Budgeting Tips for Freelance Designers and Other Freelancers
Managing money can be a problem for a freelance designer. If you’ve been a freelance designer for any length of time, then you already know that your income can fluctuate as a freelancer–sometimes a lot.
Many freelance designers find the financial ups and downs of freelancing to be a real challenge. In this post, I share some budgeting tips to help freelance designers and other freelancers manage their budget. If you like this post, you will likely also like Budgeting for Freelancers.
Avoid These Common Freelancer Money Problems
There are several common money problems that freelance designers face, but each can managed if you know how. Here are the common freelancer money problems, with tips for managing each:
- Irregular Income. One month your earnings are high, the next, you bring in hardly anything. You may have also heard this referred to as “the feast or famine cycle.” The feast or famine cycle can be really tough if you’re accustomed to living from paycheck to paycheck. Quite frankly, it drives a lot of folks out of freelancing. The trick to managing the feast or famine cycle is this: don’t spend everything you earn when you earn it. Especially in feast months, put a portion of your earnings aside. If you practice this regularly, you should always have a fund you can dip into during the slow periods.
- Lack of Marketing. This may not sound like a money problem, but it is. In fact, failure to market a freelancing business during the busy times is one of the causes of the feast or famine cycle. When you are busy, it’s easy enough to get caught up in doing the work and forget to market. Then, when the work is completed, you find that there is no new work to take its place. The solution is to continue to market your freelance design business even during your busy periods. The best way to make sure that this really happens is to schedule a regular time for marketing at least once a week.
- Not Knowing Your Income. Another problem freelance designers face is the inability to project income. While a traditional employee knows that they will receive $X a month as long as they remain employed, many freelancers don’t take the time to figure out how much income they can expect each month. To solve this problem, keep excellent records. Track how much money is owed to you from work already completed (accounts receivable) as well as how much money you can expect to receive from projects you complete during the month (work in progress). Update these figures regularly to get an idea of what the month’s income should be. Make a note of any clients who have a history of paying late.
Of course, avoiding these common freelancer money problems is just half the battle. You’ll want to take other steps to make sure that your finances are in order as well.
Other Budget Tips for Freelance Designers
Here are some other steps to keep your freelancing finances in order:
- Remember Income Taxes. Since there is no withholding for freelancers, paying your income taxes is totally your responsibility. Set up estimated quarterly payments to keep from getting behind.
- Remember Self-employment Taxes. As a self-employed individual, you’re also responsible for the portion of payroll taxes that your employer would have covered.
- Pay Cash as You Go. Whenever possible, avoid credit and other payment plans to keep your monthly debt as low as possible. This will help your budget during the “famine” periods.
- Do Have a Budget. Plan for your regular monthly expenses. Some freelancers think this isn’t possible because of their irregular income, but budgeting is even more important for freelancers.
- Be a Bargain Hunter. If you need a big-ticket item, don’t just buy the first product that you find. Shop around and look for deals to make sure that you are getting the best price.
- Don’t Buy Things You Don’t Use. It’s not uncommon for a freelancer, or anyone else for that matter, to get caught purchasing wants instead of needs. Make sure you will really use something before you buy.
- Sell What You Aren’t Using. Do you have old college books laying around the house? What about that unwanted housewarming gift from your Aunt, do you still have it? If you’re not using it, sell it.
Budgeting can be a real challenge for the freelance designer. I’ve shared some of my top budgeting tips. Now it’s your turn. How do you manage your freelancing budget?
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