How Freelancers Cope With Money Lack
In today’s freelance world, money is tight for everyone. With the demand for freelancers outpacing supply, many contractors are having trouble making ends meet. If you’re also struggling with money, it can feel all too easy to let your savings dwindle or become so focused on saving that you neglect other aspects of your life. This lack of financial security can take a toll not just on your bank balance but also on your mental and physical well-being. And while it might seem like there isn’t much you can do about it right now, there are some steps you can take to reduce the impact of this lack later in life. To help freelancers better understand their finances and build an actionable plan moving forward, we consulted a panel of freelancers from multiple fields to answer some questions about their monthly finances:
How much do freelancers earn?
Freelancing is a very flexible and individualized career path. The amount of money you earn will largely depend on a variety of factors, including your experience, and market dynamics. A full-time freelancing gig will likely net you between $2,500 and $5,500 per month, although your income can vary depending on the time of year, your industry, and the type of gig you have. If you freelance part-time, your income may be less but you may spend less time working, freeing you up to take on additional projects, freelance on weekends, or work more hours per week.
What’s in a monthly budget for a freelancer?
A freelancer’s monthly budget is made up of a variety of expenses. These include the cost of insurance, taxes, and other mandatory payments, as well as costs related to the upkeep and maintenance of your home, vehicle, or other assets (like your computer or phone).
– An umbrella policy – This policy protects you financially if your freelance job or business stops providing you with income. A typical policy costs between $29 and $69 per month and protects you from injuries you incur on the job, lawsuits that might be filed against you by clients, and other mishaps. A policy with higher coverage limits costs more but provides better coverage. – A computer – Unlike in-house jobs, you won’t be able to write and edit documents on your phone. A good computer should be able to handle all your freelance work and have enough storage space to keep all your projects, paperwork, and other documents organized. – A smartphone – While most home-office gigs require you to bring a laptop, many freelancers prefer to work on the go. A smartphone can help you stay connected to clients and colleagues while on the road, allowing you to send and receive emails and access documents as needed. – A home phone – While many freelance gigs allow you to avoid the expense of home phone service, it’s a necessity for many freelancers. A home phone allows you to make and receive calls, keep in touch with family and friends, and even stay connected to your local community.
Freelance breakfasts and dinners
These costs are incurred every month whether you are freelancing full-time or part-time. They are not optional. – Groceries – You’ll need to eat, and you’ll need to eat healthily. While many freelance jobs allow you to keep costs down by cooking your meals, you’ll want to budget for eating out as well. Depending on your location, you can keep costs low by looking into local farmers’ markets, buying bulk produce, and making meals while you work. In more expensive cities, you may want to look into dining at cheaper restaurants or ordering in. – Coffee – Keep costs down by brewing your coffee or buying beans in bulk and grinding them yourself. – Transportation – Some freelance jobs will require you to drive to your clients’ or colleagues’ homes or locations. You’ll want to budget for gas, auto insurance, and car maintenance.
Freelancers often need to travel for a variety of reasons, like business travel, attending conferences, or meeting with clients in person. If you’re frequently traveling for work, it’s a good idea to create a travel fund to help you cover unexpected expenses like plane tickets or hotel rooms. – Travel insurance – You should always travel with insurance, even if you have travel insurance. A policy with higher coverage limits costs less but may not cover you fully in case of a mishap. – Travel expenses – You may have to pay for transportation, food, and lodging while you’re traveling. You should always have a budget in mind for these expenses so you don’t drain your travel fund before you have to. – Business travel – While many freelancers use their travel funds for business travel, it’s important to create a specific business travel fund. – Conference travel – If you’re attending conferences and technical workshops, it’s a good idea to create a travel fund for these events.
Freelance savings accounts and investments
A freelancer’s best bet for long-term savings is a traditional savings account. A high-interest rate account can help you earn a good amount of interest over time, and you will be deducted a small fee for using the account and for the money you’re saving. – Traditional savings account – You should always keep some money in a high-interest traditional savings account. – Tax-advantaged investment – Many employers offer Roth 401(k) plans, which help you save tax-free. You can also invest in a Roth IRA, which allows you a special tax break. – Roth IRA – Traditional IRAs offer a good amount of tax-free investment, but Roth IRAs offer a better return over time. – Roth 401(k) – With a Roth 401(k) account, you get the best of both worlds. Your money is tax-free while still earning a good amount of interest. – Traditional 401(k) – A traditional 401(k) plan is an account that lets your employer match your contributions.
Freelancers can find themselves struggling with finances during the season when there is a high demand for their services. To make the most of this season and to ensure that you have enough money saved for the future, it’s important to budget and plan for any possible financial problems. Make sure to set aside a portion of your monthly income for retirement, health insurance, car insurance, and any other financial costs that may come up in the future.