How I Built My Freelance Freedom: A Guide to Financial Security (Part 1)

Discover how to achieve financial security as a freelancer with practical tips on managing income, setting goals, and building steady revenue streams.

For many, freelancing has always been a dream. The freedom to work from anywhere, to not join the rat race and the daily commute, to set your work hours and choose clients you want to work with. And of course, the financial security that it affords.

A few years ago, I took the leap into freelancing. However, I soon realized that though the freelancing life looks rosy from the outside, it’s not without its unique challenges.

The road to financial security as a freelancer can be bumpy. Freelancers often face challenges like inconsistent income, limited financial planning tools, and lack of access to social security benefits.

However, with the right strategies, freelancers in India can navigate these obstacles and build a stable, sustainable income.

In this two-part guide, I’ll walk you through my journey of building freelance freedom while ensuring financial stability. In Part 1, we’ll focus on:

• The Harsh Truths of a Freelancer’s Life
• How to Manage Income Volatility
• Financial Goal-Setting for Freelancers
• Managing Freelance Finances

Let’s explore!

The Harsh Truths of a Freelancer’s Life

Before I moved into freelancing, I worked a traditional 9-to-5 job. The itch to do something that I could call my own led me to freelance. Initially, I was drawn towards its flexibility, but soon its ugly side showed up.

I didn’t get regular work for days, often weeks. I found that “good” months meant earning Rs. 30,000, and they were irregular.

Later, I found that the early stages of a freelancer’s life is generally a roller-coaster ride. Soon, I worked a way around it: I built financial discipline and planned for any fluctuations at work.

Also Read: How To Build Financial Security As A Freelancer

How to Manage Income Volatility

The ups and downs of my income scared me. I could never be sure of how much I would have this month or the next. So, I quickly learned how to manage income volatility.

I learned to live within my means and spend on necessities, not luxuries. I created a realistic budget that would help me in the long term. I realized that financial planning for freelancers like me was of paramount importance.

Here’s what I did:

I Set Up an Emergency Fund

At this time, I was earning Rs. 40,000 per month. I decided to set aside six months’ worth of living expenses for lean times. It took me a long while to reach my goal, but I carried on nevertheless.

I Set Aside Money for Taxes

A friend advised me to set aside some money for taxes to be paid annually. I calculated my taxable income and subtracted business expenses. These included internet fees, mobile recharges, software subscriptions, and travel costs.

This prepared me for tax payments in the year. I realized the importance of maintaining meticulous records of my income and expenses. I got into the habit of paying my advance taxes on time.

Looking back, I feel that tax planning for freelancers is an important part of the business.

Financial Goal-Setting for Freelancers

One of the biggest mistakes I made at the beginning of my career was not having clear financial goals. At first, I didn’t track how much I needed to earn to cover my living costs or achieve my long-term goals.

I decided that it would help me get clarity on my income if I had clear income goals, so I set that up. 

#1. Setting Financial Goals as a Freelancer

I realized the need to set up short-term and long-term financial goals. At first, my short-term goals were to ensure I made a steady amount of money each month. I set this at Rs. 50,000 per month.

My long-term goal was to gradually increase my monthly income to Rs. 1,00,000 within a year. I broke down the numbers in this way:

I calculated my living expenses, which included groceries, utilities bills, etc. I also factored in other costs like shopping, entertainment, etc.

I created a media kit that included my charges per project. I decided to charge per project instead of per hour. This would give me greater ownership of the project rather than being ruled by time.

Charging per project allowed me to focus on delivering value and results, rather than just trying to beat the clock. This, I found, benefited both me and my clients.

I looked at it this way: Take, for example, that you charge Rs. 1500 per hour and your short-term goal is to earn Rs. 50,000 per month. This means you would need to put in 33 hours of work each week.

#2. Budgeting and Tracking My Finances

 It was important to track my incomings and outgoings. For this, I used a tracking tool that gave me a clear picture of when my money came in each month and where it went. Over time, I learned ways freelancers can manage income fluctuations.

#3. Building a Steady Income Stream

Over time, I started generating an income by working on short-term projects for a diverse range of clients. But though this gave me financial security, I realized that true financial security meant diversifying my income sources and securing long-term clients.

#4. How I Diversified My Income

Now, as you may realize, I was getting more and more into creating a steady income stream. I also worked hard to get this fixed income each month.

Here’s how I did it:

I Found Recurring Clients

I couldn’t reject one-off projects, so I continued to accept them. However, I also began focusing on building long-term relations with clients who needed regular services.

I had a client who regularly outsourced work to me. It provided me with a sustainable freelancing income from content writing projects for about four years. I enjoyed the process and the consistent income it brought.

However, when he diversified his business into a new area that no longer required my services, it came as a sudden and unfortunate change. I truly missed working on his projects after that.

I Explored Multiple Revenue Streams

Working for clients didn’t satisfy me entirely. I felt the need to explore more avenues of income. I liked the idea of having a source of passive income, particularly affiliate marketing on my website and writing e-books.

Soon, I had a mix of active and passive income. That’s when I stopped depending entirely on client work.

I Built a Personal Brand

Early on, I chose to spend time building my personal brand, and it made a big difference. More and more, clients were beginning to trust freelancers with an online presence. This led me to build my website, which showcased my achievements and portfolio.

Managing Freelance Finances

I’m not a good manager of money, and this came through quite clearly. As I made decent money, I found that I needed to have an organized mechanism that would take care of my earnings, investments, and savings.

Here’s how I went about managing my resources:

• I Set Up a Business Bank Account

A well-wisher advised me to have a business bank account for my freelance income. This would be separate from my personal bank account. Once I did this, I could easily track my income, manage my taxation, and calculate work-related expenses.

• I Started Using Accounting Software

I started using software to track payments and create invoices for clients. This kept me organized.

Takeaway

I credit my financial security to the strong foundation I built for my freelance finances.

Are you ready to start managing your income and planning for the future?

Download my free Freelance Financial Checklist to organize your finances, set achievable income goals, and begin tracking your expenses and taxes.