How to Deal with the Common Ups and Downs of Earning a Living as a Freelancer
Whether you’re a photographer, writer, designer, accountant or programmer, if you earn your living as a freelancer, you probably love the fact that you’re far more in control of your schedule than the average office worker.
That being said, if you’re like many of the professionals surveyed for the 2012 Freelance Industry Report, your two biggest challenges are finding new clients and dealing with the feast-or-famine cycle of work.
So while freelancing can definitely improve your daily quality of life, that doesn’t mean it’s automatically a solution for filling up your bank account. If you’re just making the leap into the freelance world, you may be especially susceptible to the financial pitfalls that often accompany this style of work.
Because significant financial challenges are a common reality of working as a freelancer, let’s look at some proven strategies for dealing with them:
Set a Budget
Although it’s a fairly simple approach, one of the easiest ways to get on the right track with keeping your income and expenses balanced is to set a budget.
By actually sitting down and writing out exactly how much you need to spend each month, you’ll know what you absolutely have to generate in revenue each month. Additionally, having this target will allow you to see what you can put into savings once you cover your expenses for the month.
Save as Often as Possible
This ties into the previous point. By creating an actual budget for yourself, you can help keep your spending under control and focus on saving as much as possible. Even though saving may not seem like a priority, the reason it’s so important is if something unexpected happens, you’ll have a cushion that can help get you through that time. If you want a tool that makes it easy to budget and will also help you maximize how much you save each month, check out Mint.com. Provided by Intuit, this tool makes it easy to see exactly how you’re spending your money. You can use that information to create a realistic budget, as well as see areas where you may be able to cut back and then encourage saving.
Don’t Count Cash Until It’s in Your Account
One of the biggest mistakes that new freelancers have is spending money that they don’t actually have yet. Even though it’s still a bad habit, this is something you can get away with when you work for a stable company as a full-time employee. However, when it comes to working for clients, payments don’t flow nearly as consistently. While working with reputable clients means your chances of getting paid are very high, it may take as many as several months after sending an invoice to actually receive a payment. So if you use a credit card because you think you’re going to have the funds to cover that purchase in a week or two, you may end up accruing several months of interest before you’re actually able to pay off that balance.
Have a Backup Plan
There’s always a chance that one bad turn can snowball into a disaster. If that happens, you need to have a plan so you’re not plunged into financial ruin. If you own a car, knowing that you can get an auto title loan from TitleMax.com should be exactly what you need to weather this rough path.
Avoid Getting Too Caught Up in a Major Win
If you land a big client and then receive a sizable payment from them, it’s easy to get so caught up in the excitement that you spend a considerable amount of money celebrating. While it’s great to give yourself a pat on the back, don’t let this victory send your spending into overdrive. Given that a major client may not be around forever, it’s important to not let this skew your spending activity.
Keep Your Pipeline Full
This ties into the previous point. Even though it’s easy to set back and coast once you have a good mix of clients, you never know when one or more may disappear. Since that’s simply one of the risks of being a freelancer, you should always dedicate at least a small percentage of your time to prospecting and networking. While you may not have any space to take on new clients right now, at least having communications with people will ensure that if needed, you’ll be able to reach out to an existing group instead of starting back from square one.
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