Managing Finances For A Rainy Day
Cincinnati, OH | Posted: 11/01/2015 | Author: April Koenig
No freelancer wants it to happen, but for most of us it does at some point. The work runs a little thin. The projects dry up. Clients just don’t have anything for us, which means the revenue stream diminishes to a trickle. That’s why we need to be able to count on a rainy day fund to get us through the lean times. Through smart choices and hard work we should be able to acquire enough to sock away for a tough stretch, until the work picks back up. Here are a few tips to help.
Track It – Too many people don’t keep a budget, which is essential if you’re a freelancer. To start, track your monthly expenses, and don’t leave anything out. Food, clothing, rent or mortgage, entertainment, and all other expenses you can think of should be included. Note not just what your expenses are, but how you pay for them monthly. Track your use of cash, checks, credit card and debit card purchases to get a full understanding of how you spend compared with what you make each month.
Form It – Now that you have all of your personal expense and revenue data for the month, it’s time to hash out a budget. Make it realistic. Cut the expenses you can, but don’t make it so rigid that you can’t stick to it. Minimize unnecessary expenses like late fees by adhering to a monthly ‘bill due’ calendar, which improves your credit score as well as your pocketbook. If your expenses outpace your income, there’s a problem with the budget, so revise! While there’s no hard and fast rule, you should have at least 10% post-budget income to start saving for that rainy day. A regimented budget means you’ve got all of your fiscal data accounted for, which makes the next step the most important.
Save It – Make hay while the sun shines. As a freelancer, it’s that simple. Make bank while you can, saving all that extra income (beyond the budget) for when you need it most. Your budget isn’t just for lean times but prosperous times as well, so stick to it. Resist the temptation to spend frivolously when you’re flush, because that extra cash beyond the budget is your rainy day fund. Stockpile all you can by taking advantage of any extra work possible.