Finances for the Freelancer

It's a difficult situation, but there are ways to approach the problem that, over time, will provide some stability for your finances.

The first trick is finding out how much it actually costs you each month to live; chances are it costs more than you think it does. Add up all your expenses - food, gas for the car, rent or mortgage payment, utilities, car payments, car and health insurance, and so on. Don't forget periodic payments like license renewals and car registrations, birthday and holiday gifts and cards, Lotto tickets - anything that costs you money. A good exercise is to carry a small notepad around with you for a couple months and keep track of everything - I mean every penny - you spend. Allow yourself a certain amount for entertainment; if you put yourself on such a strict budget you can't enjoy yourself you won't maintain it.

Once you've decided what it costs you to live each month, that's what you live on. Open bank accounts for each broad category - monthly expenses, weekly expenses, and so on - and then deposit the amount of money you need per month into the appropriate accounts as the money comes in. Separating monthly from daily expenses actually frees you up; if you know you've got money stashed safely away for the rent, heat, etc., and you see a pair of shoes or a book you really want, just check out your daily expenses account; you may find that if you eat rice and beans for a few days you can spring for the impulse buy without wrecking your budget. Just don't, under any circumstances, raid the monthly expenses account!

If you have a month where you earn more than you need to spend based on your budget, put the extra into an interest-bearing savings account until you need it during the next low income period. Don't blow the extra on a luxury item, at least not until you've built up a substantial financial cushion.

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