Freelancing has become one of the primary ways to earn money for a wide range of people. Especially after the pandemic. However, unlike a job, freelancing doesn’t have job security. As a result, your earnings don’t always stay the same, and it fluctuates month by month. Hence, it is extremely important that you manage your money wisely. But most freelancers are not aware of how to manage their funds.
That’s why in this article, I will be sharing 5 money management tips for freelancers. So let’s quickly get into the topic:
5 Money Management Tips For Freelancers
1. Know Your Expenses And Income
It is extremely important to know how much you are earning and what your expenses are. Only then you will be able to spend and save your money wisely.
You should always keep a record of the invoices you are issuing to your clients and how much you are getting for your freelancing job.
Then track your expenses. Tracking down expenses can be tricky. As unwanted expenses might come at any point of time.
For instance, there are certain bills that you pay each month such as your internet bill, cell phone bill, electricity bill and others. These expenses are fixed.
But sometimes, there are unwanted expenses too. For instance, if your laptop gets damaged and you need to repair it or you fall sick.
Also, often people spend on things that they don’t really need. And by keeping a record of earning and expenses can help you limit your expenses. So you will get to save more.
2. Invest In Crypto
In some months, you are going to earn more than what you need and spending that extra money isn’t really a good idea.
Instead, you should invest in something that fetches you high returns. There are way too many investment options available out there.
However, my favorite one is investing in crypto. Why? Because it gives you high returns within a short period of time.
For instance, Solana was priced at $14.20 on March 21, and by November 7, 2021, it was priced at $258.76. So if you had invested a few dollars in that crypto coin, you would have made a lot of money by just investing in crypto.
But we also cannot deny the fact that the crypto market is highly volatile. However, there is a hack that protects you from volatility. You can simply lend out your crypto funds and earn interest on your assets.
For instance, Celsius Network (A popular crypto lending platform) offers you 17% yield on your crypto holdings. All you have to do is hold your assets on their platform for a certain period of time. If Celsius Network is not available in your country, you can try some similar crypto interest platforms which are available in your region.
This is surely a good idea when you are looking for long term investments and earning some extra interest on the go.
3. Separate Your Professional and Personal Accounts
Many experts suggest that keeping a professional and personal account separated is a wise idea. This way, you will easily be able to track the financial health of your work and be more organized.
To separate your professional and personal accounts, here are some tips that you can follow:
- Track Work Expenses: With a separate business account, you would make transactions that are relevant to your business. This includes all the expenses that you need to pay to run your business, like internet bills, telephone bills, and others.
- Make Taxes Easy: With separate records, it will be super easy for you to fill out your taxes. As there is no need to go through different accounts to track your expenses and earnings. Also, in most cases, freelancers don’t really pay taxes. But it will come in handy when you are going to fill your self employment taxes.
- Keep Business Processes Streamlined: Keeping accounts separated really helps you to keep your business streamlined. If financial difficulties arise, a solid list of records cannot be debated or doubted. Plus, you can easily collect payments from your freelance clients and easily track your earnings.
4. Save For Emergencies
You must save for emergencies. As you already know, being a freelancer, your earning isn’t consistent, nor do you have job security. Your earnings fluctuate month to month. As a result, when an emergency arises, you might not have the funds to deal with it.
Hence, you must save for emergencies. An emergency fund will help you pay your bills like medical bills, repairs, natural disasters and so on.
It is recommended that you save enough for at least 3 to 6months period of expense. So no matter what financial situation you go through, you will be under control.
There are different ways to save up for emergencies. Many people invest in stocks which grow their money. Plus, you have the ability to withdraw your funds at any moment. Also, some people keep their money in a separate bank account.
5. Choose A Budgeting Strategy
Lastly, you should have a budgeting strategy. Freelancing earning isn’t consistent. Hence, creating a helpful budget and following it will ensure that you are not losing out on funds.
As there is no surety on how your job or how much you are going to earn from month to month, having a strict budget will help you a lot in the long run.
To create a good budget, you can follow these tips:
- Base your idea of possible earnings on a monthly income basis.
- Calculating the average monthly income will allow you to have a better idea of what and how to budget.
Also, you can follow the 50/30/20 rule. In this case, you can keep 50% for essentials, 20% for savings, and 30% for non-essentials.
So those were some of the best money management tips for freelancers. I hope this guide will help you to manage your money in a better way. Also, if you have any more questions to ask, then do feel free to drop a comment below.