How to Freelance Without Ending Up Penniless

Before I get going with the post, there’s news to share today! I’ve been listed on ProBlogger as one of 30 Bloggers to Watch in 2010, and I also have a guest post up on Copyblogger that might interest any writers amongst you: Dragon Slaying 101: How to Use Heroic Language to Battle Boring Copy

A while back, Allison from LifeUnqualified asked me in a comment:

I’d like to hear your thoughts on budgeting as a freelancer. I recently waited almost 6 weeks to receive a paycheck, during which time I wasn’t working and had no future projects. We all have certain fixed costs each month (rent, bills, car/insurance payments), and sure, some weeks or months you’ll get a big check and be able to actually save a little money, but other times those checks will barely cover a week’s groceries.

This was a question that I wasn’t sure I was qualified to tackle. I’ve been supporting myself as a freelancer for a year and a half, and I’ve been lucky enough not to have that feast-or-famine cycle. I’ve never faced the situation Allison was in, of waiting six weeks for a paycheck.

However…

It’s struck me that, actually, I set things up from the start to avoid becoming another freelancer horror story. I’ve been used to living on a tight budget (first as a student, then while working full-time and saving up for my MA fees). And one of my resolutions for this year is to keep a closer eye on cashflow and divert what I can towards savings.

So here’s what I did when I started out, and what I’m doing now. I’m focusing on freelancers here, but a good bit of this will apply to 9-5ers and students too.

(If you’ve not got it already, you might want to nab my free ebook More For Your Money – no email address or anything required, just right-click to download the pdf.)

Pre-Freelancing: Saving Up

If you’re not yet a freelancer – if you’re still in college, or you’re still in the 9-5 – then it’s a great idea to build a money-buffer behind you, especially if (like me) you tend to be a tad risk-averse.

I read several freelancing blogs, and the book How to be a Rockstar Freelancer (great read; reviewed here), all of which advised establishing an “emergency fund” as a buffer. I knew I’d have college fees to pay too, so I saved up that and about three months of living expenses.

How? Well, one key way was reducing expenses. Things like:

• We cut way back on how much we ate out.
• I stopped buying new books and hit the library (and very cheap local booksales) more often
• I took packed lunches to work rather than eating out

Yes, they’re little things, but they do add up a surprising amount. And yes, there were times when I wanted to go back to the old days of just hanging out in pubs with Paul and blowing £50 ($80) in an afternoon on food and drinks … but frankly, having a shot at my dream was worth it.

In the couple of months before I quit my job, I was already freelancing on the side, writing a couple of posts a week for two different blogs – I was making perhaps $400 – $500 a month. Most of this, too, went straight into my savings.

Starting Freelancing: Structure Well

Cash flow wasn’t foremost in my mind when I started out freelancing – and it was mainly to reduce admin time that I focused my writing work on blogging. I soon added in a couple of new gigs to the ones I’d had before quitting, and then a couple more.

I’ve been writing for most of my blogs for over a year now (and coming up to two years on the very first one I started as a paid writer for, Diet Blog). Blogs, obviously, need regular new content – I typically write one or two pieces each week for the editors I work for. This is great for practical and financial reasons: I don’t need to keep sending out queries for new work, and I have a chunk of predictable monthly income.

By my second month of freelancing, blogging was covering (just!) my rent and bills. I was obviously doing other work for things like taxes and groceries, but even if I’d just had the blogging alone, the emergency fund would’ve easily kept me going for a good while.

Now, I’m hardly expecting everyone to share my love of blogging, but there are plenty of ways you can find regular work that keeps a roof over your head and food on the table. Here are a few possibilities:

• Get a column in a local paper.
• Get a series in a magazine (you don’t necessarily have to be “a writer” for this; go for a magazine in your particular field of interest or expertise)
• Focus on schools, governmental organisations or large companies which are likely to want repeat work

If you do something like life coaching or website creation (I dabbled in the latter), where clients typically only stay for a short time:

• Find ways to strongly encourage referrals, eg. paying commission
• Offer other services as an ongoing package with a monthly fee

Beyond Freelancing: Create Your Own Income Sources

Even before I started thinking about freelancing, I created a blog (The Office Diet) where the intention was to make some money from my own little corner of the internet. That first blog took eleven months to deliver a cent, but I now earn a small-but-not-insignificant chunk of money each month from advertisers there.

Since then, I’ve also published my own downloadable ecourse (the Staff Blogging Course) and a bunch of affiliate-income-generating reviews (on Aliventures, cunningly named “Reviews”). I’m not making as much from any of this passive income as from my paid blogging gigs … but it’s allowed me to ditch the website work which I used to do, and to stop hunting for any new blogging work, in favour of writing here on Aliventures. J

I really strongly recommend that, if you’re a freelancer, you start seeing yourself as an creative entrepreneur. It took me a while to do this – at first I couldn’t see the point, because $50 in hand seemed much more worthwhile than a potential $50 in several months’ time. But all these little income streams are starting to add up. It reminds me of when Paul and I went and walked from the source of the Thames during September – it didn’t seem like a muddy trickle could ever become the great river we’d walked alongside regularly in London – but as we kept walking, the river gradually grew.

When I wrote the Staff Blogging Course, I hadn’t much of a clue how to create a good sales page, or how to launch a product. I muddled through based on what I’d seen other entrepreneurial types do, but since then I’ve bought the excellent How to Launch the *** Out Of Your Ebook (haven’t reviewed it yet, go read Jade’s review instead). There’s also a big section in The Unlimited Freelancer (review) on creating passive forms of income, with advice for different industries.

If you’ve not got any spare cash to spend on an ebook (and, let’s face it, you’re reading a post about budgeting), then Dave Navarro has some really great free stuff on product creation here – The Launch Coach’s section on Creating Products. Carve out some time in your schedule to go through that, and then to actually do some of it.

Income Rules for Freelance to Live By

Long before dreaming of freelancing, I dreamt of becoming a novelist. (I still do; I’m chasing several dreams at once.) And a lot of advice to novelists tackles exactly the problem that Allison mentions; that money comes in big lump sums, then stops altogether.

So a lot of times, I saw the excellent advice: don’t go out and spend like a loon in the good times.

When I get a gig that promises a big sum, I’m always tempted to up my spending, even before I’ve got the money in the bank. And when money’s flowing well, I definitely relax a little: I’m no believer in being frugal to the point of misery. However … my rule of thumb is to put unexpected cash (especially gifts or advertising payments) into the savings account.

I’m particularly keen on having a decent buffer of money in savings (the current target is to get this back up to £5000, now I’ve paid this year’s university fees and taxes).

I’ve never had a credit card, and I only have a £50 overdraft. I know that, if the money was there, I’d be too tempted to spend it – and without a definite paycheck, I can’t risk spending money I don’t have.

I’m lucky, I know that. I’m in an industry where regular work is an easy possibility, and where I can create my own products without any cost but time: words are free. I’ve not got any dependents, and I didn’t have any debts when I started freelancing. We don’t have a car.

I’m very aware that for you, life may be a lot trickier. You may have to stick it out in a day job much longer than you want, in order to get together an emergency fund. You may have little choice but to take freelancing gigs which give you a sporadic income. Your passion might be one which would leave you broke. You may already be in financial difficulties. If that’s you, please talk to a professional, or at least read one of the very good amateur personal finance blogs (Trent Hamm’s The Simple Dollar is my favourite).

However you organise your work and your money, don’t let freelancing turn into working crazy hours for peanuts. You started freelancing to be freer … not to end up enslaved. If you’ve found yourself in a binge-or-starve cycle, figure out how to get out of it. Talk to other freelancers in your industry, and find out what they do. However tough it might seem right now, there will be an answer.

If you’ve not yet subscribed, you can grab the RSS feed for Aliventures here – or if you’d prefer to get my twice-weekly articles by email, just pop your email address into the box below: