Staying In The Black: Budgeting Tips For Freelancers
One of the benefits of having worked for a media agency is that the concept of measurable ROI has now become engrained into my thinking. In fact, we can potentially apply this to all areas of our life - from what we eat and how we exercise to the types of relationships we build and keep. But a more obvious application would be how we apply this concept to our personal finances.
A few weeks ago, I decided it was time to take control of my finances and recognize that the only thing I could change in the immediate future were my spending habits. Like any strategist, I delved into research, conducting my own personal behavioral study. The internet told me that Toshl Finance was the best spending tracker and budgeting app.
So I downloaded the app and inputted a weekly, optimistic budget of $150. Despite having Mint for the last few years, I found the act of inputting my expenditures curbed my spending habits immensely. Instead of having black holes of "cash & ATM" littering my Mint account, I had a detailed history of where my money went. I initially decided to leave off the one off's - a prescription, new frames, etc. because I couldn't handle the truth. Finally, I took the plunge and upped my budget to $200 a week, vowing to input every last penny. In the process of discovering my spending habits, I changed my behavior. Suddenly, one drink I didn't need in the first place didn't seem as appealing if it threatened to tip my weekly budget into the red. I even bought an espresso maker with my credit card points. I finally convinced myself that the experience of standing in line at the cutest café, surrounded by French people, was not worth a potential $20 a week, $80 a month or if I really wanted to make a point - $800 a year. And not contributing to a landfill with my cup usage was an added motivator.
But more importantly, now that I'm freelancing, I can develop a road map for what I need to achieve to stay in the black instead of the less organized approach of living job to job. Plus, this time around, I can be realistic and base my budget on my actual spending habits instead of making up an imaginary number as to what I hope to spend per month. By adding up my fixed costs; rent, health insurance, gym, mobile phone, etc. with my newly discovered monthly spending number, I can get a very solid idea of what I need to stay in the black. I took that number and divided it by my hourly rate and day rate. I now know that I need to work 100 hours a month or 22 hours a week, or 10 days at my day rate in order to achieve my desired income. And obviously this is a best case scenario but it still gives me a good idea as to how I'm doing with gaining clients. As a freelancer, you are your own biz dev, which means I'll need to spend at least 40% of my time developing my own business to attract clients, and the other 60% working on actual client work. I'm looking forward to the challenge!