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5 Effective Strategies for Managing Freelance Income

One of the questions I get asked the most as a blogger and freelancer is how the hell I get by with managing freelance income from writing, blogging and consulting.

Truth be told, I’ve learned several lessons the hard way as it pertains to freelance income. Every once in a while, I still get hit with another lesson. Like when I didn’t realize that I’d reached a new tax bracket because I was making a lot more money. This caused me to not save enough for taxes and have to pull money out of my emergency fund.

I’ve also had some other hard lessons. Lessons like not having enough money in an emergency fund for unexpected oral surgery, spending some unnecessary cash on my business and leaving myself with not enough to cover groceries, still struggling to save enough money to get my own place.

I’m going to be honest, learning to manage freelance income is a huge pain in the ass for just about every self-employed person on the planet. This is especially true within the first few years of business when things are rocky. It is not easy to budget when your income isn’t fixed.

The good news is I have gotten much better at it. I’ve learned by watching colleagues and reading up on what they do. I’ve learned by having open communication with my accountant. And I’ve learned simply through trial and error.

In this podcast, I’m going to lay out some of the strategies that have worked for me as they pertain to managing freelance income.

Strategy #1: Focus on the positive.

There are actually some upsides to having freelance income. You may not see them when you’re first starting out, but as you begin to maneuver running a business and you see revenue starting to increase, you begin to realize that managing variable income isn’t totally terrible. You just have to keep your eye on stuff.

Here are some of the advantages of having freelance income:

  • If you want to make more money, you can. No need to ask your boss for a raise. No need to go through red tape. Just put in a little extra elbow grease, raise your rates or make some extra sales calls. I personally find this incredibly empowering, especially when I’m working toward a big financial goal.
  • There are resources to help you. Plenty of people have been managing variable income for a long time. Many of those people have gone on to write books or create resources. The book that has helped me the most as it pertains to managing variable income is The Money Book For Freelancers, Part-Timers and the Self-Employed.
  • It forces you to take an active role in your finances. When you have freelance income, you don’t have the luxury to guesstimate or check out. This may seem like a bad thing, but it’s not. Personally, for me, it’s been the one thing that has helped me manage my money better. Most of all, it literally forced me to stop being afraid of numbers. This never would’ve happened if I was getting a regular paycheck every two weeks.

Strategy #2: Get clear on your baseline.

The key to managing freelance income is to know the minimum you need to bring in each month to cover your baseline expenses. I take it a step further and add savings goals, taxes, retirement contributions and anything I may want to do that requires money. With all this in mind, I know I need to bring in an average of $6,000 each month (though I always shoot for more).

Strategy #3: Go on regular dates with your budget.

I sit down with my both my business and personal budget quite often. I do this for two reasons. First, it helps me see exactly where my money is going. Second, I use it as an opportunity to see where I can make some cuts and therefore save money.

For example, I realized I wasn’t using as much data as I was paying for on my cell phone plan so I switched it. In doing so, I’m now saving myself $10 a month. That may not seem like much, but these little things do add up.

Like I mentioned earlier, you don’t have the luxury of checking out of your finances when you have freelance income because you’re never quite sure what you’re going to bring in each month. That’s why it’s important that you run numbers on a regular basis.

Check out this video to see the exact steps I use when I review my budget.

Strategy #4: Keep track of where your income is coming from.

I once asked my accountant what he saw as some of the biggest mistakes business owners were making as it pertained to cash flow. His response was that many business owners don’t have the proper strategies in place to collect payments. This could look like not accepting online payments and not keeping good track of who owes them money.

This begs the question, how can you get better of managing freelance income when you don’t even know how much money is coming in and from where?

Fortunately, there are tons of cost-effective online tools that can help you keep track of all of this stuff. One such tool is Freshbooks which provides user-friendly invoicing services. You can also automate invoices and late payment reminders so that you never forget to send them out. Click here to try Freshbooks free for 30 days.

Strategy #5: Prioritize emergency savings.

While everyone should be focused on emergency savings, those with freelance income need to pay extra close attention to how much money they are putting away. The reason being that one month you can make $10,000 and the next month you might make half of that because you’ve entered a slow season (summer, for example, is a slow season for me because everyone is on vacation).

By prioritizing savings when you’re experiencing plentiful months, you’ll be better able to ride out the lean periods of your business.

If you don’t feel confident enough in your savings abilities or feel like you don’t have any money to save, I highly recommend checking out Chime. Chime offers you the ability to save money automatically, so you don’t even realize you’re stashing money away! 

Resources Mentioned In This Podcast Episode:

 

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5 Things Millennials Can Do To Save For a Home in Five Years


Disclaimer: This post is sponsored by Better Mortgage. All opinions and thoughts are my own.

I’m currently a renter, and that’s fine for right now, but I do not want to rent forever. I want to build my wealth. I want to have a home for my future family. But here’s the problem – housing prices in Miami are INSANE. It seems impossible to save for a home!

The median price of a home in Miami is over $400,000. The average salary is around $52,000. That’s not even enough to LIVE in a city where you need at least $70,000 to live comfortably. The truth is there is a massive housing crisis we’re dealing with.

Now, someone might say, just move out of Miami, but that’s not currently an option for me. I want to stay in Miami because a) I love the city and b) most of my family is here. My parents are also getting older and I know they’ll need my help sooner rather than later. As a Latina, family is THE most important thing and I don’t want to be too far from them.

My History of Dealing with High Housing Costs:

It took me years to move out of my parents’ house after college. Because of a down economy and rising housing costs, I thought I would never be able to afford rent, let alone a home.

Even though I had a job, I wasn’t making nearly enough money to afford rent in such an expensive city. In fact, nearly my entire salary for that job would have gone to rent.

The only solution I saw was to start making more money on my own. I took up freelance writing gigs, started consulting and was doing everything possible to learn about negotiating, marketing and sales.

While it took me a while, I now earn 4x what I was earning at that last job and can afford living in the apartment I’m currently live in in a trendy part of town. But I know that’s not the case for everyone. It wasn’t that long ago when I couldn’t afford rent.

Now, I find myself wanting to eventually buy. In fact, I’ve given myself a goal of buying a property within five years. I have to learn how to save for a home while simultaneously paying high rents. Not to mention, I’m self-employed so I need to show up to the negotiation table with a lot of cash and profits.

I know I can pull this off, but it doesn’t mean I’m onlivious to what’s going on out there. After all, it wasn’t that long ago that I couldn’t afford my rent. Most people are in a situation where they are dealing with deficient funds. Between student loans, stagnant wages and high housing costs, it seems as if we have everything working against us. I get it because I’ve been there. But if I was able to figure it out for rent, then I can figure it out for owning property too – even if the cards are stacked up against me.

Here’s how I plan on making it happen.

Increase my income…again.

There’s no amount of daily lattes you can cut out that would help you save for a home. We’re living in a time when lack of income is the problem, not overspending.

Just like I had to increase my income to be able to afford rent, I plan on doing the same thing to save for a home. In my case, that looks like getting bigger contracts, creating new offerings and increasing sales.

For you, the easiest thing may be asking for a raise or promotion. Or maybe you make a move and find a new job where you negotiate a higher salary. The latter is actually something my brother did with a lot of success. In fact, he probably has more take-home pay than I do thanks to that one move he made.

On top of that, there are plenty of ways to make extra money – from freelancing and consulting to becoming a driver for a ride-sharing company. At this rate, it’s up to us to proactively find ways to increase our incomes. In doing so, we can put more money away for a downpayment on a property.

Make sure I save enough of a downpayment where I’m not paying extra every month

A downpayment only covers a portion of the housing costs. If you don’t show up with enough, you’ll have to get mortgage insurance which only increases your monthly cost.

I, for one, don’t like having to pay extra money when I don’t have to so my plan is to actually exceed the 20 percent downpayment when I save for a home. First, I don’t want to pay for mortgage insurance. Second, I’m self-employed – since I don’t have W2s or pay stubs I know I have to show up with more cash anyway.

Keep my credit on point

I have excellent credit thanks to my responsible use of credit cards over the years. This will come in handy because it will keep my interest payments lower.

That being said, I have to make sure my credit stays excellent. That means continuing to use and pay my credit card balances in full each month. I haven’t failed at doing this yet, so I suspect if I stay disciplined I’ll be able to keep this going.

If you’re not there yet, consider starting to fix your credit. The easiest way to do this is to pay down your debts. However, you’ll also want to keep an eye on your credit report to make sure everything is correct. The last thing you want is a mistake on your credit report keeping you from buying a house.

If you have no credit, that’s the same as having bad credit. Consider starting with a secured credit card and then upgrading to unsecured once you feel comfortable enough using credit responsibly. (Again, my brother actually did this and it worked well for him)

Consider house hacking

House hacking is when you hack a portion of your mortgage payment by renting out parts of the property. I was recently at an event where I heard Shark Tank’s Daymond John talk about how he rented out every room in his house and lived in the basement while he was building Fubu.

I also know several other people who buy properties and rent out rooms (or units depending on the type of property) to help with the costs. This is definitely not something I would be opposed to.

That means in the next five years I would need to research the right properties I can actually do this with. That way, by the time I’m ready to purchase, I have an idea of what I’m looking for according to my goals. This helps me save for a home because I’m clear on what kind of property I would need and want.

Write my goal down every day

Saving for a home is a BIG commitment, especially when housing costs are so high. You can easily burn out or lose motivation on your journey. It may even seem impossible at times.

That’s why I have a notebook I keep by my bed where I write down my goals each morning when I wake up and each night before I go to bed. I also write the goal in past or present tense as if it’s already happened.

This may seem trivial, but reminding ourselves of our goals makes a huge difference. It keeps the fire burning so we can show up, do the work, make the money and save for a home. It’s a technque I’ve used to build the business I have to day and I’m sure it will work as I save for a home.

Final Thoughts

Do we have a serious affordable housing problem? Yes, we absolutely do. It’s something I’ve witnessed for years and struggled with personally. That’s why I teamed up with Better Mortgage to spread the word so we can finally fix this issue.

You can help by sharing the following video on all of your social media channels and using the hashtag #SpentonRent. Even though we’re all trying our best to save for a home, the reality is there is an issue that needs to be dealt with. Let’s do our part to make sure it gets fixed.

For more about Better Mortgage and their study on affordable housing visit http://www.better.com/spentonrent

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Florida Prepaid vs 529 Savings Plan: What You Need to Know

Blog disclosure: This post is sponsored by the Florida Prepaid College Board. All thoughts are my own.

Over the last few months, you’ve heard me mention Florida Prepaid quite a few times. You’ve heard me mention how Florida Prepaid plans helped my parents put my brother and me through college. You’ve also heard me say that Florida Prepaid is a big reason why I graduated from college debt-free.

Recently, I also talked about another option for college savings called a 529 plan. The Florida 529 Savings Plan is slightly different than the Florida Prepaid plan, so I figured I would give you a quick rundown of each so you can make the decision that makes the most sense for you and your family.

The timing is right to figure out which is best for you, because Florida Prepaid is seeding new Florida 529 accounts with up to $50 between now and June 30, 2018.

Florida Prepaid Plan

The Florida Prepaid Plan is a prepaid college savings plan. With this option, you prepay the future cost of college tuition and other specified fees. The savings are tax-free when they are used for a qualified plan. Some of the pros and cons:

Pros

  • Your savings are guaranteed by the State of Florida, so you can’t lose what you put in.
  • Payments can be refunded or transferred to a beneficiary.
  • Savings are tax-free.
  • The value of your plan can be used in Florida, or at other postsecondary institutions around the country – public and private.

Other considerations and eligibility requirements

  • The child or his/her parent must be a resident of the state of Florida for the past 12 months
  • The plan does not cover room and board (but Florida Prepaid offers a separate dormitory plan)
  • There’s an Open Enrollment period a few months each year
  • You have payment options to choose from – lump sum, monthly over 5 years, and monthly through 12th grade
  • The child must be a newborn to 11th grade

This is the option my parents used. When my account had money left over, they used the extra money to ensure my brother’s extra classes were paid for.

Florida 529 Savings Plan

The Florida 529 Savings Plan is a little different than the Florida Prepaid Plan.

It’s an investment plan, so it is not guaranteed by the State of Florida. As with any investment, you can either make money or lose money, depending on how your investment choices fare. That’s just the nature of investing.

Like the Prepaid Plan, the Florida 529 Savings Plan is tax-free so long as the savings are used for qualified educational expenses.

Some of the pros and cons:

Pros

  • You don’t have to wait until college to use the funds. You can now use it for private school tuition in K-12.
  • You can start with as little as $25 a month, and there are no monthly minimum contribution requirements.
  • The funds can be used for expenses beyond tuition – books, housing, etc.
  • You don’t have to wait for an Open Enrollment period. You can apply right now.
  • There is no residency requirement.

The latter point is especially important because I have several friends whose parents did not save for their education because they were not residents and therefore did not qualify for the Prepaid Plan. In a state with a large immigrant population, it’s important that we know we have other options that can help us save for our child’s education.

The Bottom Line

Both plans are fantastic and considered top-rated in the nation. Which you choose depends on your particular situation and eligibility requirements.

If you feel like a 529 Plan is the best move for you, you can apply in as little as 10 minutes right now. If you apply before June 30th, Florida Prepaid will seed your new account with an extra $25. You can get another$25 when you set up automatic monthly savings of $25 or more.

Click here to apply for a Florida 529 Savings Plan before June 30th and get up to $50!

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What is a 529 College Savings Plan?

Blog disclosure: This post is sponsored by the Florida Prepaid College Board. All thoughts are my own.

As you all may know, I write about student loans for some of my banking clients. In the last two years, I’ve written about the amount of debt students find themselves in, repayment options, and what happens when people default on their loans. I’ve also interviewed student loan experts on my podcast to help listeners know their options.

Needless to say, knowing how dire the student debt situation is, it’s made me a very passionate advocate for college savings plans.

I don’t even have kids yet and I’m already thinking about how much college is going to cost and what I can do to make sure my future children don’t need to take on debt for their education.

One option is a 529 plan.

What is a 529 plan?

A 529 plan is a tax-advantaged savings plan that allows you to save money for education. These plans are sponsored by states, state agencies, and educational institutions. There are also two kinds of 529 plans – prepaid savings plans and education savings plans.

I’ve discussed prepaid savings plans in the past. This time we’re talking education savings plans. In the case of a 529 plan, the account holder opens an investment account to save for the beneficiary’s future higher education expenses. Savers usually have the option to choose from a range of investment options like ETFs or aged-based portfolios.

Pros of a 529 Plan

There are three main advantages to using a 529 plan.

  1. You can typically use the funds at any institution. You can also use the money to pay for education before college as well. For example, you can use the money in a 529 plan to pay for private elementary school.
  2. Return on investment can be strong. Whereas with a prepaid plan, you may not see a big return on investment, with a 529 plan you could. Of course, as with all investments, a return is not guaranteed. However, the more time you have on your side, the more your money grows in your investment account.
  3. Depending on the state, 529 plans come with special tax benefits. For example, the Florida 529 Savings Plan is tax-free so long as the withdrawals are used for qualified education expenses (any money outside of that would be subject to federal income tax).

Florida Residents Get $25 When They Open a 529 Plan

Now that we’ve covered what a 529 savings plan is, it’s time to get to the good news! Florida Prepaid is having a Summer Jump-Start Promotion where you can get $25 toward your savings when you open a Florida 529 Savings Plan. You can get an additional $25 when you set up automatic monthly contributions for as little as $25 per month. You have until June 30th to set up the plan and receive the incentive, and it’s only applicable to the first 5,000 plans opened! So hurry!

Here’s how to get started:

The sooner you start saving for your child’s future, the better off they will be. The last thing you want is for them to be one of millions of Americans who are being crushed under the weight of student loan debt.

Click here to get started with a Florida Prepaid 529 Plan and receive up to $50 before June 30th!

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