Budgeting Tips for Freelancers: Where does your money go?

Have you ever wondered where your money goes? When it comes to budgeting, the first step is understanding your spending habits. Personally, I have a few indulgences—I love eating out, shopping for new clothes, and collecting Lucky Cats (check out @luckycatcity to see my obsession!). On top of that, there are bills to pay and unexpected expenses. I myself had surgery in 2020. Surprisingly, my health cover didn't cover any of it, leaving me $5000 out of pocket. It was a shock, but it taught me a valuable lesson: always double-check your health cover and insurances.

As a freelancer/contractor, money isn't consistent. Some months are filled with back-to-back jobs or even multiple projects simultaneously, while other times, there's nothing at all. That's the downside of being your own boss—you have to hustle, constantly searching and applying for jobs. To mitigate the uncertainty, I try to maintain multiple income streams whenever possible. If there are two different jobs available, I'll take both if at all possible. I also strive to have a passive income stream, even if it's just enough to cover a nice lunch or dinner. Remember, any money is good money—unless it's obtained illegally, of course!

When I started freelancing, I prioritized saving as much as possible. With an unpredictable gig flow, I didn't know when the next opportunity would come. Thankfully, I had consistent work and even took on additional projects after hours as my experience grew. Alongside working weekends and applying for jobs, I saved diligently. This allowed me to have a financial cushion for periods without work and emergencies. Remember, saving should include enough to cover your living expenses and then some. Another thing is to try and take some breaks. If you burn out or get injured, you can't earn money!

Being a freelancer also means taking care of your own taxes since you're not under a PAYG system. It's essential to set aside enough money for tax payments. One budgeting strategy that works for me is dividing my pay into thirds. I allocate one part for savings, one for taxes, and the remaining portion for fun. Of course, life happens, and this division doesn't always apply. In my early freelance years, I had less fun money, and sometimes I would put the whole pay into savings, just to ensure I was covered for taxes. Over time, I've learned to strike a balance.

Additionally, I save a small amount of money each week, regardless of whether I have a job or not. This is a strategy that can work for anyone. Even setting aside $5 a week can accumulate to $1820 in a year. It may not sound like much, but if $5 is all you can afford, it's still better than saving nothing at all.

Another aspect to consider is Superannuation (Super). It may not feel important when you're young and/or struggling to earn money, but it's wise to start thinking about it sooner rather than later. Money put into Super is taxed less (only 15%), offering some advantages. I regret not sorting out my Super earlier; I only started considering it in my late 30s so I'm quite behind.

Lastly, I highly recommend finding a good accountant, someone knowledgeable about artists and freelancing. Avoid run-of-the-mill tax agencies as they may not understand your specific needs. When I first started, I made the mistake of going to basic accounting agencies, and I ended up paying more than necessary.

If you have any suggestions or additional tips to share, feel free to message me or leave a comment!


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