Personal Finance Apprentice

How Freelancers Can Make the Most of Their Income

How Freelancers Can Make the Most of Their Income

How Freelancers Can Make the Most of Their Income

Everyone financial situation is different, and this mean it’s necessary to have your own approach to your personal finances. And today we have guest blogger Maricor to share with us tips for freelancers.

For freelancers, making the most of their income can be tough.

The main reason for this is because a freelancer’s monthly income tends to be incredibly inconsistent. On one month it could be a significant amount, and on another it could only be fraction of the previous months. This inconsistency can lead many freelancers to overspend on some months and have to borrow money on others.

While there’s nothing wrong with borrowing money, there are certainly better, smarter ways freelancers can manage money. If you’re a freelancer struggling with this same situation, perhaps it’s time you made a change.

Paradigm Shift

The first thing you need to do in order to better manage your money is to realize that this shouldn’t be the norm. You shouldn’t have to keep switching between overspending and underspending. You can achieve financial stability, but there are certain things you’ll have to do.

Paying what’s due

One thing you need to do is to make sure you’re able to pay your monthly dues.

While your monthly income may be unpredictable, your expenses aren’t. Many of them come in like clockwork every month: rent, bills, insurance, groceries, and many other things. And all of them need to get paid on time.

Paying them shouldn’t be a problem when your income is high, but what about those months when it’s low? To make sure you’re always able to pay those monthly dues, you need to make them a priority.

First, write all your expenses down. Things like utility bills, rent, food, health insurance and the like can be grouped together as one under “living expenses”. Next, there’s taxes, which should be around 20% of your income. But what is your income? You can get a rough estimate by basing it on your total annual income from last year, divided by 12.

Apart from taxes and living expenses, you also have to spend for two other things: retirement and emergencies. While being a freelancer does mean you’ll do most of the work at home, you really can’t guarantee that you’ll be doing it forever. So make sure you save up for retirement. And an emergency fund ensures that no matter what happens- be it a broken leg or a busted pipe- you have money to spend for it.

Now that you have all these categories and know exactly how much each of them need every month, turn them into bank accounts (or brown envelopes if you prefer to go old school) and make sure you put in what is required by them every month. If you have a particularly high-income month, put in a little extra to make up for the low-income ones. Whatever is left from “paying” these accounts, that’s what will be spent for less urgent purchases, such as dinners out, a new phone and other such splurges.

Maximizing Income

Whatever is left may not be ideal for you, but you can certainly change that. You can choose to cut out some of your less urgent expenses like those dinners out, or you can lessen them. For instance, you can minimize your utility bills by conserving water and energy.

Of course you could also choose to grow and maximize your income by making investments. You could purchase hardware or software beneficial to your business, or invest in training that could boost your business offerings. You could also choose to increase whatever income you have by setting financial goals. You could make it a goal to increase your fee incrementally, or increase your number of clients. Whatever goal you set for yourself, make sure that it is achievable and it won’t put too much pressure on yourself.

A freelancer’s income may be inconsistent, but that doesn’t mean it isn’t sustainable. With the right practices in place, you can max

Author’s Bio:

Mari writes for Loansolutions to help educate people in making informed-decisions on taking out loans and becoming responsible borrowers. Being the COO, she feels it is her social responsibility to do so. Learn more from her as she shares tips, advises and stories on finance. Also, she’s fond of 9GAG, so you might read some random stuff over here.

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photo credit: W! via photopin (license)

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