Being a freelance creative is incredible, especially if you’re passionate about your craft. You get paid to do something you love and on your own terms, a privilege not many people in the workforce can say. One downside of doing freelance work compared to a traditional job? Variable income.
Variable income, a.k.a. feast-or-famine income, means you don’t know exactly how much you’ll earn every month, sometimes even when. Depending on the time of the year, commissions, or workload, a freelance creative can kill it, just do okay, or fall flat on their faces when clients pay late (or worse, decide not to pay up at all). As crazy as these all might sound to people working your typical 9-to-5, they’re actually pretty common scenarios for freelancers.
If you’re a creative who wants to thrive as a freelancer, you need to budget to stay on top of your income, which can double or crash at any given month. Here are a few practical ways to do just that.
A step to budgeting on a variable income is knowing your baseline, the bare minimum expenses you need to cover every month. This budget is comprised of expense categories that are absolutely essential. Depending on your needs and priorities, these can include food, housing, utilities, fuel, childcare, insurance, and debt repayments.
This information is crucial in order to know what you must earn, at the minimum, in order to get by. Start by breaking out a pen and paper and create a list of your most essential monthly expenses.
If you are just starting out on your own and don’t have yet a lot of recurring expenses and responsibilities (such as a family, a mortgage, etc.), you might also opt to start with estimating your lowest monthly income and create a budget based on that. You’ll want to start with the smallest estimate because it’s always easier to add funds to the budget than deduct from it.
For example, if you estimate that you’ll earn at least PHP 20,000 (roughly $400) on a monthly basis, budget your basic necessities (food, housing, utilities, and transportation) below that amount. I say ‘below’ because you want to save for your emergency fund.
If you’ve already started saving, then you’re ahead of the game. Experts suggest having an emergency fund enough to cover you for three to six months. Unfortunately, saving is not everyone’s strong suit.
A few things you want to consider doing is opening a separate bank account dedicated solely to your emergency fund. Then, take a certain percentage of whatever income that comes in and sock it away in that savings account. Also consider selling stuff you don’t need and allocating all unexpected income (like a tax refund or monetary gifts from family) to your savings account.
Your emergency fund is the key to living stress-free on a variable income. Expect bad months to come, and when they do, your savings will be there to fill in the gaps and keep you afloat.
Everyone has unexpected or unplanned expenses that pop up on a monthly basis. Whether we didn’t expect or simply forgot to account for them, they will still make a dent on your budget. This is why it’s important to allocate at least about 10% of your budget to a miscellaneous category.
Once you’ve allocated a budget, it’s time for you to stick to it. A good way to go about this is to track every income and expense. There are tons of personal finance apps that can help you do this. Find one that best suits your needs and is simple or easy enough to use.
Being a freelance creative with an unpredictable income does not mean you should have an unpredictable budget. As a final piece of advice, give yourself grace. You won’t get it perfect the first time—you’ll forget things, not allocate enough budget for certain categories, and not stick as well as you wanted to your budget. Don’t stress and just keep at it and you’ll soon find yourself in a budgeting rhythm.
Nicole Mendoza is a freelance writer and work-at-home mom running on sugar and caffeine. She's been trying to avoid the writer life for nearly 20 years now but still somehow ends up writing anyway.