in your personal expenses, any subscriptions or things you buy for your career go in business expenses, and any bills like water or electricity get split between the two (in the UK you can expense part of your bills if you work from home). It’s also important to work out how much you spend on leisure each month.

Next, set up three bank accounts - one to accept business payments, one for your personal current account and one for savings. Have all of your freelance payments go into your business account, then transfer the amount you need for personal bills and “fun money” into your current account, leave enough in your business account for expenses/paying your tax bill, and everything else goes in savings.  Trust me, buying an extra coffee isn’t worth it - you need to save!

  1. Save What you Can in Good Months

This is probably my biggest tip and the number one way I survive, and why I put so much importance on saving in the previous section. Freelancer wages are always going to be up and down, but if you have a good backing behind you then you won’t need to worry as much. You don’t need to have these savings earmarked for anything - if you have enough good months that you can afford to treat yourself then great, but you should always make sure you have a good amount of savings. It’s not good practice to live off of your savings and if that happens for a few months then you should rethink your business model, but it’s there if something happens and you need to take time off.

3. Pay Everything you can Upfront

This is possibly not the best tip, but it’s one that certainly helps me. A lot of business subscription companies offer the option of paying for a year’s service upfront instead of paying monthly. Personally, I prefer to pay upfront whenever there is an option. You’re still spending the same amount overall, but it takes the pressure off in bad months by minimising your monthly outgoings.

4. Diversify Your Income Streams

This is something I’ve been hearing for years and rolled my eyes at, but when COVID hit and I was posting solely travel-related content I was STRESSED. Fast forward a year and I do freelance copywriting, I’m launching two new websites, and I’ve broadened my content a little to include more lifestyle things (like this post!!). Not only has it taken the pressure off, but it’s allowed me to turn my blog into a proper job because I always have other plans.

5. Things Happen Sometimes, and that’s OK

I know this isn’t a nice thought, but sometimes you might end up in a bit of a mess. You could’ve done everything you can to avoid it and you still just don’t have enough money to cover everything. While it’s best avoided, sometimes the only option is to take a loan. This is something that should be a last resort and you should only ever take out credit if you know you can definitely pay it back with the interest on top (i.e. if your clients are late paying you and everything is going to come in a week too late), but if you’re sensible and you do your research into a company first it can be totally OK to use. Polar Credit are a direct lender which means they lend directly to you rather than going through a middle man. They approve you for a credit limit rather than an amount of money each time you need it, which means once you’ve been approved you can instantly transfer a little money as and when you need it rather than needing to go through the approval process all over again. Like I said you need to be careful with some credit providers if the interest rate is higher, but as long as you’re sensible it’s a good idea to have as a backup option.

Working as a freelancer can feel like both the most incredible job in the world and absolutely terrifying, and it can just depend on the day of the week or time of the month as to how you feel about your job. But as long as you get organised and keep an eye on your finances there’s no reason why you can’t take the leap and turn your passion into a career that gives you freedom.

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