Financial habits such as forming a budget, saving for emergencies and paying off debt can help freelance writers build financial confidence over time. Having good financial habits can also help reduce stress during tax season and keep your business running smoothly.
To get on track with your finances, start by identifying and eliminating bad money mistakes that can hurt you in the long run.
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Track Your Spending
You need to know where your money is going before you can create a budget that will help you spend within your means. Start by tracking your spending throughout the month. If you fill up your tank, subtract the expense from your transportation budget line; if you buy tickets to see your favorite boy band in concert, subtract that from your entertainment budget line.
There are several different ways to track your expenses, but a spreadsheet with columns labeled by category works well for many people. You could also use a digital calendar, or simply reconcile your online statements once a week to keep the transactions fresh in your mind. If you use a credit card for business purposes, look into getting one that offers itemized end-of-year statements to simplify record keeping.
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Create a Budget
A budget helps you identify spending patterns. It also shows you whether your expenses are exceeding your income or not, which can be a warning sign that you need to take steps to reduce your expenses. Investing in a home warranty can help you save money. Managing finances and creating a budget is important. You may be wondering, “Are home warranties worth it?” Many homeowners who have a home warranty find peace of mind in not worrying about repair costs.
You can create a budget with a spreadsheet. Make sure to include fixed expenses, such as your mortgage or rent, car payments, utilities and day care, as well as variable expenses like groceries, clothing and entertainment.
Commit to reviewing your budget on a regular basis. If you experience a significant life change, such as a promotion or a move, or have new or ongoing financial obligations, such as child care or minimum loan payments, reassess your budget and adjust accordingly. Make it a habit to review your budget before making any major purchases.
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Save for Emergency Expenses
Many financial experts recommend having enough cash in reserve to cover three to six months of expenses. While that’s a great goal to shoot for, it may feel out of reach for many people.
Make it a priority to set aside emergency savings by setting up an automatic transfer from your paycheck into a separate savings account. This will remove the
temptation to spend the money and it will help ensure you’re not forgetting to save each month.
It’s also helpful to find ways to economize or cut expenses where you can. Taking on a side hustle, carpooling, shopping at discount stores and even reducing your streaming services can all help you increase your savings. Remember, though, to only use that money for true emergencies.
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Pay Yourself First
Paying yourself first is a low-maintenance form of budgeting that helps you build savings, reach financial goals and avoid splurges. It involves putting a certain percentage of your income into savings, retirement or emergency funds as soon as you get paid. The rest of your paycheck can be spent however you like.
This method is particularly effective when you’re trying to establish an emergency fund or pay down debt. You may decide to pause paying yourself first once you’ve established an emergency fund, or if the rate of interest you earn on your savings exceeds the rate you’re charged on your debts.
Freelance writers need to be mindful of their credit and work diligently to maintain a healthy financial foundation. By tracking spending, saving for emergencies, and practicing sound financial habits, you can minimize debt and maximize your earning potential.
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Be Mindful of Credit Card Use
Credit cards can be a helpful tool when used responsibly, but they can also be dangerous when they’re not. Using credit cards to live beyond your means can lead to unaffordable bills, interest charges and other fees that can damage your credit score.
Make sure you’re using your credit card correctly by checking your balance on a weekly basis and paying at least the minimum amount due each month, says Hopkins. This will help you stay in control of your spending and avoid getting into a debt trap.
Whether it’s with your bank account or online financial software, making an effort to keep track of your records can make tax time much less stressful. By adopting these healthy habits and sticking with them over time, you can show yourself that you can responsibly manage your freelance writing career.
