Freelancer budgeting 101: how to get your finances in order

Working as a freelancer has its pros and its cons. You set your own hours. You choose how you get work done. You have the flexibility to create a schedule that works for you. On the other hand, you may not necessarily have a steady income throughout the year. While most people can create and follow a traditional budget, freelancers face unique hurdles when it comes to money management. For starters, they often don’t know when money is going to come in—or if it is going to come in at all.

For freelancers who feel the burn of this uncertainty, there is good news. Also, you’re not alone. More than one third of U.S. workers (read: 57 million) are in the gig economy. That means a lot of people are in the same boat. Thankfully, there is a way to manage the uncertainty of irregular paychecks (and the heartburn they bring) and to create a functional budget to help your money make sense.

Keep tabs on cash flow

The first step to having a healthier relationship with money is to keep track of what is coming in and what is going out. Everyone has their own preferences about how to do this. Some prefer good ol’ fashioned pen and paper while others love creating tables in a spreadsheet. The most important thing is getting it documented in some way, shape, or form. Take note of your projects (including some details about what they entail) the dates you issues invoices, their amounts, and the dates they get paid.

In terms of outflow, you also want to be aware of how much money is going in the opposite direction. A lot of people opt to do this in their head and the problem with that is that people tend to underestimate how much they’re spending. Instead, try keeping notes on what you’re spending money on and how much you’re spending.

There are dozens of helpful apps and sites that can help with this, including Mint, CountAbout, and PocketSmith. Not only does this help you reconcile the difference between what’s coming in and what’s going out, but it gives you a sense of how much it actually costs you to live (e.g. what you spend on rent, groceries, utilities, etc.). Once you have a handle on these details, it’s much easier to make adjustments to spending or set higher goals for earning as needed.

Get financial priorities in order

Now that you have some solid documentation on what you’re bringing in and what you’re spending as a freelancer, you can begin to set goals and priorities that will get you closer to achieving those goals. The most popular method for budgeting money is the 50/30/20 budget. In simple terms, it calls for splitting after-tax income into three buckets: 50% goes toward your needs, 30% goes toward your wants, and 20% goes toward savings. Here are some examples of how those categories break down:

Needs

• Rent/mortgage
• Car payments
• Groceries
• Utilities
• Minimum payments on debt

Wants

• Dinner date night out
• New Kate Spade purse
• Tickets to see the newest Star Wars movie
• Latest digital gadget

Savings

• Building up an emergency fund
• IRA contribution.
• Stock market investing
• Extra payments on debt (above minimum payments)

This is a structured way to set financial priorities while making sure all needs get taken care of and that you have some room baked in for “extras.”

Find ways to save

One of the easiest ways to give yourself a raise is to spend less. It’s true and it’s a helpful freelancer budgeting trick that can pay out in spades. Finding ways to creatively cut expenses can make your wallet smile. Here are some starter ideas to do this:

Groceries: Plan your meals for the week (or month, if you’re feeling especially ambitious) and purchase groceries in bulk at a discount. Team up with friends for even greater discounts.

Office space: Cut the solo office expense and take advantage of a co-working space instead.

Entertainment: Cut the (cable) cord and hop on the streaming bandwagon. Switching can save you a significant chunk of change each month.

Health insurance: Check out freelancer-specific forums to get crowdsourced advice on the best health insurance plans for freelancers in your area. Check to see if your freelancer union offers special plans that are designed (and priced) for freelancers.

Health Insurance Hint: For freelancers in Austin, Decent offers plans designed specifically for freelancers. Check out our Pathfinder bronze plan and our Trailblazer silver plan to see if you might be able to save money from switching today. Bonus: we offer free primary care. Double Bonus: We offer open enrollment 365 days a year!

You got this

Freelancer budgeting can be tricky because of the feast or famine nature of the business. Fortunately, the tips above can be helpful in creating a freelancer budget that works how you want and need it to. At the end of the day, find a system that works for you and ensures that you can keep finances in check. Just because your income might not be as “regular” as the 9-to-5ers, that doesn’t mean you need to skip budgeting altogether. Keeping track of what you bring in and what goes out can help you maintain a sense of control, even during the peaks and valleys of the freelancer lifestyle.