While working at home as a freelancer sounds like the ultimate dream for anyone who tires of the rat race, freelancers still have more than their fair share of financial matters to worry about. In fact, perhaps the most important trait that any freelancer should have is the ability to be fully responsible and accountable to themselves, and saving money is something that you will be wholly responsible for.
1. Maintain an Emergency Fund
Since you have little or no financial protection as a freelancer, maintaining an emergency fund is an absolute must. You never know when the work will dry up, even though it will likely only be temporary. However, in order to have something to fall back on during these dry times, make sure that you always keep enough savings to cover essential things such as rental or mortgage payments and utility bills.
2. Wait before Leaving Your Job
If you’re only just starting out as a freelancer, but you still have a regular job, consider it as your lifeline for the time being. Many freelancers make the mistake of diving straight into their self-employed venture, and unless you have considerable savings at your disposal, leaving your day job prematurely can spell disaster. Wait until you have enough clients and consistent work before you even consider quitting.
3. Have Multiple Sources of Income
Freelancers often find that work is inconsistent, particularly during the first year or two. A consistent and reliable income comes with time, since you’ll need to build up a regular and reliable client base. As a freelancer, you can never have too many strings to your bow, and it is usually preferable to have lots of small clients rather than rely solely on one or two streams of income.
4. Enjoy a Debt-Free Life
Even worse than not maintaining a generous emergency fund is running into debt. You should avoid borrowing money to get your freelancing career off the ground, and before you even think of relying on it as a way to earn a living, make sure that things like credit card balances and bank account overdrafts have been fully paid off. Do not fall into the trap of long-term loans: it all has to be paid back eventually.
5. Use Open-Source Software
While freelancers typically don’t have high expenses, the cost of productivity software can still be considerable. However, there are cheaper options than purchasing a retail version of Microsoft Office or a subscription to Office 365. A popular alternative is Apache OpenOffice, formerly OpenOffice.org. This office suite is available for free, and it provides a similar set of features to Microsoft Office.
6. Claim All Expenses
Many freelancers actually end up paying more tax than they need to, simply because they neglect to declare all of their expenses. All work-related expenses should be claimed as such when you’re filling in your tax returns, including software, hardware, home office equipment and everyday supplies. Any related bills, travel or education should also be claimed as expenses. Just be sure to keep all of your receipts and invoices in case you need to provide evidence!
7. Use Free Forms of Marketing
If you maintain a website or blog as the hub of your online freelancing career, you’ll need to spend a considerable effort on promoting it, but this doesn’t necessarily mean spending money. Use free methods to promote your website and your business, such as social media marketing, search engine optimisation and content marketing. Leave the paid advertising to the businesses.
8. Use VoIP Telephony
If you rely heavily on communication by telephone, be sure to use a VoIP telephony service for handling your phone calls. You can also get an online phone number so that people can call you from a landline or mobile phone. VoIP telephony also tends to be much cheaper for making international calls to landlines and mobiles. Skype is the best-known solution, though GoToMeeting, WebEx and Google Hangouts are also worth considering.
9. Buy Used Furniture
Designing your own home office can be great for a bit of motivation and inspiration, but it is easy to go overboard with the expenditures. While most things can be classified as expenses for tax purposes, you should still be wary of overspending, particularly on expensive items such as furniture. While spending a bit more on a comfortable, ergonomic chair should be considered a priority, everything else can be brought second-hand.
10. Run a Paperless Office
There is rarely a reason for using the printer in the typical home office these days. While most freelancers still need one for those rare occasions, running a near-paperless office will help to save on things like ink cartridges, paper and printer maintenance itself. Only use the printer when it is absolutely necessary, such as when you need to send a letter or print out a copy of an important document.