Joe is a web developer. He had been doing well until one day, his employer called him into his cabin and informed him that the company had decided to downsize. Unfortunately, his name was on the list of redundant employees. His life had been going so relaxing until he had a rude awakening. He had just applied for a mortgage, and then he had to back out.

Joe became sadder and wiser and decided to go freelance. He knew that all he had to do was to set himself apart by getting his strengths across to clients. He would take on projects based on his abilities and charge money based on his skills. Freelancing over time certainly opened doors to a myriad of opportunities for him, but he faced problems with budgeting because of irregular cash flow.

Money management can be tricky for freelancers as they do not have a consistent cash flow. You will have to come up with a few strategies to stretch your money.

Budgeting tips for freelancers

Here are the budgeting tips you can use as a freelancer:

·        Determine the bare minimum income

Based on the spending of the previous six months, you can determine the average monthly spending. Of course, it will include essential and discretionary expenses. You will have the flexibility to spend that much money as a freelancer when you manage to make enough money from your clients. Freelancing does not bring projects every month.

What Joe faced was not an unusual scenario. Many freelancers encounter this problem. To keep the wolf from the door, you should have the bare minimum income in months when you have no project at all. The bare minimum income does not need to have discretionary expenses. It will help you get by without relying on loans for regular payments.

·        Spend your income one month after

Some freelancers have reported that after a couple of months in their field, they switched to last-month-to-month spending. It means spending your previous month's income one month after it hits your bank account. So, if you have a bad month next time, you can live off the previous month's income. However, a large number of freelancers have found this method unrealistic because it is all but impossible not to dip into your previous month's income unless you have another income source to meet your monthly expenses. Even if you try rigorously reducing your monthly expenses, you cannot keep that money intact.

Instead, you should live on a month-to-month budget. Because the future is not predictable, you should try to live on the bare minimum income for a couple of months. The money you earn on top of that should go towards your savings.

·        Create an emergency cushion

Once you have taken freelancing in your stride, you should aim to earn more than the bare minimum monthly income. Get as many projects as possible, but sometimes luck will not be on your side. Thankfully, the money you have stashed away in your savings account will help you meet your essential expenses when you are without work. But what if you come across some unforeseen expenses? Your budget will likely blow up if you fall back on savings for your essential expenses.

Freelancers usually get their wages weekly or bi-weekly. Every time you get money in your account, a fixed proportion of it should go towards an emergency corpus. That money should exclusively be used for unforeseen expenses such as car repair, medical treatment and the like.

If you do not separate emergency expenses from your ordinary savings, you will end up spending the whole of that. Keep stashing away money in a normal way, and once you have a considerable size of your savings, pull a portion of it for emergency expenses. For instance, if you have saved the bare minimum income of three months' worth of essential expenses, you can reserve a one-month worth of income only for unforeseen costs. The remaining two months' worth of income will be used for your essential expenses when you do not get a project. If your emergency cushion is not sufficient, you can borrow money from private lenders in the UK.

·        Work on long-term projects

Although it is not possible, you should be on the lookout for long-term projects. They are more profitable than short-term projects. They also enable you to build a reputation. If your client is satisfied with your rendition, they will keep coming to you. They will also spread words about your service encouraging others to buy your services. Long-term projects help you leverage relationships with your clients and obtain benefits in the long run.

While bidding for projects, you should target both short-term and long-term projects. Web development and writing are the two most popular freelance niches. However, writing allows you to get multiple projects, though competition is fierce.

·        Establish financial goals

Just because you manage to set aside money and get by even if you have no projects, it does not make you a successful freelancer. You should set short-term and long-term financial goals. Do not forget that you need a large deposit to buy a house or car in the future. You will also need to plan for kids, retirement, and so forth. How will you achieve these goals unless you stay on top of your expenses?

There are some apps to help you achieve your financial goals. Apps can use artificial intelligence to understand your spending behaviour and identify areas for improvement. For instance, some apps may suggest you cancel subscriptions that you no longer use or are irrelevant. Most of the apps will send you reminders about payments of your phone bills and 12-month loans for bad credit with no guarantor from a direct lender, so you never fall behind on payments. Carefully analyse the features of every app and use the one that suits your financial goals.

The bottom line

It can be challenging to create a functional budget as a freelancer, but once you carefully understand your spending behaviour, you can come up with an effective strategy. You should trim down your expenses and live on the bare minimum income for a couple of months. Once you get it in your stride, you can become a little bit more flexible. Understand your needs and figure out what budgeting method will help you stay on top of your expenses.