Working as a freelancer is liberating. You become “your own boss” by scheduling your own working hours. Likewise, as a freelancer, you can work from anywhere without being bothered by the Rat Race of 9 to 5 work. On top of that, you can choose between clients and projects. That means you can decide what project to work on and which client is not a good fit to work with.
Similarly, your finances are also in your own hands. If you have a proper financial strategy in place, you can effectively manage your money. Financial objectives like retirement plans, getting married, saving for emergencies, and buying a new house have to be the priorities of every freelancer. Nonetheless, payments are unpredictable sometimes. For example, payments may take weeks or months even if you send the invoice to your client on time.
With that said, effective management of money is inevitable for every freelancer. That is why we reached out to financial experts to see what “effective money management tips” they have got for freelancers. Here are 3 expert money management tips they came up with:
Have a Pristinely Clear Understanding of Your Income and Expenses
The first expert money management tip is to develop a pristinely clear understanding of your income and expenses. Knowing how much money you make every month is essential for developing an effective money management strategy. Once you have reckoned your income, compare it with your expenses.
Top-class financial expert and host of the money-management podcast Living Boujee and Balanced, Raquel Curtis, asserts that your monthly bills are the major factors that drain out your money. “When your income becomes inconsistent and fluctuates every now and then, reassess your monthly bills,” he suggests.
This way, you will be in a position to rearrange your monthly bills and cut off unnecessary ones. Think about your cable, internet, and electricity bills. Cut off unnecessary premium subscriptions. Consequently, this will help you in better managing your money in the longer run.
Keep Your Personal and Business Money Distantly Separate
As your freelance gig expands, you tend to outsource your offers and become an entrepreneur. At this stage, a lot of freelancers misalign their personal and business money. You won’t probably like to aimlessly float your money. To avoid that, an efficient way could be opening up a separate bank account for your business.
Sodano, another highly qualified financial expert, argues that a lot of freelancers fell into the trap of financial mismanagement due to personal and business money. “Separate personal and business accounts are inevitably essential for effective money management,” he suggests. He goes on to say, “having a separate business account helps in keeping proper track of weekly and monthly income and cash flow.”
Another effective way to separate your personal and business accounts could be to transfer all the income to your business account and pay yourself every month – assuming that you are your own employee.
Have an Emergency Fund in Place
Unexpected situations are bound to happen, as life is full of uncertainties. That is why financial experts suggest having an emergency fund in place.