Freelancing is great. But, just like any other professional work, you won't have something to do every day. Maybe you find only 2 hours' worth of projects, or maybe your long term client decided that he was going to head for a 2-month hiatus (well-deserved might I add) during the Holiday months. Anything can happen. So, in those “dry” period, you still need to survive. The bills will still need to be paid and the doodads will still have to be bought, however reluctantly. Also, Freelancing is not like a full-time job – you don't get a regular fat paycheck every month just because you showed up. Believe me, I know – there were months when I felt like I hadn't done anything other than attend trainings just so that I could appear to be busy. As a freelancer, I can't even imagine undergoing some training, unless I know that it will add to my bottom line. It's survival of the fittest on steroids.
So, as a freelancer, you have to be smart with your money. And that is what we are going to learn about in this post. Very simple, straightforward advice. You may not like what I am about to write, but you will most likely agree in the end:
1. Clipping the Expense Feathers: Expenses are important. However, you have to differentiate between needs and wants. Your daily, weekly and monthly expenses should be very very clear. Let us say that you need x bucks every month to survive(Needs). And you earn say y bucks per month. This means that ideally, you should be saving y-x bucks. That's all well and good, but how do we end up not saving that “theoretical” amount? Because we end up spending money on things we really don't need(Wants). Needs are the utility bills, and wants are the impulse purchases that make no sense a week after they were made. I agree that you “deserve” some rewards, but not at the expense of peace of mind. So, clip the expense feathers and make sure you check yourself before every purchase. Only buy what you need. Also, try to work from home at a low cost. Working from home is a boon for the freelancer because you simply don't have to spend on things like commuting.
2. Automagic Deposits: My bank offers a deposit account in which I can put in money irregularly, but I can't take the money out unless I “break” the deposit, which requires a little bit of effort from my end – enough to steer me away from any impulse purchases that promise to ruin my finances. Whenever I make any money, I always put away money first, and then because I know that I need x bucks to survive, I keep that with me too. And I usually keep a little extra liquid in case something urgent comes up. The most important part of this equation is the automagic deposit where I can put in money but can't take the money out no matter how hard I try. In fact, I used to work a full-time corporate job and I wasn't able to save enough. Today, I put in more in the bank in a week than I could when I was working full time. All because today I know that I won't get a paycheck at the end of the month and that I am my own credit card, loan agent and insurance provider. Not to mention, the guy who gets to help the family out in times of deep financial distress.
3. Buying protection: You may think I am going to sell you on insurance. But that is not the only thing I am going to write about. I am going to write about the what-if scenarios. If you work on a PC or a laptop, and you make a full-time living doing that, what will you do if a virus crashed your laptop? (I hope that never happens to you). Or what will you do if your laptop's keyboard stops working for some weird reason. Or the ISP decided to play ping-pong with your internet connection. There are so many scenarios, but if you depend on online work, you need to have contingency plans and protections in place. For example, I always keep a couple of spare keyboard and mice in the house. I keep a dongle, and I keep a separate mobile company's connection alive, just in case something terrible happens to my primary connection provider's service. I have a couple of operating systems in the form of live USBs and I have all my data uploaded to the cloud on a regular basis. Frankly, my PC's health matters a great deal to me because I depend on it full time. Of course, I have the other kind of insurance too. I didn't want one, but I was offered such a low-cost solution that I couldn't say no. So, I am covered when it comes to life and health. Great, now I can focus on work.
These are some of the tips that I believe will help any freelancer meet his or her financial goals quickly and efficiently. Please, feel free to add your own tips to this list.