Living as a freelancer – how to budget?
The most common mistake that individuals make is to think that freelancers have it better and that they have more free time or more freedom on their hands. However, if you look at how freelancers live and how they budget their time, you would see that there is more to it than just having a lot of free time. Being a successful freelancing is all about discipline.
If you want to live as a freelancer, try following these basic steps.
1. Know your industry
There are multiple different careers you can pursue as a freelancer, starting from writing articles to bricklaying or housesitting. That is why you should research the market and wisely choose the adventure you want to embark on. This thorough research will also help you find customers.
2. Know your price point
A big part of your research should be focused on your competition and the pricing they offer. This will prevent you from making mistakes, such as overpricing or underpricing your service or product.
Make sure that your billing covers taxation. Usually, you have two types of taxes that you should pay attention to - income and VAT. Even so, always check local laws and requirements.
3. Taxes come first
Freelancers can often neglect or forget about paying their taxes. Unfortunately, no matter where you live, not paying taxes comes with more costs. Some freelancers think that they can get away with it, others just simply forget about them. If you want to budget properly and not be penalized, then pay your taxes on time.
Keep all of your business receipts. Make sure that you find an accountant or a bookkeeper that you can keep on retainer and afford.
4. Savings - second
You should pay yourself next. Paying yourself does not mean buying new things all the time or eating out. You should create an emergency fund or at least save enough money to cover your bills in case the business is slow for a certain period. Savings will also help you when you decide to upgrade your business.
5. Contracts should always be executed for your protection
You should also keep a good contract that protects you and your business. Avoid surprises and know exactly when your payments are coming in. A privilege that only a contract can give you. Executing a contract and hiring a lawyer should be a priority as well.
6. Live within your means
Keep in mind that you should always live within a specific budget, no matter how big your contracts are. Your budget can get out of control if you do not control your expenses. Live within your means and be aware of your budget.
7. Always upgrade your equipment and systems
Part of your budget should be for upgrading your equipment and systems. Preferably, this should be done every 3 to 6 months. It is important to keep this as part of your budget so you would not have to scramble looking for money when the need arises.
8. Never take more than 20% of your available credit
If you are a freelancer, controlling your credit can be hard sometimes. However, if you want to be successful at it, you should never take more than 20% of your available credit.
Being a freelancer can get overwhelming at first, especially if you have no control over your budget. If you want to successfully live as a freelancer, you should never go beyond your budget and take control of your finances.