10 Best Budgeting Tips for Freelance Web Designers and Other Freelancers

Oops! You’re out of money and you won’t be paid for at least another week. What are you going to do in the meantime?

Does this scenario seem familiar to you? If you answered “yes,” you’re not alone.

One of the biggest surprises for new freelancers is that a freelancing income is not a stable income. Some months you will earn more than others. And (unless you have signed a long-term contract) you won’t know for sure what you will earn six months from now.

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If you’re accustomed to traditional employment, where you received the same wages every month, making the adjustment to freelancing can be difficult. In fact, know that it’s normal for freelancers to struggle with budgeting. Even very experienced freelancers sometimes struggle with the ups and downs of freelancing finances.

Are you struggling to make ends meet as a freelancer despite having a good annual income? If you are, this post is for you. I’ll share ten budgeting tips to help you make ends meet.

If you liked this post, you may also like 12 Realities of Pricing Design Services.

Freelance Web Designer Budgeting Tips

Freelancers have unique budgeting needs due to the nature of the work. If anything, budgeting and good financial habits are more important for freelancers than they are for traditional employees.

Here are ten of the best tips to help you stay on track financially:

  1. Always put something aside. Did you just have a great month? If you did the natural tendency is to feel like you got a raise and spend it all. Resist that urge. Likewise, if you’re having a lean month you may think that you can’t afford to save any money. But if you’re freelancing you need to have a cushion of savings. You need to always be putting something aside for slow periods. You also need to save money for vacations, sick days, and unexpected expenses.
  2. Live below your means. Even if you have a very successful freelancing business, it’s a good idea to live on less than you earn. You never know when the business environment will change and the changes may affect your income. To be more specific, this means that you shouldn’t live in the most expensive place even if you think that you can afford it and you shouldn’t drive the most expensive car. Also watch out for common budget busters like credit cards and eating out.
  3. Charge a professional wage. One reason many freelancers have trouble is that they base the rate they charge their clients on having 40 billable hours a week. However, very few (if any) freelancers can actually charge for forty billable hours each and every week. There are many, many necessary freelancing tasks (such as marketing your services) that you won’t receive any pay for doing. Too many freelancers fail financially because they charge too little for their work.
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  5. Don’t forget to save extra for taxes. Income taxes are another area where a freelancer’s budget can get off track. If you live in the United States, remember that your clients are not withholding income tax from your pay. In addition, U.S. freelancers are responsible for paying self employment tax, which makes their taxes higher. If you haven’t already, sign up to pay taxes quarterly. If finances confuse you, hire an accountant to help.
  6. Don’t skimp on insurance. Having insurance is your protection against sudden unexpected and catastrophic expenses. While the Affordable Care Act may mean that you now have health insurance, there are other types of insurance that you should also have: automobile insurance, life insurance, homeowner’s insurance (if you own a home), and possibly professional liability insurance. April Greer has published a good discussion on insurance on Design Blender.
  7. Avoid using credit whenever possible. If you’re running short on cash, it can be tempting to pull out your credit card. Don’t do it. Using your credit card just adds to the number of bills you must pay each month. And over time you will wind up paying for whatever it is you were going to purchase two or three times over. If you must use credit, pay it off in the same month that you use it. The more credit you have outstanding, the more likely you are to run into trouble.
  8. Buy business assets on sale. Do you need a new computer for your web design business? Could you use a new printer? Is your business phone system antiquated? Unless your current equipment is completely unusable, don’t rush to the store right away. Instead, shop around. Compare prices. Look for sales. Find the best bargain, and then and only then, make your purchase. You can save big by bargain hunting for your office equipment.
  9. Have an actual budget. As a freelancer you need a plan for spending your money. Have a written (or online) budget for both personal and business needs and follow it closely. There are some great software tools that can help. Here are some free and low cost budgeting apps to consider: Mint.com , BudgetPulse, and You Need A Budget. Even if you don’t choose one of these budgeting options, do create a budget.
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  11. Know your bottom line. Do you really know how much it costs you to pay your personal bills each month? Do you understand how much it actually costs to run your business? While most freelancers have a general idea about the answers to these questions, a surprising number of freelancers don’t know the exact amounts. But you can’t really understand what you need to charge for your services until you know how much money you must earn to pay your bills.
  12. Moonlight on your freelancing as needed. It takes a while to build up a successful freelancing business. At first, you probably will not earn enough from your freelancing work to make ends meet. This is very common. In fact, it could take months, or even a year, before you earn enough to live off of. In the meantime, consider taking a part-time job to help bolster your cash flow. (When I started, I also worked as a substitute teacher.)

Your Turn

What budgeting tips did I miss? Do you have a budgeting secret that has helped you to make ends meet as a freelancer?

Share your answers in the comments.

Published January 6th, 2014 by

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