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3 things to focus on and remember when budgeting as a freelancer
When you're a freelancer you will usually be working for yourself (duh!) and have to manage your own money. If you don't budget right, you could have to pull back on your R&D or pause some ads. This will basically halt your progression and slow you down since you won't have as much traffic and sales coming in during this time. The downside of being a freelancer is that the money you're using to push your profits up is the same money that will put food on your table, so budgeting and managing everything properly is very crucial.
Freelancers don't get paid every 2 weeks, so writing up a budget can be difficult at times. We could make $1,000 on Monday and then not make another penny for the rest of the money. I know that I can't live on $1,000 a month because my rent alone is $1,600 split 2 ways lol. Now if you're in a different country, $1,000 can hold you over for a few months, so it's all in perspective I guess Either way, you'll have to figure out what you can and can't spend in order to be successful as a freelancer
1. Tracking Your Cash Flow
When you're working a 9 to 5 job you will usually know how much you're going to make for that month if you're getting paid hourly. If you're in a salary position then you definitely know what you'll be making and budgeting is much easier for you. Now if you're a freelancer, you don't know how much you're going to be making tomorrow, so this is a difficult task to perform since there is a massive amount of information missing.
The only way you can know for sure how much you'll be making as a freelancer from month to month is if you have contracts with individuals or corporations and they have to pay. This will give you a good idea of your lowest income because it's not factoring in the side jobs you can get from platforms like SEOclerks.com
2. Setting Up Financial Priorities
A lot of people will do a 50/30/20 allocation of their income, but that can still be difficult if you're a freelancer because, like said before, you don't really know how much you'll be making from month to month.
This portion of your income would usually go to your Needs like housing (rent or mortgage), your phone, insurance, cable/internet, food, gas for your car and anything else you need from month to month. Sometimes you will have to take more than 50% because you might not be making much that particular month.
This portion of your income can go towards your Wants like a gym membership, a fancy date night, a movie, etc. I'm not too sure about allocating 30% of my income to "Wants" if I'm trying to boostrap everything. And again, you don't know how much you'll be making from month to month so I usually tend to save some of this to have a nest egg to fall back on during rough months.
This portion goes towards your debts and savings. Now you might not have to pay off any debts if you're further along in life and have everything paid off, but you could still need to do so.
A lot of people use that formula above, but my particular one is a little different. I like paying all my bills off and then splitting the remaining profits in a 50/50 split.
The first 50%
This goes to into advertising in order to push my business into higher profits next month. I like to keep pushing and boostrapping as much as possible and I do not live like a king. I'll live like a king when I profit like sultan This means If I make around $1,000,000 a year I'd still be putting at least 400k to 500k into my business each year. If I can't push my profits higher by investing that amount of money, I just need to quit now lol.
The second 50%
This goes to my savings for a rainy day when I need some extra funding for bills, if it was a bad month. It will also go towards taxes at the end of the year because in the USA we have to give the government a chunk of our profits (insert angry emoticon here). There are ways around not paying for taxes like donating what you'd be paying in taxes to some foundation or children's hospital and getting a write off. You're still spending the money, but at least you can see who you're helping
3. Simple at first
When it comes to all these pieces of software and services out there, if I can do it manually in a short amount of time I usually will, and you should too. If I can write something up in 5 minutes or pay $5 to have someone do it for me, I'm usually going to write it myself. Now if I can't program something then I'll outsource that work, I'm a bad programmer lol.
Pay for what you can't do yourself. If you can do it, but don't want to, be sure that you budget properly so that you don't go bankrupt in a month because you were lazy.
After you become more and more successful you can start to outsource a good deal of your work and just track your profits and talk with all your clients. This is the point in a business that all freelancers are chasing, and some of us have gotten there
Budgeting as a freelancer can be a stressful thing to do, but you'll have to figure out what works best for you. Going broke after a month of reckless spending means you'll have to double the amount of work you're doing in order to get back to even. Keep it simple and live below your means so that you don't go broke. Play it smart and you should be fine
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