Step 3: Delegate
This is the most important step, and the one freelancers most often fail to accomplish. It’s all well and good to draw up a neat little budget, but it’s pointless if you don’t actually follow it. How many times have you promised yourself you weren’t going to overspend on shopping, nights out and delivery, only to completely rescind on that promise four days into the month? Having an irregular cash flow makes it extremely hard for freelancers and the self-employed to keep to their budgets, no matter how well-thought out. Although, in theory, we may allocate ourselves monthly spending limits, in reality our income payments tend to be scattered throughout the entire month. And unlike our employed friends, who can rely on a regularly scheduled pay-check each month, freelancers don’t always know when the next payment will come through. This is where delegating really helps. If the issue with budgeting as a freelancer is the lack of a steady pay-check, the solution is obvious: create one for yourself. It’s easier than it sounds. Every time you receive income, immediately put aside enough to pay income tax and/or VAT. The rest will be put into your savings account. Then, each month, simply ‘pay’ yourself your allocated amount of spendable income by transferring that amount from your savings into a separate spending account. That way, you receive a steady ‘pay-check’ each month, and can rest easy knowing it’s impossible for you to accidentally over-spend. It’s also a good idea to pay your uncontrollable and controllable expenses as early as possible, so these are accounted for before any optional or ‘fun’ spending occurs. Tip: setting up the right kind of bank account really helps with delegating. Banks such as Kontist offer accounts specifically designed for freelancers which automatically put aside money for tax every time you get paid, so you’re never caught short. 1, 2, 3- it’s really that simple. Making a realistic and achievable budget that accounts for taxes, expenses and savings, and then delegating spendable income into a separate account to avoid over-spending is to only ‘trick’ you need to successfully budget as a freelancer and avoid financial ruin. It’s a good idea to continue tracking your spending over the coming months to make sure you’re on track with your 50-30-20 budget and make adjustments where necessary. Stick to this plan and I guarantee your savings account will thank you. And remember: keep it simple!
Author: Heather Leeson