For new freelancers and veterans alike, juggling your income can be a challenge. While the benefits of working on your own are certainly appealing - flexibility, independence, and tax deductions, to name a few - managing your checkbook on an inconsistent income isn't one of them. That's not to say that it can't be done. With a little foresight and some thoughtful budgeting, you can lead a steady, stable life on a freelance income.
These quick tips will help get you started:
1. Put Yourself on a Budget
Although you may hate the "B" word, it's actually one of the best ways to get control of your finances. Use an online service like BudgetTracker, PearBudget, or even an old-fashioned pen and paper and list your estimated income in one column and your expenses in another. Don't spare any details, and be conservative in your estimated earnings. Then, evaluate the numbers with a keen eye. If you're spending more than you're bringing in, it's time to start trimming.
2. Cut Personal Spending After Off-Months
While there are obviously fixed costs in your monthly expenditures that you can't afford to cut, there's plenty you do have control over, namely what you buy on a daily basis. Cut back on personal purchases during and after your lighter months. Keep that money in reserve to cover your essentials, and when the cash starts to flow back in, you can buy the items you had to put on hold. Or, if you can resist the urge, put that money into savings.
3. Reduce Monthly Bills
Reduce your monthly bills as much as possible. Make your home more energy efficient. Cut back on your cell phone minutes and data plan. Bundle your cable, internet, and telephone services into a single discount package, and always shop around for alternatives. Competition for your business is fierce right now, so you're doing yourself a disservice if you don't push to find the lowest prices out there.
4. Consider Using Cash Only
Another way to keep spending in check is to pay solely with cash (or your debit card) whenever possible. This can protect you against potentially damaging credit card debt. Only bring what you need for any given day, and leave your credit cards home - except for a low-limit card to keep on-hand in case of emergencies. If you don't have it, you won't use it.
5. Don't Over-Celebrate After Good Months
Don't over-do your celebration after you've had a good month. Direct a portion of this windfall to your emergency fund (or start one if you don't already have one in place), or put your surplus somewhere safe for a long-term investment. Consider a savings account, mutual fund, or, for long-term planning, a retirement fund or college fund for your children.
The benefit of a flexible schedule and the ability to work from home is enough to tempt anyone into a freelance career. Just make sure you take an realistic approach to your financial planning, and see those plans through.
What are your thoughts on budgeting for a freelancer career?
David Bakke is a freelancer and small business owner who also writes about money management, technology, and online media on the blog, Money Crashers Personal Finance.