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How to Manage Your Budget as a Freelancer
Read through any guide to freelancing and you’ll find plenty of advice and tips on managing your budget. One of the most noticeable differences between freelance life and a normal employee/employer situation is that you don’t get the same amount of money coming in each month.
This is sometimes referred to as the “feast and famine” scenario, and while many are aware of it when they start freelancing, they aren’t quite prepared for how up and down it would be. One month you’ll be living out of hotels and commissioning paintings of the family estate, the next I’d be eating cold beans straight from the can.
Not all freelancers will see these kind of peaks and troughs, and with a bit of luck and effort you can keep things on a pretty even keel. These are some of the ways I’ve managed to reach a financial situation that’s a little more stable, even when monthly incomings can vary.
1. Budget from your low points rather than an average
Pick your lowest or second-lowest month’s income from the last 12 months and use this as your baseline for budgeting. Chances are you’ll be ahead of yourself most months and can use the extra cash to build up savings and emergency funds. If you’re working from a monthly average instead, you’re always straining to reach that point just to break even — unless you’re getting in more and more work every month, it’s likely that your average income will go up and down as the year goes by.
Take seasonal variations and other factors into consideration — there’s obviously no point in budgeting from your lowest month if you spent most of it on holiday, for example. When the end of the year rolls around, reassess your baseline point and adjust your spending and saving habits accordingly.
2. Set aside time for business development
Pitching for future gigs and developing your business as a freelancer are tasks that can easily fall down your list of priorities, and it’s not hard to see why — they can involve a lot of time and effort for very little reward. However, they’re absolutely essential to your ongoing fortunes as a freelancer, and it’s important to get into the habit of keeping up with news in your industry, learning fresh skills and making useful contacts. A weekly or daily slot to do this can ensure future income once your current projects are finished, and it provides a change of pace from your main work too.
Exactly what these daily or weekly slots look like will depend on your field of work, but there are many different approaches to pick from. Here’s an idea I like from Jon Norris: a whiteboard full of Post-it notes. Your business development obligations are to make sure that every day a new note appears, is moved further on, or further up. It’s simple and it’s flexible, and there are plenty of other ideas out there.
3.Prioritize the regular gigs
The more clients you can get who give you regular work (or who are likely to in the future) the better. I’m not sure you ever get completely comfortable as a freelancer, but I’ve certainly felt more at ease as the number of regular commissions I can rely on have increased. Build up enough regular clients, and it’s almost like having a real job.
If you’re in a field where it’s a case of one client after another rather than several at once, you can still focus your efforts on the people who you think will need your services again in the future. Drawing up a timetable that clients can refer to or keeping them up to date with your availability can help. Sometimes, it might mean turning down new work to give you the time to focus on existing gigs that you know will prove more fruitful in the long term.