There are several ways to get off the freelance financial roller coaster. As a freelancer, you're responsible for your own income. You have to find your own clients, and you have to make sure there's enough work each week or month to pay your bills. You understand income fluctuations better than any other professional. For that matter, you can earn a lot of money this month and very little next month. However, there are ways to get off the freelance financial roller coaster.
1. Build a Solid Emergency Fund
Building a nice cash cushion is one of the best ways to get off the freelance financial roller coaster. With money in the bank, you can keep your head above water whenever you experience fluctuations in income. If you lose a client, stop working because of an illness, or if you take a vacation, funds in your savings account can cover expenses until you get back to work.
2. Set Aside Cash for Taxes
As a freelancer, it's important that you remember to set cash aside for taxes. If not, you'll get hit with a huge tax bill, which can set you back financially. Work with an tax preparer or CPA to determine the appropriate percentage to save, and make sure you save receipts to write-off business expenses. Also, make quarterly tax payments to avoid penalties.
3. Increase the Hours You Work
Freelancers can set their own hours, and you can work as little or as much as you like. You might discover that you work less than the average worker. Although you love the flexibility, not working a full schedule each day can impact your income. If you're having difficulties making ends meet, increase the hours you work.
4. Look for Higher-paying Opportunities
Unfortunately, some freelancers throw in the towel and return to the 9-to-5 grind because they're not earning enough money. But if you raise your rates, you might generate enough income to continue freelancing. Begin searching for larger clients, and gradually raise the rates for current clients. You work hard and deserve to get paid your worth.
5. Pay off Credit Card Debt
A credit card offers a financial back up plan. But you'll need to keep credit card debt to a minimum. If you owe thousands on your cards, high minimum payments make it difficult to make ends meet each month. Only use a credit card for an emergency, and only if you can pay off the card each month.
6. Live beneath Your Means
It's difficult to forecast your income as a freelancer. To make this easier, live beneath your means. Therefore, it's easier to save money, and if you lose a client, your personal finances won't crash and burn. Plus, your financial life will be a lot less stressful.
7. Have Multiple Baskets
Even when a single client pays well, it's dangerous to rely on one income stream. For that matter, make sure you have multiple clients. This way, if you end a working relationship with one company, you'll still have income to cover your expenses.
Being a freelancer can provide the life you've always dreamed of. You can set your own schedule, work from any location and control your income. But income fluctuations can be a roller coaster ride. If you're a freelancer, what tips can you offer?