It’s tough to be a small business owner or a freelancer. Yes, you can work whenever you please and there is that freedom that comes with the job, but living with an irregular income is hard.
There may be months when everything is nice and fuzzy, but there are also those… you know… other months.
One of the main goals most freelancers and small businesses have is to be able to provide themselves with a regular income and build from there. And that requires a lot of discipline and hard work.
Here, we want to help you out with 5 easy-to-grasp — yet not that easy to implement — tips. Let’s roll…
1. Put an extra income on the side
When you don’t have a regular income, there are better and worse months. At some point, you may wish you have a regular job, and on the other — you love the game, with your customers flushing you with money. It is essential to put all that extra cash on the side, cause not all months are (born) equal.
This will take some discipline, and you should give your best not to go on a shopping spree. It is ok to congratulate yourself with something special you have postponed buying for some time, but be reasonable. Again, you will need that extra cash at a later date.
The reasoning is simple — the larger your savings become, the easier it will be to provide yourself with regular paychecks. Which leads us to our next point…
2. Know your costs
Specifically, you will want to determine your minimum budget baseline; it includes the cost of all essential things you can’t live without, such as food, electricity, internet access, cell phone service, transportation, mortgage and child care.
At the end of this exercise, you’ll get a number which tells you the minimum amount you must have every month. Now, you should strive to have enough savings to cover 3 to 6 months of life, depending on the variability of your income. Naturally, the bigger your savings are, the better.
3. Determine your discretionary expenses
This is arguably a part of the same exercise — you should realize how much money you’re spending on things you can live without. Since this category can vary a lot, try to come up with an average figure.
Costs in this category include entertainment, dining out, cable TV subscription (you can really live without it), and so on.
If you’re not sure where to look for all these costs, check out your credit/debit card statement(s); they are seldom nice to read, but they can reveal a lot.
4. Have your paychecks deposited into savings
Say you completed the exercise above and have been saving for a few months; it’s time for the next level.
Pick a few clients and have their payments deposited directly into your savings, rather than checking account. Then, only if you really need some extra cash, move it from your savings to the checking account to pay what’s due.
Yes, it can be a hassle — but that’s the whole point. To think twice before spending your savings.
This way you will also be forced to come up with a better budget, one that you can actually follow through.
5. Save for the future
Finally, once you have created the system that works like clockwork, you are ready to further extend your savings.
Whether it’s retirement, an investment opportunity, some nice trip you’ve been dreaming about or college tuition for your children — there is always something you will need money for. With your business being properly funded for daily operations, you can put any extra cash towards these longer-term goals. Good luck!