There are many benefits when it comes to being a freelance writer, or any type of freelancer for that matter, but there are also a few hardships that come along with the job. Remember, the sweet is never as sweet without the sour.
The biggest hardship of all is the unpredictability of income. It is not only hard to determine how much you will be making on any given month – there are the fat months and there are the lean months, sometimes more so for the latter than the former – but there is also the slight possibility that you may not receive full compensation for a job at all. Some tips to ensure that you receive compensation will be covered in a future post.
Today lets discuss budgets. If your sole income comes from freelance work, a budget is crucial, because as mentioned there are those lean months that you will have to prepare for.
When you are first setting out on your own you may not have a lot of savings to play with, or any for that matter. This is why it is best to set a budget early and stick with it. Sure there will be those emergency moments when you will have to go over and above what you have, but hopefully if you set up your budget properly you will be prepared for it.
The simpler the budget is the easier it will be to adhere to. As simplicity is the key, I just divvy up any income equally into eight key categories, ranging from highest priority to lowest:
1 – Where You Hang Your Hat
For myself, the highest priority is shelter. It might be because I live in a colder climate, or just that I like the sense of security at night with a roof over my head and a soft mattress at my back, either way shelter is my number one priority. Every payment I receive I automatically put 1/8 of it away for rent. My landlord is not very good at cashing my cheques right away, and ever fearful of bouncing a cheque I have devised a new system. I opened up a line of credit and pay my rent from that account. Since the bank provided me with cheques for my line of credit account it makes it easy and best of all there are no fees involved. Sure I might be missing out on a minuscule amount of interest, but I find squirreling away that 1/8 as quickly as possible makes life much easier at the end of the month when the rent is due.
2 – The Staff Of Life
Next on the list is food. What can I say, I love to eat and, well, be alive. Sales, freezers and pantries are your best friend. Remember those lean months I was talking about? Well they are real, and having a fully stocked larder will help you weather those occasional times of famine. Having access to cash makes adhering to a budget that much harder for me. So since I can’t trust myself with saving the money allocated towards the food budget and not spending it on something shiny, like a bottle of ice cold beer, I have started turning that cash into cold hard gift cards. The local grocery store offers gift cards in $25, $50 and $100 dominations. They are as good as cash at the grocery store and there are no extra fees associated with them.
3 – Planes, Trains and Automobiles
Although working from home has a huge advantage of cutting down on the daily commute, there are times when having a little money for transportation proves helpful. For myself, I own an automobile, and although I reside in city with a relatively decent transit system, having access to a car once and awhile can really prove useful. But a car is only as good as the gas that is in it, not to mention the maintenance and insurance that is required to keep it road legal. Again 1/8 of a payment is allocated to transportation. I tend to set a little aside for maintenance and insurance, and just like the food budget; I don’t entirely trust myself with cash so I opt for gas cards to help keep me in line.
4 – Communication Is The Key
Sticking to the budget I now have a warm place to lay my head at night, a full belly and the ability to get from A to B. Next on the list of priorities is communication, because let’s be honest, without the ability to communicate, finding work becomes next to impossible. I lump my introweb costs right in my telephony costs and allocate 1/8 of each payment received from a client. Again trust is a little lacking on my part, so instead of waiting to pay the bill at month’s end I pay into my account as the money comes in. In most cases I am ahead of the game a few months at a time.
5 – Better Than Bailout
Credit card companies love when you spend money. They really want to encourage you to go above and beyond your means and will have all sorts of incentives to try to entice you to do just that. The trick is to use these incentives to your benefit without falling into their trap. The one that I like to use is the very low interest promotion where you can consolidate your debts for a specific promotional period. There usually is a charge associated with transferring your money, but if you speak to a representative you can sometimes get that low one time transfer fee waived. It is advised to hold out for the good promotions, such as the one I am currently on – 0% for the next 16 months. An automatic 1/8 of each payment goes into paying down this debt, with the hope that in 16 months it will reach zero. Again I find the best way to adhere to the budget is to get rid of the money as soon as I get it, so once it comes it I automatically pay it towards the bailout, er, I mean debt.
6 – Payin’ The Man
Sometimes you can’t win for tryin’ – and as a freelancer you are responsible for paying your own taxes each year. After putting away 1/8 of your income you may end up having thousands of dollars just sitting there in an account, which can be very tempting, but you just have to use the will power not to touch it. I keep mine in a tax-free savings account, so at least I can make a little interest on it before I have to hand it over to the Feds. You can also ask the bank to put a hold on the funds so the only way you can access it is if you call in to have them remove the hold. Other options would be to invest it, by locking it away for a short term GIC or other such investment. Gambling it on the stock market or on the roulette table probably isn’t a sound investment.
7 – All Work And No Play…
No one wants to be a dull boy, so setting aside an 1/8 of your income for fun will not only keep your spirits brighter, but it will also save you from dipping into the budget, borrowing from here and there, in order to let off a little steam.
8 – The Following Is A Test Of The Emergency Broadcast System
Emergencies will always come up when you least expect them, so setting a little aside for a savings / emergency fund is never a bad idea. Again I allocated 1/8 of my income to this final category.
And there you have it, the Freelance Writer Survival Guide on budgets.