How freelancers can manage their income and save better
What's the story
Freelancing has its perks: it's flexible and gives you independence. But at the same time, it's important to manage your finances carefully.
Since you don't have a regular paycheck coming in, you need to cultivate the habit of saving smartly to remain financially stable.
Here's how you can learn to manage your irregular income, plan for the future, and save money.
Drive #1
Set clear financial goals
Setting clear financial goals is imperative for freelancers. By outlining short-term and long-term goals, you can chart a course for your savings expedition.
Be it saving ₹50,000 for an emergency fund or planning to purchase a laptop worth ₹80,000 in six months, having set targets keeps you focused and motivated.
Revisiting these goals from time to time makes sure they stay relevant.
Drive #2
Create a budget based on income fluctuations
Since freelancers tend to have fluctuating income levels, budgeting is a must.
Start by calculating your average monthly earnings over the last year to set a baseline budget.
Set aside money for fixed expenses such as rent, utilities, etc. first.
Then play around with how much you can spend on discretionary expenses based on how much you're earning at the moment.
This way, you can keep finances in check even during lean months.
Drive #3
Build an emergency fund
An emergency fund serves as your safety net during unforeseen circumstances, be it a medical emergency or sudden loss of work.
Try to save at least three to six months' worth of living expenses in this fund.
Saving even small amounts every month consistently can build up this reserve over time without putting too much of a strain on your budget.
Drive #4
Automate savings contributions
Automating savings contributions is a crucial trick for freelancers to save without having to keep a constant watch.
By setting automatic transfers from your checking account to savings accounts, immediately after getting paid by clients, you ensure that a portion of every payment is saved.
This trick reduces the temptation of spending and helps you grow your savings steadily, making financial management easier and more constant.
Drive #5
Track expenses regularly
Tracking expenses is a great way for freelancers to keep a tab on their spending habits and spot areas where they can cut costs.
This ensures that you manage your finances efficiently, particularly when you need some unexpected adjustments.
It saves you from stress and keeps your finances stable by giving you an opportunity to intervene before things go haywire.