6 Important Money Rules For Freelancers

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In a perfect world, freelancers would have a consistent income. For a majority of my time freelancing, I actually worked more hours than when I’ve had a 9-to-5 job. Freelancing can be exhausting since the hours in-between creating my art are spent chasing the next gig, or organizing my finances so I can continue to maintain my career. Until last spring, my husband and I freelanced at the same time which practically made our hair stand on end every first of the month — things just never seemed to line up. I recently took a full-time job outside my career to catch up for a bit, and it’s given me some insight into why so many non-freelancing friends of mine are able to do things like chip away at their debt — it’s because they have a predictable budget to manage.

After discovering the website LearnVest, I started to grab hold of me and my husband’s finances. Taking budgeting into my own hands made me feel more in control of my financial situation and less alone. Apparently, I am not the only one frustrated that most budgeting instructions begin with “enter your income.” Here’s the kicker – since freelance jobs often come in last-minute, and the timing of paychecks vary significantly, you often don’t know your income on the first of each month (this was one of the hardest things about figuring out the Affordable Care Act forms). But alas, this inconsistency is a sacrifice that you happily make to do something you truly love, so you have to deal with it. Still, I knew there had to be a way to catch up and keep track. The constant wave between feast and famine was leaving us in a purgatory of credit card debt that slid up and down depending on the week. After many failed months of trial and error, these are the five tips I learned to make our full-time freelance situation work for us.

Budgeting for the essentials.
The first thing we did when we built our spreadsheet was to create a section just for essentials. These were the “if we ignore these, someone will come knocking on our door” payments. Rent, credit card minimums (not ideal, but again, bare minimums), and student loans. I added groceries to this list, but this was more a psychological trick for me, to remind myself that if all else fails, we will still be able to eat. I have managed, in a very tight month, to get our grocery bill down to $200 for the two of us, thanks to Trader Joe’s and a lot of pasta nights! The other items on this list include commuting costs, gas money, electricity, and internet.

Budgeting for monthly variables
These are all those “special” bills for that month in particular. Things like union dues, medical payments, and random things like parking tickets or a bill from your neighbor for breaking his gutter (whoops, we drove a U-haul into it by accident). The only reason they are not in the top category is that they can wait if absolutely necessary. But it isn’t ideal, and no, it doesn’t feel great. It’s important to build yourself a little monthly cushion so that you prepare for these small incidentals. I also try to put savings into this category when we can. Paying yourself first, especially for an emergency fund, is always a priority in my mind.

Budgeting for lifestyle.
And this is where all the “living your life” bills comes into play. These are the items people often bring up when they say, “maybe you can just cut back a bit.” I assure you, freelancers are most likely not splurging the way you think they are. For me, this category is often restaurants/bars, coffee, gifts, shopping, education/gym, misc., and any special events that occur that month like a wedding or graduation party. Determining your priorities is very helpful here and can help you save $$$.

Making the numbers add up (to something over $0)
Back at the top of the spreadsheet, have a place to input your income. You can break it down by source if that helps, or by person if you combine finances with someone else. I like to use two different lines for expected and actual income. Then when money is deposited, I enter the actual one and the formula changes the amount that is still expected that month. Creating a center box for all this is really helpful. If you are interested in seeing how we set up our sheet itself, email me!

As your gigs line up for that month (and you know the check will arrive before the 31st) add this to your income. This way you can see how far away you are from breaking even. If at the start of the month you are not breaking even from what you know, adjust all the lifestyle categories. If that doesn’t fix it, take off the Special Essentials category. Most importantly though, add the amount you are putting off to next month so that it is not simply brushed aside and you account for it — give yourself a timeline for paying it off. Having a timeline and a plan is better than putting it in a sad growing pile of bills with the post-it  saying “someday” on top.

Diagnosing the sneaky problems that drain your finances.
The first few months of strict budgeting for us were very eye-opening. Every several days, I would check in on our account and add the purchases to the appropriate category. At first I realized that we were spending a comical amount on coffee. We used to have a Dunkin Donuts next to our train station, and we would stop there almost every time we caught the train. I think at one point we spent $200 in one month on breakfast sandwiches. So yeah, that had to stop. Instead of wondering where all our money goes, we can see the reality of $3 sandwiches adding up over time.

Focus on creating more income rather than focusing on solely reducing spending.
Sometimes there is only so much you can cut. You need to eat and live somewhere, and getting to work is not always cheap. So this year, I stopped beating myself up for spending money on essentials and remembered that increasing income is often way more effective. Unfortunately, it’s tougher to just “get” more income. I’ve come across similar posts online where comments go off track and accuse the writer of “not getting a real job.” If you are confused by artists and why they break away from the typical structure of 9-to-5 jobs that aren’t related to your interests, message me — I’m happy to chat. But nonetheless, sometimes your budget can alert you that it is time for a change and maybe you need to try to find an extra gig. But it’s important to remember that these things take time.

As you are budgeting for your life, it’s important to take a deep breath. I felt a huge weight lift off my chest after we set this up. LearnVest also has a fantastic budgeting program that goes into way more detail, but having an excel spreadsheet worked better for us and allowed us to share the document between us. Budgeting gives you a game plan instead of just holding your breath until the last week of the month hoping that everything adds up. Seeing your end of the monthly total rise above $0 always feels like an accomplishment.

As stressful as it can be, I don’t think we will ever give up the freedom of pursuing our art as freelancers. While we may bring in less money than many people, I believe we as artists need to be more diligent and organized because of our income’s inconsistencies. I always remind myself that we are still plugging away, doing the things we love and somehow squeaking by making it all work. Perhaps in a few years the phrase “squeaking by” will be a thing of the past, but at least for now we can sleep more soundly because of a meticulous excel spreadsheet that helps us living financially healthy lives.

Ginny is an actor and writer from Montclair, New Jersey, and runs her blog Maybe There Will Be Cupcakes.

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