All manner of self-employed people have a much more challenging task when it comes to money management. When you don't know exactly how much income will come through the doors each month, it can be hard to save money for bigger items and the future. Here are some principles you can follow as a freelancer to make sure you're not living paycheck to paycheck.
Set Aside a Percentage of Each Check
Since you don't know exactly how much each check will be worth, consider setting aside a percentage for savings rather than targeting specific dollar amounts. Once you get in the habit of doing this as soon as you receive a payment, it becomes an automatic way of saving. It's much more painful to stick with savings when you take out a set dollar amount of each check; $500 out of a $1000 check is painful, but 10% of that $1000 will be less of a burden in the short run.
Plan for Taxes
Don't let tax day surprise you; make sure you're setting aside some money from each check to pay the tax man, too. Put that money in a separate account where you won't be tempted to spend it. It's easy to think you have more money than you do and have that all change as soon as you do your taxes.
Figure Out Your Retirement Plan
Don't wait to figure out retirement, because there will be no employer reminding you to set up a 401k. If you are a permanent freelancer, setting up your own investment accounts is a task that's going to take a bit of research; each one has a different cost and different types of risk.
Consult a Financial Planner on the Big Stuff
Having a financial plan for meeting big goals is challenging for anyone, but it's especially tough for people whose income varies each year. How will you know how many years it's going to take to raise the funds for a home down payment or a big trip? Consulting a certified financial planner is a great idea; they will help you chart the course of the next 5 to 10 years. Especially if you have a partner with a more traditional job, you can probably use someone to bridge the gap between two different finance styles and help you figure out what's realistic for savings, monthly fixed expenses, and those future dreams.
