Financial Planning Tips For Freelancers

Not too long ago freelancing was considered job of the uneducated/unskilled people. It meant people with no degree or less formal education sold their skills to people who might need it. But with advent of internet, technology, valuing of skills above degrees and increase in penetration of internet connectivity all this is changing. As per a report by The Hindu, India could have up to 20 million ‘freelancers’ — individuals who use computers/internet to offer services in both domestic and export markets. Some experts believe the number of freelancers in India could double every five years until 2035.

With changing life dynamics, stress levels, pressures of balancing work home life, majority of us now want to be our own Boss instead of working in Corporate World from 9am-6pm. Freelancing offers flexibility and freedom.
But this comes with its own set of challenges. With no fixed salary and security of pay check job of a freelancer can be a tough one. As a freelancer one is the business owner and every facet of business needs to be sustainable and cared for. Financial life of a freelancer need not be unpredictable just because pay checks are not regular. Here are some ways you can plan your financials wisely and save even when your incomes fluctuate:

  • Plan for lean time and Pay yourself regularly

Freelancing can be a roller coaster ride. One is likely to earn different amounts from month to month depending on the number of jobs and timely payment. Even as earnings grow overall, uncertainty of monthly earnings will probably never change. So, it’s important to recognise this and accept the slower months as a risk of freelancing and plan for the lean periods by getting a realistic sense of your average income.
What did you earn last year? Divide that by 12 and you have your average monthly earnings. Do you have five years of freelance experience under your belt? Average those years out too and look at the numbers. Hopefully your earning are growing from year to year, but if they aren’t you need to take that into consideration and average out your income for the past few years to get a better sense of what you truly make. Once you have a solid number as
your average monthly income, use that number as a baseline for your budget.Based on the budget gift yourself a consistent pay check as if you are a regular employee of the business you are running. This will reduce stress and make monthly budgeting easier.

  • Track Everything

First step towards this is opening separate bank accounts for personal and business spending. Track every business and personal expense. Free apps are available on both Google Play store and Apple iTunes. It will give you a visual representation of spending habits and can highlight areas of waste in both in business and personal spending, as well as help decide how much one can spend each month.

  • Create an Emergency Fund-Non-Negotiable

Ideally, we should have this in place before we say good bye to safe and secure regular job. If not than this should be on top of the priority list. The fund can vary from person to person,but planners majorly recommend saving for at least 6-9 months expenses for both personal and business expenses. This will come to use during lean times or when you don’t want to take up work you don’t like. The stress of of irregular income is lessened when there is emergency Fund. In a perfect world client pay regularly as you work but in real world it seldom happens. Payment fluctuates and arrive late than the promised time line.

  • Save for Retirement

Being the business owner freelancers need to plan and fund their own retirement without the luxury of matching contribution from employer etc. Small contributions in Mutual Funds every month through systematic investment route can be initiated. One can also boost savings by making use of windfalls, such as Tax refunds or big client payments.

  • Risk Management

Some of the Insurance one can, consider buying:

  1. Term Plan – To cover the risk for your loved ones.
  2. Health Insurance – Most required and significant to ensure timely health facilities for yourself and your family.
  3. Disability Insurance – To be ready for any unforeseen and unprecedented happening and to cover the risk of dependency due to an accident, illness etc.
  4.  Professional Insurance – Professional liability insurance protects individuals from professional risks and related legal expenses. It provides indemnity in case a third-party sustains injury, harm, death or damage to property due to the professional service or advice provided by the insured.

Top 10 Financial Goals everyone must have and why Travel should be a part of it

Gustav Flaubert describes the goal of our life in one sentence when he says, “Travel makes one modest. You see what a tiny place you occupy in the world”. Travel as a mode of experience is rising as a habit among the people. Travel is invariably a costly affair if you fail to plan your financials properly and may prove to be disastrous. Here are the top ten financial goals everyone must have and also travel as far as this world can go without falling peril for the financial crunches.

1. Plan your finances and set a saving goal for the year:

Assess your income sources carefully and examine whether you are getting the worth of your hard work. If you answer is yes, and you are satisfied, and your hands are tied and weighed down by the limitations of life and your profession, then plan out your finances and set a saving goal for the year. Explore other income opportunities you can take up without putting yourself under the boulder. Stick to the saving goal, assess your savings and expenditure periodically, and review the saving goal and push to save more. Before planning to spend money, ask twice is it worth to spend and how important and urgent it is to spend money on what you planned for. It is also advised not to push yourself too much and allocate a separate fund for refreshing and recreating yourself occasionally to keep you going.

2. Prepare to meet the emergencies with a fund dedicated to it:

Society and life always present surprises. Not all the surprises are sweet, and sometimes emergencies might push over the cliff. The emergencies might be of health emergencies, family emergencies, and emergencies presented by the friends and obligations. Expect the worst and be prepared to mitigate the situation and not to get yourself to be trapped in debt. Allocate a separate fund for meeting the emergency exigencies and save yourself the stress and turmoil. On the brighter side, if there are no emergencies, the fund can be used for your traveling and other investment plans.Nevertheless, it is also advised to allot a sum for an emergency fund.

3. Plan early retirement and plan it right:

It is desirable to work hard when you are young, and it is also important to plan your retirement early. What is the point of working hard if you are unable to enjoy the fruits of your hard work and follow your passion and soul? Plan your finances to create an income source for your retirement and plan them in the areas where they are safe. Estimate the amount that needed to spend your retirement peacefully and hustle free.

4. Make budget-friendly trips:

Traveling not only rejuvenates your soul but also gives different meaning and perception to your life. It is important to undertake trips occasionally, but it is seriously advised to make them budget-friendly, if you intend to travel often and far. Budget-friendly trips don’t mean to put yourself in the discomfort; however, at the same time, it also does not necessarily should make you enjoy the luxuries you do not need them.

5. Keep track of your expenses:

No matter how small the expense, keep track of it. You should know where the money goes. This will allow you to revisit and question yourself where did you fall short in your saving goal and where is your money leaking through your fingers. This will also help you to avoid unnecessary expenses and become financially smart.

6. Know your strengths and passion and try to make money out of it:

The whole human beings can be categorized as those who follow the herd and those who follow their passion. It is important to follow ones passion and do things which one love to do, as it gives the immense, immeasurable happiness, which keeps the stress away. It is also advisable to work ones passion at the same time make money.
This should be defined as a dream job. The passion makes you excel and make you achieve new heights in your profession.

7. Explore the options to invest and plan your stable retirement income:

Along with the savings for the retirement, it is also advisable to invest the fund in order to get some stable income at the retirement. This will also allow you to travel extensively in your retirement. Mutual funds and share market with fewer risks is also an option one should explore. Alternatively, coming up with innovative and creative start-ups which will ensure minimum income sources at retirement.

8. Include your partner in planning the finances:

As it is more fun to travel with your life partner, it is also advisable to take your partner along your financial journey too. One it provides you some assurance and second opinion on the decisions you are making in your financial plans. Second, it also gives you another option of the source of income if you partner also happens to have a similar plan and orientation to include you in the financial matters.

9. Know your place and do not put the eggs in crusher:

It is an adage to say ‘do not put all your eggs in one basket.’ However, it is also important that one should not unknowingly put the eggs in the crusher. As one plan their finances, it is also important to not to be too ambitious and venture into the areas which one is not familiar and loose the hard earned money leading to make the life and the financial situation hell.

10. Insure yourself to insure your future:

It is also advisable to opt for various insurance plans such as pension plans and health insurances in order to save yourself from the financial crutches and lead a smooth and peaceful planned life. It is vital that the planning to should start early and gradually progress to be a long term venture to reap the benefits when you want to hang the boots and relax. It will also make sure that you are following the passion of traveling.

By following the above ten financial goals, one can ensure that they are traveling plans are on and exploring the world better. Some even choose to make their traveling plans as a source of income too, which is also advisable as emerging creative plans to earn money. Travel the world while traveling in the well planned, insured, income assured financial journey.