Wednesday, September 18, 2013

Budgeting 101 for Freelancers

            One of the major advantages of being a freelancer is the flexibility of your time and the ability to control your cash flow. However, getting yourself caught off-guard with the volatility or seasonality of your freelance job may nail you in financial constraints, especially if you are fending for a family or a loved one. Remember, working freelance deprives you of the fixed income you get as an employee. With this in mind, being financially responsible with our finances is a must. Maybe we can consider the following:

1.      Build your Emergency Fund, ASAP
2.      Stay away from debts
3.      Always have a back-up plan
4.      Juggle your work accordingly
5.      Hone your craft
6.      Live below your means
7.      Splice a small percent of your income to have savings and investments
8.      Get covered

-          Build your Emergency Fund, ASAP:
Granted that your nature of work is very unstable (not unless you’re always in-demand 24/7 but still I’d recommend this), having a tangible fund to utilize during the “rainy days” would be a great idea. According to financial authorities, a healthy emergency fund is 3-6x your income safely kept aside in the bank and accessed ONLY DURING EMERGENCIES. Hence, the term emergency fund.

-          Stay away from debts:
The last thing you would want in your life is sinking well below your financial means with the aggravation of debts. If you can, stay away from scratching your credit cards every now and then. If you do, pay it completely and on time. Though some credit cards can offer cash-lending facilities with minimal interest rates which you could utilize during emergencies, you better leave that only for the harshest scenarios.

-          Always have a back-up plan:
This provides a plan B for the uncertainties of your work. If your income is not going to get you far for the month, you better have something else to utilize for the meantime to help augment your shortfalls. Link with other people. Market yourself so people can recommend you. Make use of your other skills effectively. Daig ang magaling ng maabilidad.

-          Juggle your work accordingly:
Get enough sleep. Rest even now and then. Stress is always present whether you are employed or freelancing. Take vitamins and eat well (but not extravagantly). The last thing you want is getting sick for this will definitely impale your wallet big-time.

-          Hone your craft:
Treat your freelance work as your business. Invest on it by enriching yourself with the latest trends and innovations in your craft. Competition is rising and you are not the only one doing your freelance work. Set yourself apart from the mediocre ones, be the best you can be. You wouldn’t run out of financial opportunities if the people know you’re the best guy out there for the business.

-          Live below your means:
Learn to discern what you want and what you need. Do not get fascinated with the latest “in’s” so easily. It’s necessary to salvage every little penny you earn. You wouldn’t know when you’re going to need the extra centavo. Rather than buying something you do not need today, why not set it aside for savings or investments? That can be more beneficial in the future rather than the new IPhones and IPads you just bought because of the spurt of the moment.

-          Splice a small percent of your income to have savings and investments:
Aside from financing your emergency fund, you should at least put in a small portion of your income to savings and investments. This will give you a compelling reason to work hard and smart. Set aside short-term expenses (grocery funds, bill payments, rent, mortgage, play money, etc.) in your savings account. However, if you dream of buying a car, a house, aiming for a business capital, setting aside your retirement fund or establishing the future budget of your child’s education, you’re better off with investments such as mutual funds, stocks, and investment-linked insurances. They will make your money work harder for you. Ideally, you should set aside AT LEAST 10% of your income for savings and 10% of your income for investments. Make this a commitment; no one else will benefit from this but you. If you think you can’t; think of a reason why you can and why you should. Maybe you can decrease unnecessary expenses (cellphone load, dining out, shopping, travelling, etc.). Maybe you can walk home sometimes. Maybe you can postpone buying that new cellphone unit.  Kung gusto madaming paraan; kung ayaw maraming dahilan.

-          Get Covered:
Make sure your PhilHealth is up-to-date. If you can afford to have a health card without compromising your budget, don’t hesitate in doing so. However, the most important foundation of any financial plan is establishing it with life insurance. You get insurance not because you will die but because someone else will be left behind to live. This will make sure that the dreams and aspirations you have for your family and loved ones wouldn’t get buried six-feet under if something were to happen to the breadwinner, the dream maker: YOU. Pay it annually or as frequently as possible; you’ll never know when you may suffer financially and be unable to pay it on time. Take note, your insurance policies provides a fund value or a cash value as time goes by, adding another “purse” to access in the event of needing money for life’s unexpected expenses. With all the benefits you can get by getting covered and on top of your PhilHealth or health cards, you’re fortifying your financial shields to make sure you wouldn’t devastate everything you have worked hard for during the tough times.


For any questions, don’t hesitate to write comments below. I’d be more than happy to assist you with financial planning. You can PM me so we can talk about it in detail. =D

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