It takes a lot of self-discipline to be a full-time freelancer. People are prone to laziness when they are in charge of their own hours, and even place of work. But anyone who has already spent a few months in self-employment knows that they have to put in that extra mile if they want to reach their goals.
The best self-employed businesses are the ones where a person can work as if they had a manager breathing down their necks the entire day. And while freelancers make the most of the freedom that’s offered to them, it’s very important to never lose sight of the big picture.
This is why self-assessment is important as a freelancer. It helps keep you within your boundaries, while still taking advantage of the benefits of self-employment.
One of the most important aspects of being self-employed is managing your finances. In order to motivate yourself to do twice as much work as you need to survive and start saving money, you not only need a concrete money-management plan, but also a long-term goal that will keep on motivating you throughout the journey.
First and foremost, you need to understand your daily routine and optimize your workday. A lot of freelancers work on a due-date basis, and that can result in doing everything at the last minute, or constantly going into “overtime”.
This is not only bad for your health but can be counterproductive in the long run, as you’ll end up feeling scattered all the time.
Creating a concrete and reliable timesheet for your workdays, and creating boundaries you don’t let yourself cross will help create a realistic and optimized financial plan. For example, an ideal weekly plan can be working at least 6 hours each day from Monday to Friday, and a realistic boundary can be never working on Sundays, or past a certain time each evening.
Of course, there are instances when this boundary can be crossed in an emergency, which is one of the benefits of freelance working, but in order to keep your sanity, you should work on never crossing them.
Once you create a timesheet, you’ll be able to calculate the number of projects you’re able to do each day. For instance, if you’re a designer, and you know that you spend approximately two hours on a project, and you want to work 8 hours each day, you know that the maximum amount of gigs you can squeeze into one day is 4.
This can then be easily calculated into income. If you receive $50 for each logo you design, and you’re able to design 4 each day, five days per week, you know that your weekly income in an ideal world is $1000.
Now that you have a working timesheet, and an idealized maximum income, you can start planning your money-management strategy.
It’s likely that the aforementioned idealized income based on working hours is slightly romanticized, mostly because as a freelancer, you’re not completely in control of the number of projects you receive.
So in order to turn a rough calculation into a realistic one, the next step is managing your actual cash flow. Following your timesheet to the tee, you should start observing your actual income for at least 2-3 months. Record every project you get, every month’s income, and every expenditure. This way you’ll start to understand your actual cash flow, and will be able to create more realistic calculations, and therefore more realistic goals.
In the previous calculation, you worked with the maximum amount of projects you can complete in an ideal workweek. But after a few months, you can calculate a realistic average. For example, instead of completing 4 projects per day for 5 days, you realistically receive 10 projects per week, which instantly makes your weekly income $500 per week instead of $1000.
You’ll also see your expenses more clearly, and will be able to realistically calculate the amount of money you typically have leftover by the end of each month. Now you have a number on which you can start building your goals.
Everyone has goals that require certain financial freedom. For some, it’s a house, for some an expensive trip, a car, or a pony. No matter what your dream is, you probably obsess over it just enough to know exactly how much it costs. The good news is, that now you can start planning your way toward this goal.
Chances are, you need to attract a couple more gigs in order to start setting aside for that goal. But using your previous calculation, and by understanding your cash flow, you can also calculate exactly what you need to do in order to earn not only what you need per month, but also what you want.
In order to motivate yourself and become proactive when it comes to earning and saving more money, the first savings account you should open should be set aside for personal savings. Seeing the amount grow in that account, and seeing your dream becoming more and more tangible each month will motivate you to do more work, and become more productive.
Apart from your personal dreams and goals, it’s also wise to think practically about your future. Next to your extracurricular savings mentioned before, you should have at least two forms of investments.
The first should be your emergency savings which are set aside for any emergency from your car breaking down, to your roof falling apart. And the second should be your retirement savings. No matter your age or your future plans, it’s always wise to set aside for retirement.
You should consult with your accountant or your bank about how much you should ideally be set aside for these two. Most banks have great packages and benefits for savings accounts regarding emergencies and retirement, so it’s always wise to consult with your banker before taking matters into your own hands.
In today’s world, there’s an app for everything. And in a world where remote work is becoming the new norm, and digital nomads roam the Earth, there are thousands of money-management apps available. They’re incredibly easy to use, and most are free.
It’s smart to try out a few before investing in one, but once you find the perfect one for your needs and your work style, never let it go. These apps are not only great for managing your cash flow, but can also keep track of your savings, calculate more idealized incomes and distributions, and also create invoices.
It’s a long journey, but by becoming more conscious about your workdays, and accurately calculating your incomes and expenses, you’ll be one step closer to a more comfortable life where you have the luxury to plan ahead.
It takes a few months to get used to this new lifestyle, and it takes time to find more gigs, and generate a higher income. But even if you won’t see total financial freedom for a few months, becoming self-aware, living by a stricter daily routine, and carefully recording your incomes and expenses will help you stay sane and more motivated.
Better yet, you’ll have a much brighter outlook on life, and you’ll once again dare to dream. And at the end of the day, that is the number one reason people choose this lifestyle.