This is the golden era for freelancers. Post the pandemic, freelancers have found a ground where they can experiment and earn on their own terms. There are multiple benefits of a freelancing career. Multiple sources of income, flexible hours of working, remote work stations, are some of the highlighted ones.
Freelancers are highly passionate for their line of work. Many 9 to 5 office goers are quitting their regular jobs for a freelance career. Those profesionals who are not ready to start a business on their own and yet desire to work independently opt for a freelancing career.
The primary and most frightening risk is related to financial management. During the initial phase, it is a challenge to deal with financial commitments as the income is not regular and steady. Freelancers do not have a fixed source of income. Freelancers are not able to plan a steady investment plan due to irregular income. This exposes freelancers to several financial problems. It is necessary to plan in advance. Businesses make use of lead management software to manage their leads in advance.
Here are some tips that helps freelancers to meet their financial goals in a timely manner.
Set a target to invest every month
Yes, this does not work at all times. There are months when even expenses could not be met by freelancers. However, this is the entire point. There are some months when the income is quite high and then there are also others when there is zero income. Hence, ensure that when the income is high, a part of it needs to be saved. Also, save some extra for those months when there is no income.
Financil experts maintain that at least 10% of income should be saved every month. Freelancers should execute a thorough financial plan that helps them achieve financial freedom right from the beginning. When the investment is regular and consolidated, it strengthens the financial base. Compounded investments help freelancers expand their wealth.
Make Mutual Funds a part of the portfolio
Mutual funds refer to those funds that are managed by professionals who identify and select perfect investment assets in the market. The chosen assets by these professionals could either be equities or debt. A freelancer needs to perform multiple roles in a day’s work. This does not leave much time at hand to research and invest. Hence, it is important to recieve the right guidance.
As every mutual fund has its own set of rewards and risks, it is crucial to opt for the right type of fund that is aligned with the financial goals. Taking the help of professional financial advisor results in a great investment portfolio comprising FDs, RDs, ELSS, PPF, mutual funds, and the like.
Take the road less travelled with SIP
Freelancers are often worried about the flow of regular and consistent income, especially in the initial phase of the career. However, even with inconsistent income, they can opt for Systematic Investment Plan or SIP. It requires investing a small amount of income to receive cost average benefit while eliminating associated risks. Freelancers can even opt for auto-debit for compulsory investment.
Opt for a high-interest savings account
Instead of worrying over the income, freelancers should focus their energy on savings and schemes. They should ask their bank whether it offers the facility of a specific savings account wherein when the amount is beyond a particular limit, the extra fund gets transferred to a FD automatically. This will help freelancers get higher returns. It is advisable that they select a bank that offers the benefit of sweep-in facility. Alternatively, freelancers can keep their funds in a high-interest savings account that is offered by several banks. This gives the flexibility of withdrawing funds at any point of time without any compromise on the interest rate.
Take the right amount and right type of insurance
Insurance is one of the important requirements in this day and age. It helps protect the finances as well as save on income taxes. While regular employees get the benefit of group insurnce policy from their companies, there is no such facility for freelancers. Hence, freelancers should consider opting for comprehensive health insurance plan. It is recommended to select a plan with a good sum assured that benefits not just them, but also their dependents. It even helps safe hard-earned savings during medical emergencies. In addition, freelancers should also target to select a term insurance cover that protects their financial interests and also their family members’ in untoward events.
Work on a contract basis
Freelancers are often left hanging when clients do not make payments on time. At times, they are not even paid if the project is scrapped. Experts advise that freelancers should opt for contracts. This assures timely payments and results in a strong investment portfolio.
Start planning for retirement
Freelancers generally have a tendency to delay retirement financial planning. However, it is quite important. Freelancers can purchase a retirement plan with tax-free withdrawals. Choose a plan wherein premium payment is flexible giving you freedom.
Diversify income streams
Freelancers should make sure that they work for multiple clients during a month. This helps diversify income streams. In such cases, payment is assured from one or the other client in that month, helping in investments.
Prepare a contingency fund
There are times when there might be zero income. Hence, it is necessary to build a contingency fund that can be used during such times. Funds with enough liquidity help meet immediate requirements.
Create income boosters
Freelancers need to make income boosters. Emergency funds help cover short-term needs. But there should be a side-hustle that help them earn income from a secondary source. This side-hustle should be very different from the present line of work.
Stick to your plan
It is necessary that freelancers stick to the financial plan that they have charted out for the benefit of their family members. There is a tendency to earn more but people forget to save more. And this results in a disruption in financial strategy.
In the end
Earlier freelancers did not receive as much respect as they now. This is because freelancers did not earn sufficient and regular income. Also, freelancers were considered to be those people who did not get a job due to some reasons. However, freelancers have grown big and they are receiving both – respect and income. But still there are some inherent risks in this system of working.