How to Save on Monthly Expenses as a Freelancer
As a freelancer operating on a tight budget, saving a few dollars can majorly impact your business and personal life. However, with so many different expenses, it’s often challenging to know where to start. Yet, there are easy ways to save on monthly expenses as a freelancer.
Freelance Work on the Rise
You don’t need anyone to tell you how much the business landscape has changed since the turn of the century. The growth of the internet and technologies like smartphones and cloud computing have helped skilled professionals the resources branch out on their own. Now, they can pursue freelancing as their primary source of income.
According to research from Freelancers Union, there are now 53 million Americans working as freelancers. That means 34 percent of the American workforce – or 1 in 3 workers – is a freelancer.
People are attracted to freelancing because of the opportunity to enjoy certain freedoms that aren’t easily attainable in a traditional office job. Perhaps the single biggest draw is the income potential. It has a significantly higher ceiling than the average career in corporate America.
“If you’re good at your job, there really is no limit to how much you can grow your business,” says Jonny Steel of Payoneer, a platform that helps freelancers get paid. “Many of the most successful entrepreneurs we come across just keep growing, and it’s because they’re bold and eager to promote themselves. Companies will be more drawn to you — and be willing to pay more — when they see you’re serious.”
Yet, there’s a difference between having an opportunity and realizing that opportunity. For thousands of freelancers, the challenge is finding a way to maximize profits and make a comfortable living. There’s always an opportunity to increase sales and drive more revenue. However, it’s also important to consider saving money and trimming expenses.
8 Proactive Ways to Save on Monthly Expenses as a Freelancer
In order to give yourself the best chance of being financially successful as a freelancer, you have to attack the situation from as many angles as possible. Here are a few proactive solutions to get the ball rolling:
Understand the Season of Life You’re In
Before digging into the nitty-gritty of cutting expenses and saving money, it’s important that you get in the right frame of mind. Specifically, you need to recognize that life is full of seasons and this one’s particularly challenging.
As a freelancer who is just starting out, you’re in a season of life where you need to work hard and sacrifice. Expect it to be tiring and overwhelming at times. Also, recognize that it won’t last forever. It will eventually feed into better seasons of life marked by wealth and prosperity. Having this sort of perspective will help you push through. Also, this can increase your willingness to experience temporary frustrations for the greater good.
Get a Good Mortgage
The vast majority of freelancers work from home to save money on office space. While this is a step in the right direction, you can cut your home/office expenses even more by being strategic with what you buy and how the mortgage is structured.
If you’re on a tight budget and can’t afford to make a large down payment on a house, an FHA loan might be the best financing option available. It’s easy, flexible, and usually comes at a pretty decent rate.
“FHA’s minimum down payment can be as little as 3.5% on most types of properties,” On Q Financial explains. “These mortgages are insured by FHA which allows borrowers to finance approximately 96.5% (excluding mortgage insurance) of the value of their home purchase in many cases.”
Live a Life of Minimalism
When you look at each line item, you’ll realize there are so many unnecessary expenses in your life and business. This includes fast food, Netflix, drinks at the bar, and season tickets to your favorite team’s games. All of these things are fine in moderation. However, you might be burning hundreds or thousands of dollars a month on them.
By pursuing a life of minimalism, you can trim down your budget. This allows you to do more with the money you do earn as a freelancer. Your quality of life will remain the same despite not doing anything to increase income.
Use an HSA for Medical Expenses
One of the biggest downsides to being a freelancer is that you’re on your own for healthcare and benefits. This might not be a big deal if you have a spouse who can add you to their employer’s plan, but it becomes an expensive problem when you don’t have this option. While it’s not a perfect solution, a health savings account (HAS) can save you a considerable amount of money.
“By opening an HSA you are able to put away funds that aren’t subject to federal withholding at the time of deposit,” one accountant explains. “The funds can be used to pay for qualified medical expenses, at any time, for medical expenses that are below your health plan’s deductible amount. Beyond that, the funds can be used for any co-pays once your deductible is met.”
Use Free Tools for Your Business
As a freelancer, you don’t have access to some of the different resources that you might have if you were working for a traditional employer. If you aren’t careful, purchasing these solutions on your own can add up and eat away at your profitability. Thankfully, there are a number of free tools on the market that can be used to tackle major challenges without draining your coffers dry.
This article has a list of some of the top free tools for freelancers, including solutions that help with billing, client communication, time management, proposal drafting, marketing, networking, and brainstorming.
Hire the Right Accountant
It doesn’t always make sense for freelancers to hire an accountant, especially if the operation is relatively simple and doesn’t involve much money, but you could potentially save thousands of dollars per year by hiring an experienced financial team that knows how to help you handle your income.
Even if you take the savings out of it, hiring an accountant lifts a huge burden off your shoulders during tax season. Instead of sitting in front of the computer and filling out complicated forms that don’t make sense, you can leave the tricky parts up to the professionals and spend your time on your business.
Don’t Scale Prematurely
Honestly, one of the best pieces of advice you can ever receive as a freelancer, entrepreneur, or business owner is to avoid scaling prematurely. While it’s normal to have growth on your mind, scaling before you’re ready will only result in additional costs. As a result, you’ll actually come away with less money and more problems.
By waiting until you’re ready to scale, you can implement sustainable systems and procedures that give you the best chance of experiencing long-term success.
Defer What You Can
If you do a good job of being minimalistic, you don’t need a ton of money to make ends meet. This allows you to defer a large portion of income towards retirement. This is something you probably haven’t focused on.
As this study shows, 45 percent of working-age households don’t own any sort of retirement assets. This sobering statistic should serve as a wakeup call to freelancers who don’t have employers willing to establish retirement accounts and match earnings
A simple Roth IRA or Solo 401(k) is always a great choice. Also, consider a Savings Incentive Match Plan for Employees.
“While the Savings Incentive Match Plan for Employees is typically for small business owners, it also works for freelancers, especially those who intend to scale up their businesses,” entrepreneur Abdullahi Muhammed explains. “For instance, if you intend to hire some freelancers to work under you, this might be the best option since it will be easy to grow your business. You can transition from a sole proprietor into a business owner without any problems.”
Set Yourself Up for Long-Term Success
For many freelancers, the path to profitability and financial freedom isn’t quick or straightforward. If you were looking at a graph or chart, you’d see income decrease in the beginning stages before leveling out and rising over time. In the bottoming-out phase, it’s imperative that you get serious about your financials. This is when it’s time to figure out how to maximize your earnings.
Wanting to save money doesn’t make you a cheapskate – it makes you a realist. The tips in this article are by no means a comprehensive list of what you should do. Yet, they provide a great starting point in your journey towards freelance success.