When you start out as a freelancer, long-term financial health isn’t usually top of mind. You’re too busy trying to land gigs to cover next month’s bills. Freelancers are often so focused on surviving from month to month, that they overlook long-term financial security. If you want to escape the financial anxiety of survival mode, then you need a plan.
1. Set a Financial Goal
Setting a financial goal is the first step toward financial security. If you don’t have a clear financial roadmap, how will you know what you want to achieve? Your financial future involves more than just one goal. Take stock of your current situation and list specific goals, such as:
- Saving 10% of your income. Many financial experts preach about paying yourself first before paying anything else. Aim to save 10-20% of your income every month. If your freelance income is currently meager, you may feel that you can’t afford to save. Do so anyway, even if it’s just $20 a month. You’ll establish the habit and can increase it as your income grows.
- Creating an emergency fund. If your car breaks down, your HVAC system needs repairs or a plumbing emergency strikes, will you be able to fix it? An emergency fund will see you through an unexpected crisis.
2. Reduce Expenses
Take a ruthless approach to your expenses such as heating bills, retail spending, entertainment, and insurance (medical, home, and car). Especially during the summer and winter seasons, when you may have to pay hefty energy bills, it seems essential to cut costs. How much heating oil will you use? How can you reduce air conditioner usage? You may need to find answers to these questions in order to reduce your utility bills.
A little forethought can also save money in the future. For example, does your car insurance include accident forgiveness? According to The Zebra, car insurance can increase by $617 in the first year after a claim and up to $1,861 by year three. Accident forgiveness can avoid a nasty jump in premiums should you claim for an accident.
3. Lower Your Debt
If you’ve reduced your expenses, you can put the extra money saved towards debt. If you don’t have much debt, then funnel it into your savings.
Debt is stressful, especially if you’re a new freelancer and your income is sporadic. Once you skip paying a bill, it becomes harder to catch up. Put a plan in place, like the debt snowball method, to pay off credit cards, personal loans, auto loans, and student loans.
Be diligent about paying your minimum balances so you don’t fall behind. Use some of your disposable income to make bigger payments whenever possible. If you pay off one debt, use the freed-up money to pay off another debt faster.
4. Use Easy Invoicing Software
Invoicing as a freelancer is much different than invoicing as a corporation. So, using software built for large corporations as a solopreneur does not make much sense. And, why would it?
Instead, use a software like Harlow that is built for freelancers by freelancers. While hosting a suite of other features for freelancers, Harlow has an organized invoicing dashboard, and allows integrated payments. Use an easy invoicing software to make your invoicing simple, automated, and straightforward. Not a stress-inducing chore.
5. Take Out Disability Insurance
As a freelancer, you’re a solopreneur. Should you be unable to work for a long period, there’s no one else who can keep the business going. How will you cover your monthly expenses?
Disability insurance can cover a loss of income if you suffer a long-term illness or disability that prevents you from working. You can choose cover for a specific period like 12 months or up to retirement age. You can also choose how much of your monthly income you want replaced during the time you are laid up – 50%, 75% or 100%.
If you don’t want to take out an insurance policy, you can cater for this in your emergency fund. Calculate your monthly expenses and save enough to cover your expenses for at least 3 to 6 months or longer if you can. Planning for life’s unexpected curveballs gives you peace of mind.
6. Hire a Financial Planner
If you want to take financial security to the next level and create wealth, then consult with a financial planner. A financial planner can advise on the best investment funds. There are a lot of options out there from bonds to stocks and even Bitcoin. There are also a lot of shady schemes you can unwittingly fall into. That’s why it’s best to seek guidance from an expert. Creating wealth is a long-term process that requires time and patience.
7. Do Retirement Planning
Unless you intend to work forever, you should plan for retirement. When you worked for an employer, money was deducted from your salary to go into a retirement fund. Why should it be any different now that you’re working for yourself? Consider this part of your standard monthly deductions just like it was when you were a salaried employee. It’s a crucial part of your financial security in the future.
You can consider this example to understand the importance of financial security during the golden years of your life. Suppose, during your retirement, you end up having no one by your side to look after you. Since this is the time when you would be prone to suffering from ailments, you would need someone to be by your side. In this case, you would need to either hire an in-home caregiver or relocate to Chelsea Senior Living. But if you don’t have enough funds, how would you support this lifestyle? That is why it is crucial to plan for the future! You surely do not want to end up suffering alone.
That is why, freelancing could be a great way to make some extra money. Keep in mind that it doesn’t have to mean riding the feast or famine rollercoaster. Financial security is possible but will involve some time, sacrifices, and dedication. It requires a broad strategy that covers both short-term needs and long-term goals. It won’t happen overnight but taking one small step today puts you on the path to a better financial tomorrow.
The post Make Finances Easier As A Freelancer appeared first on Personal Branding Blog – Stand Out In Your Career.
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