Now that I'm a young adult living outside of my parents home, I'm starting to realize that while money may not buy happiness, you need a lot of it to pay for the things to keep you going.
How do freelancers manage their finances?
Managing your own income can be a difficult and stress-inducing task, but it's important that you track your spending and set finance "goals" for yourself before your freelance work begins. Being your own boss can be difficult, as you have to determine what amount you deserve for the hours it takes to complete each individual project.
It's a good idea to create a spreadsheet detailing how much you expect to need each month for all necessities; Software, electronics, travel, rent, etc. Try to get a better understanding of your monthly spending habits, and plan-ahead for set-backs and emergencies.
Tips & Tricks
There are many suggestions and pointers on how to efficiently manage your money as a freelancer, but we don't have all day, so I compiled a list of the most important tips to help get you started:
Create an Emergency Fund - I've said it twice now, but it's so important I'll say it one more time: CREATE AN EMERGENCY FUND. Everyone should have an emergency fund, but when you're working for yourself it's important to realize that things will not always be easy or go according to plan. Being a freelancer means that you wont consistently be bringing in money every month the way you would with a salaried job. To insure that you can live healthily if unforeseen issues arise. It's recommended that you put away at least enough money in savings to last you a year before venturing off on your own.
Project your monthly income and expenses - Track your monthly expenses and create a budget based off of your research. How much will you need each month for basic living expenses? Create a household-budget, and a balance sheet to help with determining cost-of-living. Play your averages (take yearly income and divide by 12 to determine your monthly budget) and expect the worst. As stated before, being a freelancer means your work-flow will be inconsistent. Expect lulls in work-flow and plan for these times accordingly.
Use software/applications to help with budgeting/spending overviews - There are many budgeting software's available to the public that are free, easy-to-use, and very beneficial to those who need to track their spending habits. The budgeting software Mint, for example, works on all PC and mobile platforms, and is a one-stop-shop for all financial information. It's easy to set-up an account using your banking information, and once set-up will give you up-to-date information on your banking account, upcoming bills, and credit cards. Best of all, it's free! Mobile Apps like Expensify take money management a step further by offering the ability to scan receipts and save purchase details, as well as track your distance traveled by odometer, allowing freelancers to determine the miles/time it takes to travel to a job site.
How do you manage YOUR money?
I'd love to say that I have accountant-level skills at managing my finances, but as a student in college and a young-adult, it really can be difficult to create budgets and plan-ahead. After doing my own research (and because I will be in the freelance-field soon) I took a lot of the advice I read to heart. Managing your money can be difficult, but it's another important step in adulthood. Even more so when you're trying to become your own boss.
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