There are a number of Americans who are choosing to work as a freelancer and one of their main concerns is how to budget better given their new financial standing. There is a lot of difference between earnings from a corporate job as against a freelancer. They both have their own sets of benefits and disadvantages but there are still a lot of people who prefer to freelance.
When you are a freelancer, your income may not be coming in on schedule and most especially, you could have good and bad days. This means that your income can change from one month to another depending on your performance. This makes it a little more challenging to pin down a household budget when your income keeps changing.
There are people who take on freelancing on the side to help them use the extra money on top of their regular income. This is great if you can find a way to balance it with all the other things you need to do. Apart from a regular day job, you need to attend to your family’s needs and even try to have a life of your own.
This is also one of the main reasons why a lot of consumers choose to do freelance work. They get to manage their time better and be able to spend more of it with people that matter. The downside is that their pay starts to become erratic with both amounts and even the timing. If you are a freelancer or thinking about it, here are a few ways to help you budget your finances better.
Budget better by having accurate financial details
In order for you to be able to budget your funds better, you need to have accurate financial data at your disposal. You can do this with pure hard work because guessing your income and expense can put you in a compromising situation. You can either end up with a lot of extra funds you keep spending on unnecessary purchases or drowning in debt without you realizing it.
To get accurate expense data, you need to take a moment and list down all your financial debt obligations. It will also be a big help if you observe your expenses for a couple of weeks. One thing you can do is to list down everything you spend on regardless what the amount is. There are times when the smallest expense items are the ones that derail your goal to budget better.
Once you have an accurate representation of what your expenses are, you can now make a target for your income. It takes a different approach when you are a freelancer because your income may not be as consistent compared to a regular office job. You need to have a goal so you know how much work to put in to help you cover your expenses.
Get everyone on board
Freelancing gives you the chance to either pursue your passion or even spend more time with your family. The downside is that there will be times when your finances will be tight that is why you need to budget better. One of the ways to do this is to recruit help from family and friends because it will be easier if you have help.
If you are married, it is important that you work with your partner to make sure that they understand the situation. It might be hard for them to figure out why you have started to be strict with the utilities at home or even why you have taken up cooking. The more they know about it, the better they can help you with your plans.
It is important to have a common goal and budgeting together will always give you a better chance at success. Your family can be more aware of how they use the lights and water and be more conscious of their spending pattern. Your budget will be better off if every member of the household knows that you need to do some belt-tightening for your finances.
Be smart when saving money
When you enter into the freelancing world, you need to accept the fact that your income will be a challenge to pin down. There will be times when you are earning good and at times when it will come too far in between. The important thing is to be vigilant with your savings and know that you have to set aside for the rainy day.
This is one key component which will allow you to budget better and make sure that you have everything you need when emergencies happen. Just because your a freelancer does not mean that challenging times will not be a part of your planning. On the contrary, you need to make sure that you are able to save up for it. Moreso that CIT shares that one in four consumers do not have any amount saved for emergencies.
One thing you need to start thinking about is your reserve fund which will make sure that you get to handle any financial emergencies that comes along the way. Your emergency fund, as well as your rainy day fund, will be crucial in keeping you away from debt. This is because when you have nowhere else to go to, the temptation is high to just use your credit card. Once you do that and miss your payments, you then start your journey to a very deep debt hole
Always be on the lookout to make your budget better
There will always be room for improvement and the same can be said about your household budget. You will find areas where you improve on or even instances where you will have the chance to increase your income. Whatever these are, it is important to grab these opportunities and make the most out of them.
You might identify an opportunity to offer your freelancing work to a small business in your area or the chance to showcase your work. With your expenses, you might be given a bike so you do not have to drive all day every day to get to your meetings. There are countless ways to help you manage your budget much more efficiently. You just have to identify these areas and work on them.
Have a retirement plan
When you are a freelancer, the same benefits offered to employees might not be available to you especially when it comes to retirement planning. One thing in particular that you could be missing out a lot from is the matching program. Some companies offer a matching program to its employees to help them save for retirement. CNBC even shares that about 21% of Americans have nothing saved for their own future needs.
However, this does not mean that you will stop saving for your retirement simply because you do not have access to a matching program. This is just a component of retirement savings and you can find ways to save on your own. The important thing is to start early and be consistent with it so it will yield the results that you need.
There are a number of ways to budget better even when you are a freelancer and the best thing you can do is be ready. You need to be proactive with your finances when you start taking on freelancing as a source of income. It will be a lot different if you were coming from a regular day job because freelancing has a lot of financial challenges in it. However, it is sometimes a lot more rewarding because you get to follow your dreams. You just have to manage your finances better which will start with your household budget.