Managing your money is one of the toughest things about being a freelancer and many people are unprepared when they first start out. All of a sudden, you go from having a regular paycheck to having chaotic finances. One minute, you could have plenty of work coming in and the next, it could dry up for a month and your earnings will suddenly drop. If you are going to survive, you need to learn how to manage your money properly so you can deal with those difficult periods and continue planning for the future, even though you don’t have a regular paycheck. These are some of the most important financial skills that new freelancers need to learn.
Budgeting and Saving
Budgeting is an important financial skill for anybody, but it’s even more essential for freelancers. When things are going well, it’s easy to get into the habit of spending as if you will always be earning this much. But that leaves you in a tough position when work slows down. If you want to be secure, you need a financial buffer so you can still pay your expenses when you don’t have much work. You need to create a budget based on the lower end of your average earnings and make sure that you include some money to be put in savings each month. That way, you are always living within your means and you have a healthy savings account to fall back on if things are difficult.
When you are a freelancer, you don’t have the benefit of an employer that pays into your pension pot and it’s up to you to sort your finances out for retirement. But so many freelancers don’t consider this until it’s too late and they end up struggling as they get older. That’s why it’s important that you learn how to make investments now. Set up a retirement account and start putting money into it right away, and look into other investment opportunities, like Forex Trading or stocks and shares. If you start investing small amounts early on, those investments will grow over the years and you will have plenty of money in retirement. But if you wait too long, you will struggle to save the money that you need.
Pricing Your Work
There are a lot of common mistakes that freelancers make when they first start out and pricing their work too low is one of the big ones. It’s understandable because it’s hard to get the ball rolling and build a client base, so people assume that undercutting the competition is the easiest way to get started. However, if you price your work too low, you will only end up with financial issues. On the other hand, if you go too far the other way and price your work too high, you will struggle to find any work. It’s important to see what other freelancers are charging for similar services and match their prices. You can undercut them a little but don’t slash your prices so much that it makes it impossible to manage your finances.
If you are just starting out as a freelancer, you need to learn these important financial skills if you want to remain comfortable in the future.