Devika Pathak started her journey as a marketing and content consultant eight years ago. He enjoys his work and the fact that he is free to choose what he takes on and also in which industry he works. Along with that, Pathak relies on the ability to maximize earnings based on the effort and time invested.
Reem Khokhar has been a part-time freelance writer and has had a full-time job for several years. He started it as a full-time profession in 2018. This is not just a job for him, but what he says is the “most organic form of expression” he explores through writing about social, cultural and lifestyle-based ideas.
Freelance media professional Sonali Chowdhury is most attracted to saving time and effort by working from home. She gets work at her own pace, saving energy and time for her seven-year-old daughter and other commitments related to taking care of the home.
Freelancing is really about the freedom that structure provides, be it creative or the ability to dictate the terms and time of work.
Despite the benefits, freelancers may sometimes have to find hidden extra energy to push harder because income can be irregular, uncertain, and there are no fringe benefits like paid vacation or health insurance.
“We can lose a client with up to two weeks’ notice, which can change the entire revenue overnight,” explained Pathak.
For all three, irregular payments were a reality when they started and it was necessary to be selective about the assignments they accepted. When it comes to finances, this also means that focusing on financial health must be a priority from the start. To stay on top of their financial health, a freelancer must invest in their personal finances.
Save more initially
You should start freelancing fully aware that income may be irregular. It can also be uncertain, meaning losing clients in an instant or not getting paid for work done months ago.
Khokhar is a careful saver, which has its advantages as it controls work and money.
“I had all my savings from my previous full-time job back – it really helped me in the first two years and also during Covid-19. Fortunately, the work didn’t slow down due to Covid-19, but I had to turn to cover more diverse topics and push to find international locations because many domestic ones dried up,” he said.
Working innovatively is part of the freedom freelancers enjoy, but it also means being conservative with money: spend less and save more. In the early years without sufficient savings, some may even have to get used to the idea of reducing lifestyle expenses for a while.
If you have a co-worker’s cushion or an overdraft from your parents, it may be easier in the beginning. However, avoid exaggerated decisions that may arise from this ease of starting capital.
“Freelancers have to ‘front’ savings, but that’s easier said than done. In the beginning, the income can be just enough to support yourself. Let’s focus on mandatory savings, whatever the amount, or at least regular savings,” said Srikanth Bhagavat, CEO of Hexagon Capital Advisors. savings are good for the future and can act as a reservoir in bad times, in this regard, aiming for preservation can change the equation and make cash flows more predictable.
Avoid expensive loans
Home loans, credit card overdrafts and personal loans are all readily available, giving you a sense of empowerment in your life choices. Loans are a double-edged sword and can just as easily create a financial burden or emotional distress if the income is insufficient.
Pathak had a tough time when he had to ask for money, but lately he has been focusing more on money management.
“There have been months that are extremely slow; during those times, because I had no savings, I have had to ask my parents or friends or my spouse for money. I haven’t been good at saving at all, and in fact I only started saving in a structured way this month,” she explained.
Avoid adding to your financial burden with expensive loans until you freelance on a professional journey where the foundation of regular income is strengthened and services become like a desired brand.
Also, don’t rush to buy big assets like a new house. It can wait until you can actually afford it. Consumer loans are a strict no-no – don’t even touch them with a barge.
“Often the events led as a freelancer can be an impulsive choice rather than a planned one. There is not always a savings cushion to begin with,” said Deepali Sen, founder of Srujan Financial Advisors. “If you need to consider a loan, there is no harm in asking; certain types of work, such as starting a franchise, can make it easier to get a loan. For some individuals, a loan may well be the sword that makes them focus on generating income, although expensive loans such as credit cards and personal loans are avoidable.”
Invest safely
Should you invest your savings in the stock market in the hope that your money will double in a few years? For long-term investments, taking calculated risks is encouraged to build inflation plus returns.
However, stocks are volatile in the short term. For freelancers, since there is no regular income and no financial guarantees from working for an organization, relying heavily on market-linked investments can hurt capital market declines.
However, it is not just investing, but general risk management is important.
“If there are dependents, affordable term life insurance is essential to protect the family. Health insurance and disability coverage are also critical for freelancers to consider and plan for, Bhagavat said.
More insurance, such as car and home insurance, for things like car accidents and theft. you can be financially well protected from various emergencies.
Prioritize the creation of financial protection (insurance) and a stable return investment portfolio with securities such as fixed deposits, short and medium term debt funds and a suitable pension fund. Once that part of the portfolio is well-funded to handle professional or personal emergencies, look for risky assets like stocks or property.
In addition to understanding the risk dynamics of earning and investing, as a freelance professional you also need to rely on self-discipline. Chowdhury has financial comfort because his spouse’s income is also in the family pile.
“Most of my income is immediately invested in mutual funds (SIP); I keep 10 to 20 percent of my personal expenses, he said.
For Khokhar, self-discipline not only helps to meet deadlines, but also to save and invest regularly.
“I try to keep a fixed amount in my account that I know I need, and any excess I invest in mutual funds or put in a separate account that I don’t touch unless I need it for an emergency,” she said.
Starting out on your own can provide you with the much-needed work-life balance and fulfillment of creative expression, but building your financial health around this is just as important. There is no easy route; Prudence with spending and investing is your best bet until income becomes large and regular enough to support your lifestyle choices and future financial health.