Being a freelancer comes with a handful of benefits, but it also has its fair share of challenges.
As a freelancer, one of the most common problems is inconsistent income. Yes, you can work with multiple clients, secure big projects, and have the opportunity to bring in greater profits only to find yourself scratching your head for cash in the coming months.
Why? Either your clients decided not to renew their contracts or you didn’t manage your business and finances well enough to prepare for these downturns.
Many freelancers can relate to this experience, especially those who are just starting out and still learning the ropes of this career.
While budgeting an irregular income can feel quite impossible, there are ways to pull it off.
Here are some tips to help you secure your financial future and finally reach the heights of financial independence as a Freelancer:
Scale your business
In today’s fast-pacing landscape and growing competition, scaling your freelancing business has become vital if you want it to be sustainable and secure in the long run.
Scaling means growing the revenue of your business without a substantial increase in resources.
As a freelancer, you should always make space for growth for your freelancing business to achieve success. Doing so guarantees not only efficiency but also profitability.
To scale your freelancing career, try to consider doing the following:
- Build a solid portfolio that highlights your past experiences and testimonials from previous clients
- Find clients who can pay well that you no longer need to send a follow-up email to remind them of their payment
- Reassess your fees to see if it’s high time to increase them
- Focus more on the quality of your service
- Hire more people or consider outsourcing
Track your budget (and manage your lifestyle)
No matter how big the amount you receive on a regular basis from your client, if you keep on mismanaging it, you’ll keep blowing it.
Build smart habits of tracking all expenses and savings. You can do them by jotting down all recurring expenses and evaluating them based on their priority level.
Your mortgage, groceries, utility bills, debts, etc. Those should be written down in the list.
The point here is to know everything you need to pay every month. Having a clear picture of where your money should be going, gives you a better idea about your lifestyle and makes budgeting easier.
As human beings, we’re naturally tempted by instant gratification. We tend to spend our hard-earned money on impulsive purchases.
Whenever we get an increase, we indulge ourselves in luxuries right away. There’s no wrong with that actually.
After all, you deserve to pamper yourself with your own money, but stay realistic with your budget and make sure you live within your means.
Cut down on unnecessary expenses, manage your lifestyle, and focus on long-term growth if you want to achieve stability in your finances.
Create an emergency fund
Freelancers are vulnerable to sudden financial changes. Some weeks are full of projects, while some weeks you’re struggling to find clients.
If you don’t have work, you don’t get paid. Uncertainty is looming around every corner. No matter how hard-working you are, you can’t really rely on an unsteady income.
This makes having an emergency fund evidently crucial to many freelancers. In times of income loss, an emergency fund can save you from further financial chaos and stress.
While the amount of your emergency fund depends on your lifestyle, as a rule of thumb, it is important to keep at least three to six months’ worth of all of your expenses.
Having such an amount should be sufficient enough to cover all daily expenses should something happen in your cash inflow.
Here are a few steps to start building your emergency fund:
- Make it a habit to take a small portion of your monthly income, ideally, 10%, and set it aside.
- Don’t touch it unless it’s really an emergency. Remember, the goal is to save at least 3-6 months’ worth of your monthly expenses.
- Open a separate account for your emergency fund. Don’t mix it with your regular account that you can see on a regular basis. The more you see it, the more you are tempted to spend it.
Building an emergency fund can be quite hard, especially if there are also other expenses and savings underway, but with discipline and consistency, you can achieve it.
Avoid debt
Another financial risk that freelancers often experience is debt. For small business owners and freelancers, debt is something they cling to, especially when about to start a business.
Not everyone has the financial capacity to provide capital for a business or venture; that’s why many people resort to debt with the promise that they can pay it back once the business thrives.
But unpredictable income streams combined with poor financial management practices can, no doubt, result in debt. The good news is that there are ways to help you curb your debt and avoid falling into its trap.
Try these useful tips:
- If you have existing debt, don’t forget to include it in your monthly expenses.
- Make sure you pay it on time and with the right amount to avoid being penalized.
- If in a serious debt situation, try to explore formal debt solutions. This way, banks can provide you with effective repayment models to settle your debt.
- Don’t own credit cards if not really necessary. Not only do they offer low minimum payments, but they can also potentially damage your credit score.
Get insurance
Getting insurance is one of the critical responsibilities when you get into freelancing.
While your goal is to succeed economically, limiting the risks when the worst scenario comes is always better than risking everything to go in vain due to a lack of readiness.
Individuals and businesses have different coverage needs when it comes to insurance, so it is imperative to determine the right insurance policy that would properly protect you, your business, your properties, and your profits.
Before acquiring an insurance policy, make sure you do the following:
- Talk to a licensed agent. A professional insurance agent will help you understand what you really need and can recommend the best insurance policy aligned with your unique requirements.
- Understand the potential risks. Going through a risk assessment with an expert’s help will help you decide the type of coverage you need
- Prioritize coverage over insurance costs. While choosing the cheapest policy is tempting, it can cost you more in the long run. So better invest in a reputable insurance provider where you can feel secure and confident.
- Re-evaluate your deductibles. If you are interested in choosing a higher deductible, you need to gauge your paying ability should you need to file a claim.
- Research more, read more. Try to contact multiple insurance companies before making a final decision. It allows you to expand your options and helps you to determine the most competitive policy for your requirements.
- Review & reassess regularly. As time passes, your requirements and risks may change, so review and update your insurance policies annually to find any possible new risks and ensure the relevance of your coverage to the current needs of your business.
Build investment
Investments should be another top priority that a freelancer should focus on to achieve financial independence.
In whatever circumstances, investments can give you a level of stability when it comes to steady cash inflow.
Simply put, investment is a reliable fallback when you deal with financial constraints. It acts as a great source of passive income.
You can generate more liquid assets from it without sweating too much. These days, there’s a wide range of investments that you could choose from such as rental properties, stocks, forex, crypto, affiliate marketing, and many more.
Most importantly, it can help you establish a retirement plan. Unlike regular employees, who have government pensions to back them up when they retire, the self-employed or freelancers have nothing—not even a cent.
Unless you want to grind until you’re gray and old, investing in a retirement plan is a smart option.
Plan your taxes
Handling your taxes is relatively easy when working a regular 9-5 job.
You don’t even have to trouble yourself because you have an employer who takes care of everything, from managing your contributions to filing your tax returns with the BIR.
However, it’s a whole new ballgame when you are a freelancer. It’s more complicated and confusing, especially if you are a beginner. With the income generated from multiple revenue sources, making mistakes when managing your taxes is inevitable.
Unfortunately, these kinds of blunders can cost you a lot, and that can endanger your financial health.
You can be penalized for missing your tax deadline or failing to register your freelancing business. You have to pay the penalty fee or, worse, get imprisoned.
These scenarios have adverse consequences not only for your business and your career but for your finances as well.
So plan your taxes properly, and file and pay on time.
These days, you can also do all of it online to alleviate the stress and manual work.
All these tips might sound overwhelming and daunting. These can take time, effort, and discipline. But we know for a fact that it’s all worth it. After all, who doesn’t like to escape from financial stress?
In case you need some motivation to get through, here are some important reasons why you need to pursue financial freedom:
- You can have control over your own life, time, and money
- Greater financial security
- Less reliance on minimal payments from employment
- Peace of mind
- More time with family, friends, and personal hobbies
- Early retirement
Let’s jumpstart your journey to financial freedom with Beppo!
Beppo is an all-in-one financial mobile app that can help freelancers achieve financial stability.
Beppo offers a simplified platform where freelancers can transform their finances by managing everything in one place!
You can finally say goodbye to multiple applications and DIY methods. Because with Beppo, you can now manage your cash flow, send invoices, receive payments, track, file, and pay taxes, and join community groups all at your fingertips.
Here are the features you should explore on the Beppo app to stay on top of your finances:
- Cash book – Track and manage all accounts payable and receivable easily
- Tax Projection – Take the guesswork out and view your estimated taxes based on the entered transactions in the app.
- Budgeting – Build stronger financial habits by efficiently planning, managing, and sticking to your budget
- Invoice – Get paid right on time when you create and send professional invoices to your clients via SMS, Messaging Apps, and Email
- Community – Connect & engage with other Beppo users to catch up with the latest trends, topics, industry insights, and app updates
Connect with Beppo to know more: https://bit.ly/bookacall-beppo. Or visit our website https://beppo.com.