How Can You Best Set Up Your Finances To Succeed As A Freelancer

How Can You Best Set Up Your Finances To Succeed As A Freelancer
The Siliconreview
26 May, 2020

It is 2020 and business is unusual. Employment is no longer a guarantee. If you are lucky to get a job, it won't last. Workplace frictions between colleagues, management and junior staff rifts, among other reasons, compel many to self-employment. Freelancing looks like a better alternative. The question is; how can you best set up your finances to succeed as a freelancer?

  1. Make a budget

Budgeting is critical. It should be done monthly, quarterly and yearly. Ensure you have your income-expenditure plan well laid out before you make or spend any money. As you spend and earn, work hard to match your ideas and the actual happenings on the ground.

One fact about freelancing is the inability to tell how much your next deal will be worth. That means you have to be wise with what you currently have. Planning ensures you do not run out of funds before landing your next gig.

  1. Stick to the plan

Budgeting is the first step to a successful freelancing career. But that is not all. You need to ensure things go according to plan.

For instance, if your plan is to spend $400 a month, do not exceed that limit. If you do, then you can be sure to meet problems ahead of you.

As time goes by, you are likely going to get more gigs as you grow inexperience. The secret to success is sticking to the monthly financial plans you make as the month start. No matter how much extra money you make in between the month, do not spend extra.

Financial discipline is critical. You lose it, you put your freelancing business at risk.

  1. Keep track of your cash flow

At the end of the day, it is about making more money than you spend. Although, that does not mean your expenditure should rise as your income increases. Keep track of all your money movements. Cash in and cash out should be recorded every time they happen. Leaving out any detail will inevitably lead you to wrong decision making.

  1. Monthly reviews and reconciliation

You must have accounting skills to make sound financial decisions. This is not your normal cash/card reconciliation. It is about checking whether you achieved your financial plan.

How do you do it?

Do you remember you came up with a budget at the beginning of the month? The purpose of this reconciliation is to ensure you spent what you had planned to and not more. Besides, it is meant to ensure you earned more than your projections and not less.

In the event you spent more and earned less, you need to carry over the deviations to the following month's budget. Capture the extra expense and less income as debts you need to recover. Why is this important?

Think about it this way. You spent more than you had planned in January. The same case happens in the following five months up to a mid-year. By the time the year ends, you'll be trailing your targets by a significant margin. This is based on the assumption your income neither increased nor reduced.

Monthly reviews ensure you keep track of your progress. This advises your budgetary allocations and instills financial discipline in you as every month starts.

  1. Spend money, save time

Money spent can be recovered, but time will never. How does this apply in your financial plan as a freelancer? With time, you earn more and deliver better products or services to your products. As long as you maintain quality, economies of scale are inevitable.

It is at this point that most freelancers lose it both financially and in service delivery. You cannot do everything alone. When it is time to expand, do not resist the change line most humans do.

Pay professionals to work for you. Spend time managing your freelance enterprise as your employees do the operations. This will cost you money but save you time and get you more clients.

Hiring professionals also brings diversity to your enterprise. Your clients are likely going to get more satisfied and come back for more. Isn’t that what all of us wish for growth and prosperity?

  1. Business model

While other freelancers focus on making money, you need to put your energy into strategy. All a spider does is build a web and wait for food to get trapped. Your business model is your web.

One thing to do is the separation of duties. With time, this gives birth to departments. In case your freelance enterprise does not grow into a big organization, ensure you have one or two people to assist you. Once or twice, you will need to attend to emergencies and other personal affairs. During such times, your business will stay operational even in your absence.

Staying in operation throughout ensures cash inflow does not stop. This keeps your freelancing enterprise a going concern. If your break to attend to personal matters affects your income, then you are likely to face challenges going forward.

Remember, it is even harder to plan when your income is crippled. A business model ensures your freelancing enterprise makes money for you whether you are available or away on other duties.

  1. Reward excellence and offer type two punishment to complacency

Motivation is key to further financial success. On the same note, poor financial habits should be discouraged through the withdrawal of certain benefits.

All the proceeds of your freelancing activities belong to you. While that is the case, disciplining yourself and paying yourself based on work done will keep you on toes and on track to achieve financial success.

The Bottom Line

Financial success starts with planning. A vision, mission and solid plan are essential ingredients to get you there. Regular reviews of your progress will also ensure you maintain discipline and change tact in case things don’t go according to plan. In your freelancing, always remember time is more valuable than money. Save money but be stricter with time. In case you need urgent cash, click this website to borrow money online.