Budgeting for Freelancers - How to budget yourself

Grass is always greener on the other side. While you are in a corporate job, the life of a freelancer may make you green with jealousy. After all, there is the talk of freelancers being masters of their own time, work, clients and money. They can work in their pajamas, and can even get to choose which clients they can work with. Sounds like a dream, right?

The reality is very different. Ask and freelancer about their financial situation and most of them will nod sadly to tell you that all is not well. There are frequently months where there is no income, and there are months where there is just an exhausting amount of work to do. This is the feast and famine cycle which many freelancers face.

And here is the problem with this feast and famine cycle. Let’s say that a freelancer is new to the business. He starts pitching and after a few weeks or months he gets a couple of clients. These are one-off gigs and are over soon. That means he needs to look for new clients again. In the beginning, he still has some capital to get him through the lean months, but when this feast and famine cycle keeps repeating, not only does he depletes his savings, but also his will to save.

When he does not have work, he keeps dreaming, thinking and planning to get gigs. And when work comes on his way and earns his pay, he spends it almost completely. This is because after periods of no work, he needs to give himself psychological satisfaction by spending. Due to this, freelancers find it harder to save up.

Everyone needs to budget. Same is with freelancers. However, for them budgeting is doubly hard due to irregular paychecks. To help you budget as a freelancer, here are some tips.

• Track the cash flow: When you are in a corporate job, you know exactly how much you’ll be getting and when you’ll be getting it. In freelancing, how much you make varies from one month to another and for some, payments are delayed frequently. For them, it is more of a guessing game. However, you can turn around the tables by tracking the money coming in from each of your transactions. Track things like the assignment itself, the date your client is invoiced, and when the invoice was paid. When you do this, you won’t lose money. Also, use a planner for taking care of your business and personal expenses.
• Set your financial priorities: For best results, use the 50/30/20 budget to allocate your income, even if it is irregular. According to this, you give 50% of your income on needs, 30% on your wants, and 20% on your investments and savings.
• Keep it simple: Don’t just start off big only to abandon your plan. Start small. Take baby steps when adopting any plan.

Budgeting for Freelancers - Best 3 Tips to Budgeting for freelancers

Grass is always greener on the other side. While you are in a corporate job, the life of a freelancer may make you green with jealousy. After all, there is the talk of freelancers being masters of their own time, work, clients and money. They can work in their pajamas, and can even get to choose which clients they can work with. Sounds like a dream, right?

The reality is very different. Ask and freelancer about their financial situation and most of them will nod sadly to tell you that all is not well. There are frequently months where there is no income, and there are months where there is just an exhausting amount of work to do. This is the feast and famine cycle which many freelancers face.

And here is the problem with this feast and famine cycle. Let’s say that a freelancer is new to the business. He starts pitching and after a few weeks or months he gets a couple of clients. These are one-off gigs and are over soon. That means he needs to look for new clients again. In the beginning, he still has some capital to get him through the lean months, but when this feast and famine cycle keeps repeating, not only does he depletes his savings, but also his will to save.

When he does not have work, he keeps dreaming, thinking and planning to get gigs. And when work comes on his way and earns his pay, he spends it almost completely. This is because after periods of no work, he needs to give himself psychological satisfaction by spending. Due to this, freelancers find it harder to save up.

Everyone needs to budget. Same is with freelancers. However, for them budgeting is doubly hard due to irregular paychecks. To help you budget as a freelancer, here are some tips.

• Track the cash flow: When you are in a corporate job, you know exactly how much you’ll be getting and when you’ll be getting it. In freelancing, how much you make varies from one month to another and for some, payments are delayed frequently. For them, it is more of a guessing game. However, you can turn around the tables by tracking the money coming in from each of your transactions. Track things like the assignment itself, the date your client is invoiced, and when the invoice was paid. When you do this, you won’t lose money. Also, use a planner for taking care of your business and personal expenses.
• Set your financial priorities: For best results, use the 50/30/20 budget to allocate your income, even if it is irregular. According to this, you give 50% of your income on needs, 30% on your wants, and 20% on your investments and savings.
• Keep it simple: Don’t just start off big only to abandon your plan. Start small. Take baby steps when adopting any plan.

Financial Management - How Can Freelancers Manage Their Money?

There are many benefits when you are your own boss. You can work when you want to, with whom you want to. You have the luxury of choosing your own clients, and can even work in your pajamas! In fact, working from the beach has always been the dream for freelancers!

However, at the end of the day, things are not always so good. For freelancers, life is not a party because there is a price to be paid for becoming one. First of all, income flow is uneven, and unless you pay close attention to it, you can fall into debt. Secondly, you miss out on employer benefits. Thirdly, you are the only one, on top of managing your business, who needs to manage your personal finances.

In this article, we at mymoneykarma shall help you to get your financial home in order, and will give you tips to make money by freelancing!
Track your income

The very first thing to do is to know how much you are making, or what your income is. Do you know what your income was last month or last week? Was it more or less than the previous period a year ago?

One financial expert says that freelancers have more predictable income flows than those who are not into freelancing. Most of them do not know or track their income, and feel overwhelmed when their financial situation becomes overwhelming, unmanageable and unpredictable.

On the other hand, if you do have a historic view of your income, it gets easier to prepare for the lean times of the year, especially if you have seasonal projects and repeat clients. Freelancing world can be irregular, but historic insights of your personal finance can give you some financial stability. Want to track your freelance income and expenses? Just use a separate bank account, a simple spreadsheet or a free app.
Plan to meet your tax obligations

You might be freelancing, but that doesn’t mean you can sneak away from paying your taxes. And that is one of the things which make this line or work tough by itself. It can get stressful in a hurry.

If you work in a corporate office, employers shield you from some taxes. But when you freelance, there is no such lenient shield. You’ll have to pay all your taxes yourself. But it is not so hard as it looks. Here’s what you got to do. Make an educated guess on your yearly earnings, and then make estimated quarterly payments to help you stay on track on taxes. If you can, use the previous year’s tax return as a baseline to work from.

There are, of course, things that you can deduct. These include expenses for professional development, work-related car use, and business expenses. And you can also deduct health insurance premiums, if you meet some requirements. To make sure that your tax season is smooth, learn all about the different tax rules for freelancers.
Create a budget

When you are a freelancer, budgeting may seem impossible. However, it does not have to be that way. You can use the 50/30/20 budgeting methods. In this method, 50% of your monthly income goes towards meeting your necessities post-income tax deduction, 30% towards meeting your needs, and 20% towards your savings and repaying debt.

Here are other smart things you can do:

• Stash away Rs. 50000 for emergencies.
• Save for retirement
• Pay off your bad debt first
• Don’t stop saving for emergencies
• Pay off your other debts
  

Get insured

Did you know that as much as 20% of freelancers are uninsured? And this is from a 2016 data. Today, with more and more freelancers joining the market, you can be rest assured that this percentage has increased. If you don’t have insurance coverage, you’ll have problems facing financial hardships in case of medical emergencies, health problems, and the like.

Here are your insurance options:

• Health insurance
• Car insurance
• Life insurance
  

Set competitive rates

It is always a good idea to periodically reevaluate whether or not you are compensated adequately for your efforts. According to what you find, you may need to adjust or change the price of your services. In one popular freelancing site, around half of the freelancers said they want to raise their rates the past year, and more than half opined that they planned to raise their rates the next year.

In this sense, freelancers are in a much better position. They are in control of their rates, and thus over how much they can make. This is a freedom most working people don’t have. So if you, as a freelancer, have a lot of expenses, think hard about increasing your rates.

When you earn more money, you remove financial pressure from yourself and can create a budget.

How can you be sure of which rate to have?

Talk to other freelancers. Go to sites like Glassdoor.com and see the average rate for your industry and for one of your skills and experience. When you find the average salary, break that down into hourly rate.