As a freelancer, your financial situation is likely different from your 9-to-5 counterparts. Income tends to be less consistent and expenses may vary from month to month as well. Figuring out how to budget appropriately given these peaks and valleys can be difficult, but it’s not impossible. We’ve put together some tips on how to save money and budget more effectively as a self-employed person.
Reign in expenses
While income and business expenses may vary, personal expenses are something you have a little more control over. Cutting these expenses can be a good way to get a grip on your budget and to cut the fat when needed. Consider the following tips for saving when you need to reign in spending a bit:
Plan out grocery shopping - whether you have a highly organized meal prep operation or simply have a good idea of the groceries you’ll need for the month, paying attention to grocery shopping can help you cut corners. For one, it cuts down on pop-ins to the convenient store due to lack of food in your pantry. It also presents an opportunity to purchase in bulk from large wholesale outlets. Pro tip: consider teaming up with friends when buying in bulk if you’re concerned you won’t be able to use everything you purchase.
Co-op office space - rather than renting an office building or entire space for client meetings, consider a co-working space instead. These types of offices typically provide you with different tiers of membership ranging from a desk in the building to your own office. The less expensive options are great if you don’t have a ton of client meetings and need a simple space to work. These spaces often allow you to rent a conference room on an as-needed basis, making them ideal for all different types of users.
Make a habit of comparison shopping - if you have a group of freelancer friends, consider creating a document where everyone shares the price they pay on things like health insurance, cable, streaming services, internet and phone. This can be a handy way to crowdsource a comparison chart that makes it easy for everyone to make the best decisions for their budget.
Stow away discretionary spending funds - if you’re transitioning from a 9-to-5 job to freelancing, it may take a little discipline to reign in discretionary spending. When money is flowing regularly, it’s easy to get a little lax in how we spend money, especially on non-essential items. Curb discretionary spending and opt to move “extra” funds into a savings account instead. This may come in handy when you get the urge to take a much-needed vacation further down the road.
Keep track of what you spend
In order to have a meaningful budget in place, you need to know what income you’re bringing in as well as what is going out in the form of expenses. The best way to get a handle on how much you’re spending is to track expenses for at least three months. Keep track of everything, including fixed expenses (rent, utilities, health insurance, etc.) and miscellaneous expenses that may vary from month-to-month. Try using a tool like Mint, which can automate some of this tracking and organizing.
Once you have a good record of expenses, compare this to your monthly income. Don’t forget to consider taxes in this equation. This should give you a good idea of income versus expenses, allowing you to set a budget that works for you.
Follow the 50/30/20 rule
Ever heard of it? Financial experts swear by the 50/30/20 rule, which states that entrepreneurs should aim to live on 50% of their income. After that, 30% should be allocated towards flexible expenses and 20% should go towards savings. This is a tried and true rule for meeting long-term financial goals.
Still confused? We can break it down into more detail:
- 50% of your income goes towards needs. Needs include rent/mortgage, food, utilities, transportation, etc.
- 30% of your income goes towards wants. Wants include things like travel, dining out, luxury goods, entertainment, etc.
- 20% of your income goes toward savings. Savings should serve your financial goals and may include things like cash savings, paying down debt, and investing.
Get comprehensive, affordable health insurance
Ok, so we’re a little biased on this one. Here’s the thing: health insurance can be expensive and cuts into the portion of your income you get to hang onto every month. Worse yet, if you pick the wrong health insurance, it can end up costing you even more in the long run. It sounds like a bummer all around but it doesn’t have to be.
Decent offers several different plans designed specifically for freelancers. What exactly does that mean? It means that you pay well below market rate for premiums and get great coverage, too. It means that you get free primary care, so you can see your doctor as often as you want without worrying about surprise medical bills. It means you enjoy more co-pays before hitting your deductible.
We know that being a freelancer comes with its own set of challenges, but we don’t want health insurance to be one of them. We believe in comprehensive, affordable coverage centered around the doctor-patient relationship. Want to learn more? Get your free quote today!
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