4 Money Tricks That Help Me Manage Money as a Freelancer

When I started freelancing, I had no idea how to weather the dramatic ups and downs of my income. And for the first year, I was almost always stressed out about money. But after seven years of experience, I've picked up a lot of tools and techniques to make this lifestyle work for me.

Here are my top four tips for freelancers looking to improve their finances and stress less about money.

1. Keep a checking account buffer

Freelance income can be somewhat erratic, depending on your setup and client base. If I wasn't staying on top of my checking account, where important payments like rent and utilities are deducted, I could easily run into a negative balance. That's why I have a checking account buffer. It's an amount that I keep in that account and never have the intention of touching, just in case there's a delay in payment from a client.

To find your buffer, add your biggest monthly expense plus any other expenses you'd have to pay within the amount of time it would take to transfer money into your checking account

If, for example, your emergency fund is kept in a separate account that would take three business days to transfer money from, you'd want to include any charges that would fall during that time period outside of your largest monthly expense. For example, if your rent is $1,500 a month, and you have a $500 loan payment that's due a few days before that, your buffer should be $2,000. It'll give you time to move money around when you need to.

2. Project your annual income

Paying taxes quarterly is, unfortunately, necessary for freelancers. Although tax payments can be painful, you need to know how much money you need to pay to avoid a much bigger headache later on. That means you have to understand how much money you're likely to earn that year, which can be a difficult task as a freelancer whose income may fluctuate. That's where tax software comes in handy. Depending on the one you choose, you can take your existing earnings and project those out to understand your annual income as well as your quarterly tax payments to avoid penalties come April.

You should review your tax requirements quarterly. After all, if your situation changes later in the year, that could greatly affect your tax payments. (It's also worth noting that you can make monthly payments toward your taxes instead of saving those up for each quarterly deadline. Just make sure you write down the dates and amounts so you'll have an easier time filing.)

3. Save income spikes to weather the lows

A freelancer's income can fluctuate a lot depending on many factors, including gaining or losing clients, taking time off, and opting to work more. That means when you have a great month and make more than you need, it's a good idea to save at least some of that extra cash so you'll have that amount to fall back on for slower months. And, at least in my experience, there are always slower months you can't quite predict because of external factors, like having a client run out of budget in the third quarter.

Bonus tip: I aim to limit each of my clients to 20% of my income. That way, if I do lose one, I'm not out a huge percentage of my earnings. Plus, I can avoid taking on more debt to stay afloat until I find my next client.

4. Budget a month ahead

Having a freelance business can feel a lot like performing on a trapeze without a net, especially if you're constantly battling to make sure your monthly expenses are taken care of.

One of the best things I ever did for my personal finances was to make sure the money that was coming in this month wasn't actually needed until next month. That meant saving up one month's worth of necessary expenses (which can be added to a checking account buffer). This way, anything that landed in my bank account could be more easily applied to the next month's expenses, giving me time to make adjustments to my workload if needed.

Freelancing can be complicated -- but if done strategically, it can provide financial stability. You just have to know how to leverage this unique style of working to find those opportunities.