Top 5 Money Management Tips for Freelancers – Here’s What Every Beginner Should Know!
by Abdul Aziz Mondal Finance Published on: 01 December 2017 Last Updated on: 28 August 2020
If you are a freelancer, you would know that your income for every month will not be the same. There will be months where you will make a lot of money, and on the other hand, there are months where you will not be able to make so much. It is here that you need to arrange for an emergency fund and have a savings account so that you do not face problems in the future. It is crucial for you to wake up to the fact that if you have not started money management now, it is now time for you to begin.
Top 5 money management tips for a freelancer
The following are the top 5 money management tips for a freelancer that you need to keep in mind –
1. Keep track of all your expenses-
There are two kinds of expenses that you incur each month. They are fixed and flexible. When you are aware of your fixed expenses like electricity, rent, etc., you can keep money aside for them. Your flexible expenses can include your entertaining, food, etc. and they can be reduced or cut if you want to save money. When it comes to the calculation of your expenses, keep track of them for 3-4 months. This will help you know precisely where you spend money and from here you can create a budget that you should follow. Once you get an insight into your average expenses, you will get to know what your average revenue is at the same time.
2. Divide your income in proportions-
When it comes to financial goals in life, skilled investment experts say that businessmen make it a mission to save 50% of their income and divide the remainder 50% between flexible expenses and their savings. They keep 30% of their income for flexible expenses and 20% for long-term savings. Now, if you are a freelancer and wish to keep the money for long-term savings, it is essential for you to ensure that making a sincere attempt to do the same. In this way, you effectively can save money for long-term goals like retirement and education for your kids with success.
3. Be prudent with spending
Gone are the days when you were working in a job and had a fixed income. Even if you were fond of shopping, you still got a paycheck after deductions were made on your taxes, social security, etc. However, now the scenario for you is different. When it comes to freelance budgeting and spending, it is crucial for you to be wise. The temptation to go on to shopping websites and buy things for yourself is enormous. However, you need to be prudent on spending and ensure that you oversee your money. In this way, you will be able to achieve your long-term goals when it comes to retirement and savings. Ensure that you are not impulsive and spend money carelessly.
4. Saving
It is crucial for you to make a list when it comes to spending and saving. You should shop for your groceries once a week, and you can also team up with friends and other freelancers you know to make purchases in bulk from supermarkets that give you attractive discounts. If you like partying and hanging out a lot, you must reduce the urge to do so. It is crucial for you to save money on alcohol and try not to go overboard. When it comes to shops and buying the things you need, compare prices. This will mainly help you to get an idea of the places where you effectively can save money and get the things you need.
5. Keep two savings accounts
When it comes to saving money, you should keep two savings accounts. One can be your permanent savings account, and the other could be a savings account for short-term savings. This means you can manage money for the future prudently and wisely. One of these two savings accounts can be your emergency fund as well. This will help in the future and give you the financial security you deserve. When it comes to the creation of two savings accounts, you may keep them in different banks as well.
When it comes to being a freelancer, it does not mean that you cannot have a sound financial future. The only qualities you need is self-control, commitment and dedication to keep your finances intact. There are times when you feel like spending a lot of money however it is here that you should tuck them safely away out of sight. In this manner, you can excel when it comes to freelancer money management and pass off these tips to other fellow freelancers as well!
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