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The financial highs and lows of freelancing are real.  Learn how to budget as a freelancer with these 5 tips to help you navigate through those times.

How To Budget As A Freelancer

Whether you’re just getting started or an established freelancer, you’ve likely experienced (or at least thought about) the financial ups and downs that come with freelancing.  Planning a schedule for consistent income can be tricky.  There are factors that are sometimes out of your control that can impact your bottom line each month.

But, what if you could plan ahead for those unexpected setbacks?  Once you learn how to budget as a freelancer, the unknown becomes less scary and more manageable.

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As a freelancer, it’s critical to understand and get a handle on your budget and finances early on.  Budgeting as a freelancer is way different than when you work a traditional 9-to-5 job.  If you fail to do this and your finances suffer, feelings of desperation can take over.  Legitimate worries like how you’ll pay for housing, food and other basics will fill your days.  Desperation is not a good place to operate from.

Desperation makes you feel vulnerable.  And, feeling vulnerable can mean that you’re not making the best choices for the projects you accept and work on.  You can get stuck in survival mode, and never experience what it feels like to get paid what you deserve for your skills and services.

However, by following a few tips, you can help steady your budget so that the lean times don’t feel so menacing.

Establish An Emergency Fund

Everyone should have an emergency fund.  Period.  The oft cited rule of thumb is 3 to 6 months worth of expenses.  However, if you are the sole breadwinner in the household, you might want to plan for at least 6 to 12 months of expenses.

This sounds like a lot, even if you live frugally.  But, I wouldn’t have been able to make the leap to full-time freelancing without a robust emergency fund.  More importantly, I wouldn’t have even done son had I not had one.

As a freelancer, an emergency fund has served a dual role for me.  First, it functions as an actual emergency fund for those unexpected expenses (think car repairs, etc.) that eventually show up.

Secondly, having an emergency fund has helped me to financially sail through those times between contracts, or if a payment is delayed.

So, if you have an emergency fund already – congrats!  If not, it’s time to figure out how much you need to have to feel comfortable.  Then, craft a plan to start saving and get on it.

Figure Out Your Real Monthly Budget

Notice that this section says your real monthly budget.  Why?  Because if you’re like most people, there’s your budget and then there’s your real monthly budget.  Know what I mean?

Our budgets can contain a fair amount of fluff.  Do you really need that daily fancy coffee?  Could you treat yourself to one a week, and make coffee at home the rest of the week?

When you figure out your real monthly budget, start with the absolute expenses.  Things like housing, food, utilities, transportation, and health care.  Then, add in any extras like eating out, entertainment, etc.  This will help you sort out the needs in your budget from the wants.  Once you have a grasp on your real monthly budget, then move to the next step.

Determine What You Need to Earn

Your real monthly budget total is what you need to earn each month.  This may include only your essential needs, or it may include a few extras.  It’s up to you, but your budget should help inform you about how much money you need each month to meet those needs and wants.

I take my monthly budget and divide it by my net average hourly rate.  The figure gives me the minimum number of hours I need to work that month to meet my budget.

Establish Multiple Income Streams

In my opinion, the best way to create a buffer between your finances and the ups and downs of freelancing is to establish multiple revenue streams.

Things like a blog or an online shop can provide another revenue stream that you can lean on when you’re between contracts or waiting on payment.

If you don’t have an online presence for your freelance business yet, consider starting a blog Not only can you monetize your blog over time to create another income stream, but it also serves as a platform for you to write about your field of expertise and showcase your skills to potential clients.

Turn your hobby into another source of income with an online shop.  Platforms like Etsy are great if you like to make and sell things online.

It’s worth mentioning that I’m not a fan of the “Just start a blog, online shop, etc., and you’ll be rolling in money in no time!” suggestions.  Starting a blog or online shop takes time and effort to turn them into revenue streams.  However, I do believe in the potential of these to create alternate income streams that can really help freelancers feel more secure about their finances, and that’s why I think they’re worth considering.

Review Your Business Plan

Do you have a business plan for your freelance business?  (Sorry, but hoping things will go great is not a plan.)

Your business plan is instrumental in budget planning as a freelancer.  You need to know things like:

  • What your hourly rate range should be?
  • How much contract work is available in your field?
  • How will you secure some of this work for yourself?

All of these things, and more, factor into planning your freelancer budget.  Some questions to consider are:  Are you short-changing yourself on your hourly rate?  Can you reasonably ask for more?  Is there more work available in your field, than available freelancers to work on those projects?  How easy or difficult is it to obtain projects?

You might be wondering, “How in the heck am I supposed to know all of this as a new freelancer?”  Excellent question!  And, one that I had, too, starting out.  Job boards like Indeed are good resources to find contract roles.  Sometimes, you’ll even see rates posted.  You can compare the skill criteria to your own, and start to get a feel for what you can charge.

If you don’t have a LinkedIn profile yet, consider getting one.  It was the best thing that I ever did for my freelance career, and is another great resource for contract roles.

Once you have a feel for what you can charge, how busy you’ll typically be with projects and how challenging it is to land new projects, you can decide if you can (or should) charge more.  This can help tremendously with your monthly budget expectations, as well as how many hours you can devote to project work.  The more you’re able to reasonably charge, the fewer hours you need to work each month to meet your budget.

Budgeting for freelancers is much trickier than budgeting with a traditional job.  But, it doesn’t have to be daunting.  A little thought and planning can help you navigate the uncertainty with ease, and focus on bringing your best self to your work.

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