Though freelancing entails the benefit of setting your own rates and customizing your hours, it also leaves you financially responsible for ensuring you are adequately compensated for your work, have a steady stream of income, and have an insurance plan to fall back on for when the unexpected arises. Read on to learn some essential tips for effectively managing your finances as a freelancer.

Seek Multiple Streams of Income

As a freelancer, you are likely receiving multiple income streams from different clients. However, if you are part of the percentage who rely on a specific client to pay the bills, you are putting yourself at financial risk if this client were to cancel a partnership or fall through with a project. Thus, it’s necessary to diversify your client base to ensure a steady income stream.

One way to gain new clients is by creating an online portfolio to showcase your work or simply updating your Linkedin page to indicate you’re available for new projects. If you haven’t already, reach out to trusted clients and see if they can refer you to other opportunities. To cast an even wider net of earning potential, consider leveling up on a new skill that complements your primary offering and sets yourself apart from competitors.

No matter how many clients or skills you have, freelance work will likely fluctuate from month to month, with inevitable down periods between large assignments producing less income. Thus, on top of seeking a rotation of regular clients, it’s essential to keep an emergency fund to cover your basic living expenses during these low periods.

Set up Insurance

One of the biggest financial concerns freelancers face is navigating their insurance options. Unlike 9-5 jobs that often offer extensive insurance plans ranging from dental care to travel, freelancers are tasked with creating their own benefits package to protect themselves and their assets.

As soon as you decide to depart your 9-5 to pursue full-time freelancing, set aside time to review and purchase necessary plans, accounting for expected costs. Failing to set up a viable insurance plan can put you and your family at financial and medical risk. Establishing a good financial safety net for emergencies is a priceless investment.

Establish Your Rate

Whether you’re a graphic designer or social media manager, freelancers must know how to price their work correctly and be appropriately compensated for their contributions. One strategy is establishing a set rate, whether hourly or on a project-by-project basis.

To determine your pay rate, start by calculating the monthly expenses required to do your work, such as software subscriptions and office supplies, and combine the estimated total with your required living expenses. In addition to calculating this total cost, determine the number of work hours required to reach this amount in full, accounting for planned vacations and occasional sick days.

Once you’ve crunched the numbers and set the hours, you’re ready to set your starting baseline rate (at least the minimum amount to cover these expenses). As you continue freelancing, you may want to raise this baseline amount as your waitlist grows and your skills increase. In addition to a set freelancing rate, tracking the time it takes you to complete specific projects can ensure that you are sufficiently compensated for your work and help you determine an hourly rate if you prefer to charge for work by the hour.

Need Financial Advice?

Check out our previous blog post on Organizing Your Finances as an Entrepreneur. In addition, if you need personalized financial advice, our team is always here to help—contact us today to book an appointment!