Freelance Life: How to Achieve Financial Freedom

by | Jun 3, 2019

The freelance tribe is growing in numbers. According to an annual report “Freelancing in America,” which was released by Upwork and the Freelancers Union, about 57 million people in the U.S. are part of the freelancer workforce. The good news is that 61 percent of freelancers say they started the self-employed route by choice, rather than necessity.

While some prefer the life of solopreneur (raises hand) it leaves freelancers without company benefits and employer-sponsored retirement plans. Plus, they need to deal with a variable income.

When it comes to money, the freelance life isn’t typically depicted as life on easy street. You’ll get more jaw drops than head nods when you mention full-time freelancer gig and that *gasp* you have a retirement account.

Just because you are a freelancer doesn’t mean you have to be financially vulnerable or stressed out financially all the time. Here’s a mix of budgeting tips and money tactics to help you reach freedom from financial stress when working for yourself:

Sock Away Money for Uncle Sam

“If you consistently set aside 30% to 35% of each paycheck into a savings account, you will always have money available to pay your taxes and will not be overwhelmed when the taxman cometh,” says Emily Guy Birken, personal finance writer and author of End Financial Stress Now.

“In addition, if you have any money left over in this account at the end of the fiscal year, you can roll it over into your excess income savings account for the following year.”

Put Income into a Separate Savings Account

After you’ve set aside a percentage toward your taxes, make it a habit to put the remaining income into a savings account, recommends Guy Birken. “Anytime you feel flush, put as much ‘excess’ as you can in a second savings account. This ‘excess income savings account’ will become the account from which you draw your monthly salary.”

Draw a monthly salary from the excess income account for your baseline budget (which we’ll get to next). For discretionary purchases — eating out, going out to the movies, clothes, and personal items — you can determine from month to month what you can afford from your incoming checks.

Figure Out Your Baseline Budget

Your baseline budget is the bare minimum you need each month to cover rent, utilities, groceries, and the other items you need to survive.

“Compare your baseline budget amount to how much you have saved in your ‘excess income savings account’ to see how many months’ worth of your baseline budget you have set aside in this savings account,” says Birken. “It’s a good idea to plan for three to six months’ worth of your baseline since that can relieve a lot of your anxiety if you’re having a slower month.”

So if you need $2,500 a month for your barebones living expenses, aim to save anywhere from $7,500 to $15,000 in your savings account.

Get a Month Ahead

This is probably one of my favorite tactics to ease the money stress. At the end of a given month, I’ll have enough in my bank account to cover my living expenses for the following month.

It sounds like a major task, but you hypothetically do this once. Let’s say you need $3,000 to cover your rent, bills, food, and whatnot. You set up a separate savings account with a one-time savings goal of $3,000. See if you can tuck away extra funds from the cash received during your birthday, or when you’re having a great month income-wise.

Link Bills to Payments

When you have money coming in from a handful of different clients by way of varying payment methods (i.e., credit card payment, PayPal, and ACH) automating bill payments might seem impossible — but you can still take on money management strategies.

When I took the leap to full-time freelance about four years ago, I thought I had to let go of automating payments for all my bills, which worked like clockwork. Cue the #sadface. But through the magic of getting a month ahead, I was able to sync up auto payments without a hitch.

Another way you can stay on top of your auto payments is by linking payments from certain clients to specific bill payments. For instance, a few clients always pay on the 15th of the month. Because that’s money I can typically rely on, I connect a few bill payments to those specific payments.

Create a Freelance Work Co-Op  

Remember, freelancing doesn’t mean you need to do everything on your own. My freelance colleagues and I refer jobs quite frequently and have created an informal work co-op of sorts.

How it works: If one of us is too busy or has a lead on a job that isn’t the best fit, we let our freelancer tribe know. We let the word out via Facebook groups, emails, and Slack channels. It’s a win-win. I get to help my freelancer pals find work, and other times they help me. out in some fashion. Landing enough work to cover your bills is a top priority, so passing along a job lead is one of the best things you can do to help your colleagues with their finances.

Reassess Your Business Expenses

As a writer, I essentially only need a reliable computer and wi-fi access. All other expenses are subject to scrutiny. This includes everything from traveling to conferences, cloud accounting software, cloud hosting, and online data backup.

At least once a year I’ll reassess my business expenses to see which ones are necessary, which ones actually help with me run my freelancing business more efficiently, and what can help boost my bottom line. I’ll also spend a bit of time shopping around to see if I can snag a better deal.

Yes, it takes a bit of work and discipline to create a system and employ some approaches. But not feeling constantly stressed and anxious about your money situation as a freelancer will be well worth it.

“This kind of money chore is like doing your laundry,” says Birken. “It’s a weekly chore that tends not to be anyone’s favorite, but it makes daily life a lot less stressful since you don’t have to scramble to find a clean shirt or to figure out how to get your rent paid.”

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