Superior Saving Habits
There’s so much financial advice out there. Unfortunately, a lot of it isn’t geared toward someone with a more transient career like freelancers. That’s where we come in. Thriving as a freelancer demands a higher degree of financial flexibility. There are a lot of relatively easy things you can do to make that happen. The only hard part is doing those things consistently, i.e. creating habits. Financial management, like most things, takes continuous sustained effort. You can’t just do it once. The primary strategies to increase your financial flexibility are more savings, lower fixed costs, and much less debt. Is this going to cover every possible action you can take to better financial management? Of course not, but it will be a few steps in the right direction.
Fixed costs tend to be things we immediately claim as necessary without a second thought. Some of these include housing, utilities, transportation, Wi-Fi, etc. Now obviously having a place to live is necessary, but not every place to live costs the same. Transportation is necessary but not every mode of transportation costs the same. You really want to consider these costs rather than just gloss over them because they’re essential. A few suggestions to reduce these necessary expenses:
· Dry your clothes on a rack instead of in the dryer (it’s better for your clothes anyway)
· Buy or lease a used car rather than a new one
· Get a car with no frills (felt seats rather than leather, no backup cam, no seat warmers, etc.)
· Many public transportation systems offer monthly or yearly passes. Figure out the average rate at which you ride the train or the bus. It may save you money to get a pass
· Get a cheaper co-working membership (most people don’t go there enough to merit their memberships anyway)
· You probably only use a few Adobe applications, do you really need the entire suite?
There are other fixed costs that are less necessary. These are repeating costs that are voluntary like magazine subscriptions, streaming services, or your monthly subscription to Audible that you never use. You might value some of your subscriptions but do you even know what your VPN does? Is it worth it to pay for a parking spot or just get a ticket once in a while? Don’t you use your parents’ Hulu account anyway? Subscription services often purposefully make it hard to cancel. Plus, most of them aren’t all that much a month so why not just keep it? Get rid of that shit where you can, it adds up.
Ahh debt, something we’ve all become far too familiar with. Debt is the worst kind of fixed income and the first thing your extra income should go to. Many debt payment plans are set up so you can pay it in smaller amounts over longer periods. This may seem preferable, but it’s what banks want. It makes them more money in the long run. You aren’t going to outlast the banks. In fact many Americans’ debts outlast them, which means their debt will go to their relatives. This dead weight follows you beyond the grave (pun intended). Whatever you do, get rid of as much debt as fast as you can. Don’t buy new clothes for a while. Cancel some of your subscriptions for a year. Don’t take a vacation this year. You may have heard the phrase “good debt.” There is no such thing. All debt is bad debt. The longer you have debt the more money you lose and the less respect people and institutions give to your finances. You might as well just burn your paychecks if you let debt go on too long.
It’s easy to come up with a number of how much savings one “should” have. It’s another thing to actually watch your savings account increase. Here are a few things that will help you do the latter:
· Carve out time each month for financial review, bookkeeping, searching for new work, and general biz dev even if you currently have a full slate of gigs. Has anything changed? Are you making more money? Less money? Have you realized you can do without a certain service? Is there something you’ve been saving up to buy? Continuous review will make your budget leaner and more efficient.
· Get a good accountant, which for you means someone familiar with the world and legal landscape of freelancing. You don’t need to have an accountant on standby. Pay an accountant once a year to do your taxes and give you some financial advice
· Ask other freelancers about how they might manage their finances. Money talk can sometimes be taboo, but other freelancers understand your struggles, and will be happy to lend some advice
· Become informed as to what’s a tax write off and keep track of every expense that could potentially be one. You’re going to need to do a lot of your taxes yourself. Freelancers don’t get to keep all that money, but we can get a fair amount of it back (more than an employee can anyway)
· Create an automatic monthly deposit into your savings account. Making it automatic will prevent you from you thinking “maybe I skip a deposit this month.” Always deposit
· Have fallback jobs you know will generate income for when things are really tough.
Not only does becoming more financially flexible put less stress on your wallet, it puts less stress on your mind. When you’re worried about all the bills you’ve got to pay you can’t focus as much on what you love to do. All it takes is some basic financial acumen.