In this video Di chats about being a freelancer and not always knowing when she’ll be getting money. Listen to the concerns she has around this but also the great tips and advice about budgeting and what freelancers should look out for.
00:51 – Di’s “sort-of” budget and working with cash
Di is in a kind of unique situation in that she has relatively small expenses and no debt. But having said that, she knows her “survival” number or what she also sometimes refers to as her “magic” number. That is the how much money is needed to survive the month. Thus, to survive on the least amount of groceries and no eating out in the month, no luxuries or nice-to-haves; just essentials.
She only “sort-of” budgets now but knows her expenses and keeps an eye on things closer to the end of the month. Di used to budget in a far stricter way when she had young kids and actually used cash and envelopes to manage her money. She still uses cash which I love because one is always more conscious when spending cash.
03:52 – Why are people afraid to budget?
People don’t like change and are also often afraid to face the facts! And probably a big truth is that people don’t really want to cut back on anything! (Is that you?)
5:00 – If you don’t measure it, you can’t manage it
Does this sound familiar? Tebogo also said it! This way of thinking applies to everything! Think about saving water, electricity, petrol, etc… You need some way to measure your consumption and that is exactly what a budget does.
And now a reminder about what Nicolette said, get all you income and expenses and highlight them with different colors for:
- Absolute essentials (obligations)
- Daily living
- Nice to haves
This gives you power as you are in control and know the facts!
PS – you don’t have to use spreadsheets if you don’t like them.
06:14 – What should freelancers / contract workers do
Definitely work out that “magic” number of yours so that you know what the minimum amount is that you need to earn. Also consider running 2 jobs before actually giving up your fixed income.
A tricky part about freelancing is that you may invoice lots of money now but you could wait a week, 30 days or even months sometimes before you get the money. So you really have to account for that as you cannot rely just on invoices.
Something that we often forget is the the costs involved in being able to earn the money. In Di’s case she needs photographic equipment & lots of bandwidth but that will be different based on your industry.
And remember…. Nothing is certain!
10:58 – Expect the unexpected
You should have at least one months money saved in an emergency fund as it is possible to not earn anything in a month. A good way to do this is to have a monthly debit order that puts money straight into a savings account without you needing to think about it.
11:33 – Tips and advice for freelancers
- Follow this blog! (lol I didn’t ask her to say that!)
- Work out your “magic number”
- Live frugally
- Make sure it’s your passion
- Knowledge is power – do the numbers
Let’s keep going
You’ve now heard 3 different perspectives on budgeting and interestingly enough they all had some common threads.
Budgeting shouldn’t be scary or restrictive or hard work, it’s merely a tool that you put in place to manage your money in a way that makes sense to you.
There is some work involved and lots of discipline, the the rewards are amazing! If you do it right you’ll end up having total control of your finances! Isn’t that just an awesome thought?
Let’s move on to the final lessons. Lesson 4 will help you gather all the info you need to start your budget.