Wednesday, September 5, 2018

Managing Your Money When You Work As A Freelancer

If you’re of the millennial generation, it can often feel as though the world of work and finance are stacked against you. It can feel as though your job never quite pays enough for you to live off. It can feel as though even though your lifestyle is modest and the little luxuries you can’t bear to part with are far from extravagant you keep sinking deeper and deeper into a financial black hole and your credit score is increasingly ruinous. Moreover, it can feel as though you’ll be stuck in the same dead end job forever, unable to progress in your career and earning a wage that means less and less in real terms with each passing year as the landlord inevitably hikes up your rent and inflation pushes the cost of living an inch further out of your grip.



The good news is that you’re not imagining things. The deck really is stacked against you, especially if you’re from a low income family and don’t have the bank of Mum and Dad to fall back on. Corporate wage repression keeps your wages low to insulate the bottom line of the company that employs you while an exploitative and under regulated private rental sector commands a great and greater proportion of your income in order to keep the roof over your head. As opportunities for career advancement grow fewer and further between, it’s little wonder that many forsake the rat race to take their careers and their finances into their own hands as freelancers. Yet, while freelancing is a great way to reclaim your freedom and make a success of yourself on your own terms, it is not without its financial pitfalls. Becoming your own boss is great, but it is a skill in and of itself, altogether different from the skills you take to the free market that make you a living. Here we’ll look at some money management tips to help freelancers on their way to financial security…

Take steps to improve your credit score

As a freelancer you have the freedom that your friends in the 9 to 5 rat race can only dream of… But you also rarely know where your next paycheck will come from, how much it will be and how long it will need to last you. This can make planning for life’s little emergencies problematic and you may need to rely on financial products like loans or credit cards should something go awry. While you can get decent financial products even if you have a less than optimal credit rating; American readers may want to check out this CashnetUSA review, the better your credit score, the more options are available to you. So, how do you improve your credit score quickly?

A debt consolidation loan may be helpful to you. It will not only make your debts easier to manage by replacing numerous direct debits with one single repayment, it will also improve your credit score as it replaces all of your existing debts. Managing your money as a freelancer is tricky enough without the yoke of personal debt around your neck. 

Get your monthly outgoings under control

When you’re starting out as a freelancer, you’re likely getting whatever work you can in a piecemeal fashion. Some of it will be well paid, some will not. Some of your clients will be reliable, others will have to be chased down for payment. And that’s okay. Assorting the wheat from the chaff and hustling for better work from better paying clients are skills that one develops throughout their freelancing career. Nonetheless, you can mitigate your financial risk by keeping a close eye on your monthly outgoings, especially in your make or break early years. How will you do this? Three ways;

Budget
Budget
Budget!

Budgeting really works so long as you stick to it. Establish what all of your essential monthly outgoings are, establish what you need to live to a reasonable standard and use one of these household budgeting templates. If you stick to your budget, you’ll be surprised at just how easy it becomes to manage your finances, even if your income is sporadic.


Handling unexpected expenses

Despite your best laid plans, it’s entirely possible that something may go awry and disrupt all of your well managed finances. A leaky washing machine, car trouble, falling roof tiles, whatever the cause, an unexpected yet sizeable expense can prove the ruination of your precarious financial harmony. But if you box clever, you can handle this unexpected expense with aplomb. It’s simply a matter of using the right solutions.

If, for example, you have a significant payday coming from a client who has yet to make payment, invoice factoring may be beneficial to you. An invoice factoring company will give you instant payment for an outstanding invoice for a nominal fee. If you need quick access to cash, it can prevent you from needing to rely on a loan or credit card. If you do choose to use a credit card, take the time to choose the right one for your needs. Choose a card with an introductory 0% interest rate (here are some of the best ones) and make sure you clear off the debt by the time the introductory rate expires. If you’re unable to do this, it’s not necessarily the end of the world. Simply move the debt to a new card with a similar introductory interest rate. You will be charged a small fee but it will be nothing compared to what you save in interest repayments. 

Don’t forget your tax commitments

It’s absolutely essential that you set aside enough of your income to honour your tax obligations for the financial year. An accountant will be your greatest tool in preparing your finances for HMRC inspection but ultimately the responsibility for paying your taxes lies with you. Not your accountant, not HMRC but you. However, a good accountant will usually save you more than they cost!

Finally, be wary of the dangers of overcommitting, especially in your first few months. Sure, you’re hungry to prove yourself and eager to keep the money coming in… But if you burn yourself out the quality of your work, and your reputation, will inevitably suffer. 

Do you have any tips on managing money as a Freelancer? Post them in the comments below!

16 comments:

  1. Budgeting is definitely key! And I agree that controlling your debt (or not having any at all, ideally!) is essential as well.

    -Jennifer
    https://maunelegacy.com

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    1. I wish I didn't have any debt, lol, but it happens. Getting under control early and budgeting and planning so you can get it paid down will definitely help!

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  2. Recently two of credit bureau were sued for lying to customers and that should give you insight about damages this has done to a lot of us.Before i came across freedom_hacking [at]hot mail .com ,my recent survey shows that men with credit score challenges are more than women.
    My ex wife till the divorce had her score too good before she took off,and since then i have do away with late payments but recently i got a letter from collection that im being garnished for her debt and the decree states she is solely responsible for that bill which made me put her on call and during the conversation i got to know she has been bankrupt, $9000 repo which will be settled by me.
    i am with a mortgage of $970 that has been late,went into collections which has impact on my score,all this are set backs for a good credit achievement
    i am indebted to Freedom who came to our rescue by shooting up my score,all payments paid,repo removed in a matter of days.
    it can only get worst if you allow it,no one will be liable to your ignorance.whatever way or method used is not necessary but the result achieved.

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    1. Yes, I remember when those credit bureaus totally messed up. It's not fair to a lot of people and hopefully they will fix their mistakes and make it right with everyone. I'm glad you were able to work your problems out!

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  3. Budgetting is very important. I found this post informative. I will have to share it with my fellow freelancers.

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  4. Really helpful post. Budgeting is definitely key and invoice factoring wasn't something I knew about before. Great to have this option.

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  5. budgeting is so important. Thankfully I haven't had to use factoring but it is a good option if you really need the money and can't wait.

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    1. Yes, I haven't perfected the budget part yet but practice makes perfect! I am much more focused now that my freelance business is taking off!

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  6. This is an excellent post on a timely topic for freelancers. I am in my 11th year, and I still haven't really mastered managing my money, because, as you said, income for a freelancer is typically inconsistent. Fortunately, in March, I got hired for a full-time remote position with a SALARY, of all things, and get paid bi-weekly. So I'm really just at the beginning stages, over the past few months, of having a real budget that actually works.

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    1. I *almost* miss those salary days but I truly love the freedom of freelancing! That is so awesome for you, though. I have been looking into remote options as well. The inconsistency is frustrating and scary, but like I said, the freedom with freelance outweighs that, for sure. Thanks so much!

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  7. Budgeting is something I've started working on as a freelancer

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