Whether you are in full-time or part-time employment prior to starting your freelance business, it is advisable to have a solid financial basis. There are many options and include but are not limited to a) saving a substantial nest egg b) researching and applying for loans or grants c) utilizing a funding option.
What method did you use?
To help plan for the day you leave your employer and become your own boss, here are some budget tips. Firstly, divide your expenses into 60% for monthly expenses (rent or mortgage, utilities etc.), 10% retirement savings (there is no employer to rely on), 10% debt reduction (important to enable you to reduce your total expenditure), 10% savings for periodic expenses (medical or home expenses), 10% money for you! (vacations).
To ensure you can track your freelance business’ income and expenditure, open another bank account. It need not be a business account initially, there are extra fees for these. You can then track how your business is functioning.
You should incorporate in your budget a monthly salary and pay it into your personal account. The amount will most likely start small but over time you can increase it. Also put away a certain amount every month into an emergency fund – there are no guarantees in freelancing income.
Before starting your freelance career look at your current spending habits. What can you cut out? Daily trips for specialized coffees? Subscriptions to magazines? Can you eliminate your credit card debt? Are there monthly service bills you can reduce? Be fearless, every dollar saved is a dollar invested in you and your freelance career.
Do you have any tips on budgeting you can share?
What was the most difficult aspect of finances for you?