Science & Technology

The handy guide to budgeting for freelancers

“You must gain control over your money or the lack of it will forever control you” ― Dave Ramsey

budgeting for freelancers

The handy guide to budgeting for freelancers. Source:

Most people believe that the “freelance” word is totally equal with “freedom”, “excessive flexibility”, “endless holidays”, and whatnot. Nonetheless, this way of working has its own ambiguous features, and sometimes it requires a lot more concentration and effort. The need for self-control over income and expenditure is one such feature. Those who do not receive a steady paycheque have to take care of their budgets even more.

If you were to ask us to explain how to manage a budget if you are a freelancer, in a few words, we would say: spend less than you earn. It is boring, corny, but seemingly simple, isn’t it?

budgeting for freelancers

Spend less than you earn. Source:

Budgeting for freelancers: Where to start?

  1. First, calculate monthly expenses and make a list of permanent (binding) expenses: food, utility bills, basic payments. The total expenses will determine your minimum monthly earnings. Income must cover expenses, and it’s the only way not to end up in debt.
  2. Control your expenditure. Most likely, you will have to give up some unimportant expenses. The risk of being pampered with unexpected expenditure is quite high, but it is better to abstain and keep a small cash supply, especially in the first 2-3 months. Then, you’ll have some sense of how it’s going, and which expenditures are not important.
  3. You can start with a simple Excel table, where you regularly enter the payments received from your client, or you can use other specialized programs. After six months, you will be able to predict your income (of course, approximately, but still…) and track earnings. Simultaneously, you can keep a record of expenses. Thus, you can imagine that you are an experienced accountant and know how to determine any budget deficit (which is an impetus to learn something new).
  4. Plan a program of rational expenditure of funds. Thanks to the journal “income/expenses” you can see the extra expenses and avoid them. If you need to buy a few things for work or personal needs immediately and it is a matter of some urgency, rank spending in the order of importance. Save up for an expensive purchase in advance, instead of spending your entire salary at once.
  5. The “10%” rule. Put away 10% of your earnings every month. The sum is not crucial and won’t make a big difference to your wallet. However, in one year you will have one full salary + another 20%. Freelancers do not have paid vacations or sick leave, so the accumulated funds will always help out. The extra money will always come in handy, and you will feel more confident knowing that you have a money supply put by.
budgeting for freelancers

Put away 10% of your earnings every month. Source:

Financial cushion

If you have decided to change your field of activity fundamentally, remember that in the first months of freelancing it is extremely difficult to predict your income. You do not know how much money will be credited to your account or whether any income will be received. Therefore, before your eventual departure for the freelance field, it is better to create a solid financial cushion. Normally, freelancers say that the optimal sum is the one that will cover your basic needs at least for three months.

What to do if you are not able to create a financial cushion?

Initially, take work and orders on a prepaid basis. This practice will benefit you in the future. Thus, you will get money faster, you will get money unquestionably, and you will not put yourself at risk of dealing with unreliable/fraudulent customers.

Advance payments and other reassurances

Before taking up the work, you have to request a detailed statement of work for this very order you are going to deal with. If it is possible, conclude a cooperation agreement/contract with the client. The additional safety net will save you from pro bono work and nerve-wracking experience. Aspiring freelancers usually hesitate to talk about prepayment, but it is a common mistake. This is your money, and it is in your best interests to get paid. Moreover, there is always a risk that after the advance payment you will have to wait for the rest of the money for a very long time (let’s say, indefinitely).

budgeting for freelancers

Aspiring freelancers usually hesitate to talk about prepayment, but it is a common mistake. Source:

What’s more, do not put the already executed but unpaid order into the income table.

Save up

Regardless of how much you earn, you can find ways to cut extra costs (check out our article with the best tips on how to save up). Cable television (who uses TV in 2019?), restaurants (cooking at home is fun and way healthier), expensive clothes, coffee shops, and this list can be endless, but we are sure you know what we mean, don’t you?

Reducing unnecessary expenses will save the time you used to spend having to make the money to cover these expenses.


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