Being a freelance writer can be a dream job, but the dream can rapidly turn into a nightmare if you aren’t properly prepared for the personal accountability that comes with freelancing. By that, I mean that you are financially prepared for the dry spells that inevitably come to freelancers of all stripes. As a personal finance blogger, in addition to a freelance writer, finding ways to improve financial stability are important to me.
Freelance writing may seem antithetical with stability, but it doesn’t have to be that way. There are actually some positives to the financial ups and downs of the freelancer’s life. Following a few basic personal finance rules can keep you from hitting the panic button when your clients dry up and blow away like so many tumbleweeds.
Never Spend More Than You Earn – This is the cardinal rule of personal finance and it is even more important for the freelancer. You, more than any other group, need to ensure you spend within your means and save for a rainy day.
Build An Emergency Fund – Most personal finance guru’s recommend that you build an emergency fund equal to at least 3-6 months income. This emergency fund is meant to see you through if you lose your job, or are unable to work for other reasons. It should come as no surprise that freelance writers need this emergency fund too. Actually, I would recommend that you shoot for 12 months expenses in your emergency fund. Slow months, unexpected repairs, illness, and disappearing clients are all possibilities that can see you needing to tap your emergency fund.
Create a Realistic Budget and Stick to It Religiously – Not only do you need a budget as a freelancer, you need one that is very conservative. When projecting your income, don’t use your highest months earnings; instead use an average of the past 6 months. When just starting out, it can help to trim your expenses down to the bare minimum. Remember that there is no guarantee that you will be able to make as much this month as you made last month.
Get Health Insurance – It might be tempting to cut your expenses by passing on health insurance, especially if you are young and single, but resist the temptation. All it would take is one serious illness to not only wipe out your savings, but to also put you deep in debt. You don’t get a second chance when it comes to your health, so protect it.
Learn to Live Frugally – So, this one isn’t necessary if you become one of the 6 figure freelance writers, but for the rest of us it is “the thing to do.” Actually, it does apply to the 6 figure freelance writers too. There’s nothing wrong with saving money on your everyday expenses no matter how high your income. I’m not saying you have to make your own soap, but using coupons, sales, and other money saving techniques is easy and can even be fun. Best of all it leaves your money where it belongs…in your bank account.
Treat Yourself Occasionally – You will have good months and you will have bad months, that is inevitable. When you do have a good month, or a great month, don’t be afraid to treat yourself to something nice. It will help keep your motivation high during the bad months to come.
As I’m sure you can see, it really isn’t too difficult to position yourself properly finances wise. The above suggestions can apply to anyone, but are especially important for the self employed whose income can vary wildly from month to month. One final word of caution: if you are seriously considering a life as a full time freelance writer, I recommend that you work part time on your freelance writing first to ensure it really suits you. Three to six months should be sufficient, and you can also use that time to build up the all important emergency fund. Finally, here is the upside to a few bad freelancing months: they will ingrain in you the importance of all the above points and should serve to make you very focused on your personal finance health.