I’m starting to think I may have approached this funemployment business with rose-coloured glasses. Freelancing is great because I work flexi hours, but nothing prepares you for the gaps in pay – no matter how ‘financially savvy’ you are. I’d like to share a few tips on how to manage money when you’re not getting a steady salary.
Budget for fixed and variable expenses
Some months will have more money coming in than others. I learnt to put money aside to cover all my monthly expenses. Whenever I receive a payment, my first focus is fixed expenses: Savings, rent, school fees. Then I estimate my variable expenses (groceries etc) and set that aside. Whatever is left over is allocated back to fixed costs for the next month, to give me breathing space should things be a bit tight.
Budgeting will help you have a clear picture of your situation and how your money moves in and out of your home. As above, fixed costs go down first, then living expenses, then any other payments you need to make.
Have an emergency-lite fund
I have an emergency fund, and a ‘just-in-case-I-can’t-get-to-the-emergency-fund-but-I-need-cash-fast’ fund. This is an account I can access at anytime but I don’t use often unless I really must. It isn’t linked to my main bank account so I’m never tempted to dip into it unnecessarily.
Don’t neglect your financial goals
The biggest challenge often isn’t the money (or lack thereof), but the way we go about managing it. You’ll do one of two things: refuse to spend any money other than on the very absolute necessities because you’re afraid there won’t be any more. Or you’ll spend it recklessly because you think there will be more. Both are very dangerous positions to take. Penny pinching will leave you unhappy and stressed out. So set out quarterly or biannual savings goals and work around that. If you feel you have a little extra cash once you’ve drawn up your budget, channel ‘extra’ money towards your savings account.
There isn’t a quick fix to adjusting to life after a steady income, but you don’t have to learn the hard way. Preparation is key because there will be late payments, or you’ll forget to invoice someone – or someone will forget to pay you completely. A little planning will help you stay above things, especially when times get a little tough.