Making money and managing money are two very different things. You can be really good at making money but, if you don’t know how to manage it, you’re probably going to end up broke.
In freelancing your income is not always consistent. Some months are good and some months are bad, and freelancing does not usually offer all the benefits that a normal corporate employee has, for example, health insurance, paid leaves, etc. A freelancer would have to cover these expenses on their own.
Let’s take a look at a few essential things you can do to improve your money management skills as a freelancer.
Monitor Your Finances
You should monitor how much money comes in, and how much money goes out in such a way that you will be able to easily see where the majority of your funds come from and what things you mostly tend to spend on.
This can be done using simple spreadsheets, there are also hundreds of apps out there to do it and if you are the type of person that likes the pen and paper, that works too. The point is that you should have a clear understanding at the end of each month as to where your money is going. That way you will be able to better manage it.
Also, your freelancing income should not be managed from your personal account. Create a separate business account (preferably in the same bank as your personal account) for your freelancing business.
Don’t Just Save, Invest
It’s great if you are managing to save a portion of your freelance income every month, but money degrades in value over time due to Inflation. The best use of that money is to buy assets that generate more money for you passively while you focus on earning more money in your freelancing career.
Investing your money can help you grow your money exponentially using compound interest, but be sure to do your research before investing in something as it can have its own risks of course.
And remember, your biggest asset is you yourself. So invest in yourself as well, such as in things that help you get better at your freelancing career or provide you with certifications that help you stand out, and increase your freelancing income.
The topic of investing is very vast and we won’t be able to cover it in this article, but if you want to be notified when we do publish an article on it, sign up for our weekly email below.
Have an Emergency Fund
An Emergency Fund is money set aside for unexpected expenses and financial surprises that life can throw your way. COVID-19 is a good example of an unexpected crisis that led to many people having to quit their job and being left with no source of income.
As a freelancer, you are more susceptible to unexpected events so it is vital to have an emergency fund in place.
Good money management is very important for every freelancer, and it’s not only important in freelancing, but it is also a crucial skill to have in life in general. If you don’t learn to control your money, the lack of it will forever control you.
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