How Freelancers Can Budget with a Feast-or-Famine Income

Starving freelancers do desperate things.

We cruise Craigslist and underbid projects just to get our foot in the door. We take low-paying gigs that suck up way too much time. We crawl back to clients and work we despise - just to end the dreaded dry patch.

And what does this do? It causes us to go broke and perpetuates the feast-or-famine cycle.


This unsteady income is one of the biggest stressors freelancers face. But by budgeting your money and becoming fiscally prudent, you will eliminate stress and stave off hunger pains during those lean months.

Here's how to keep the cupboards full and the cash flowing.

Track and Cut Expenses

As a Mint user, you're already savvy to what you're spending. With Mint's Budgets feature, you can track what you spend the most money on - like dining out. The Trends feature shows you a summary of what you spend each month. It's important to spend less than you earn, so let's take a look at what you can cut.

Fixed Costs: Does your cable bill seem high? Maybe you can switch to a provider that bundles Internet, cable, and phone, or cut your movie channels and get Netflix instead. Study your cell phone usage. Can you save minutes by using Skype or Google Voice? Look at the insurance policies for your car, health, and disability - can you find a better deal? Examine what you spend on utilities and try to save energy by switching out light bulbs, unplugging, and enrolling in energy-saving days.

Flexible Spending: If you're an avid reader and book buyer, take advantage of your local library. If date night involves dinner and a movie, try a home-cooked meal and renting On Demand instead. If you're spending too much on groceries, check out Woman's Day's Monthly Meal Plans. The idea is to make several healthy meals out of the same ingredients to really stretch your dollar.

Purge Assets

Do you have antiques, collectibles, electronics, etc., taking up room in storage? Consider selling them on eBay and starting a savings account with the profit. You can also sell used books and DVDs on Amazon, and handcrafted items on Etsy.

Donate clothing to a 501(c)(3) organization, such as Goodwill, and receive a tax deduction.


Budget Your Expenses into Three Categories

Take a look at your monthly income over the past year. Average your monthly income to create a yearly income and subtract 25% for taxes.

Note: Your tax bracket may vary depending on your income, whether you're filing singly or jointly, how many expenses you deduct, and other factors, so be sure to consult an accountant who specializes in taxes for freelancers to get an exact figure.

Divide your expenses into three categories:

1. Fixed Costs
2. Financial Goals
3. Flexible Spending

Allocate 50% of your income to fixed costs, 30% to financial goals, and 20% to flexible spending. These percentages can change once you pay down debt and build up enough emergency funds.

Open Multiple Bank Accounts

One easy trick to keep all your finances straight is to open separate bank accounts for each financial goal. Deposit your initial earnings into a high-yield savings account like SmartyPig, which you can subdivide into savings goals for taxes, an emergency fund, or a conference.

Set up regular "paychecks" that get transferred into your personal checking account - weekly, bi-weekly, or monthly. The idea is to keep things consistent so you don't have to scramble when bills pop into your inbox.

Tip: Use Google Calendar or the Mint Bills app to set up bill reminders.


Steady Your Income

If you've found it tough to make ends meet, it's time to take a look at your business model.

Raise Your Rates: Do you know what you should be charging to hit all your financial goals? Try using this handy freelance hourly rate calculator or this one for writers that also has advice on what to charge per word, per page, and per project.

Tell your clients that your rates are going up in a month. This will weed out clients you really don't want to work with. The ones that stay are your best clients. Ask them for referrals to bring in new, qualified clients to replace the ones that dropped.

Invoice Regularly: The key to surviving as a freelancer is submitting invoices as soon as possible. If you can send a bill along with your first draft, do it. For projects that take longer than two weeks, set up milestone payments. Ask for 50% up front, 25% on the first draft, and 25% on completion.

Get Ongoing Contracts: The key to a steady income is having several monthly retainers, which is an ongoing contract where the client commits to pay you X amount for X amount of work each month. With new clients, it's a good idea to get 50% up front the first month and then bill at the end of the month for the rest of the contract. Start with at least a three-month contract with the understanding that it will continue in perpetuity until one of you cancels with notification. Make it a habit of talking about retainers with every client.

Keep Marketing: Even if you have a solid client base, it's important to keep marketing. Instead of cruising Craigslist and taking low-paying work, spend that time marketing yourself on social networks like LinkedIn. Update your website and portfolio, and guest blog on well-trafficked sites within your niche. Get outside and meet business owners and network at events. Ramp up your marketing and you'll find a steady stream of leads and new work.

It may take a few months until you see your income start to steady, but as long as you keep budgeting, believe in yourself and your work's value, and shoot for your target income and savings goals, you will avoid the dreaded feast-or-famine cycle and be well on your way to becoming fiscally fit.

As an editor at WOW! Women On Writing, Angela Mackintosh has had the pleasure of contracting and working with hundreds of talented freelance writers and designers over the years. She blogs at WOW's daily blog, The Muffin.