7 budgeting tips for self-employed contractors and freelancers
As a self-employed person, you know the meaning of ‘famine or feast’. One month you’re riding high on a huge income, the next there’s not a scrap of work to be found. This can be a real challenge, especially with the steep rise in the cost of living meaning extra money needs to be put towards bills and groceries each month. But with a bit of clever budgeting, you can have enough money to cover even the tightest of months – and still be able to enjoy yourself.
Knowing contractors and freelancers as we do, the Kingsbridge team has put together some of the best budgeting tips for the self-employed.
1. Have different bank accounts for different things
It might sound like a bit of a faff, but having different bank accounts and savings accounts for different things can be a great way to stick to your budget. You should consider at the very least:
- One for everyday spending
- One for emergencies (e.g., when work dries up or the boiler breaks down)
- One for short-term savings (e.g., for holidays)
- One for long-term savings (e.g., for a deposit on a house)
You could also think about savings pots for birthdays, for Christmas and any other events that require you to buy special gifts, food, etc.
You could do this by having lots of accounts, literally one for each thing, or you could have one account but keep a spreadsheet tracking what amounts are for which things. Or else you could check out online banks such as Monzo that allow you to separate your money into ‘pots’ where you can save for different things.
2. Keep separate business and personal accounts
In a similar vein, you really should have a separate business and personal account – even when you’re a sole trader. This way you don’t muddy the waters and accidentally spend ‘business’ money on personal matters, or find yourself spending your own money on the business. Keeping defined lines between business and personal when it comes to money is crucial.
3. Review your rates
With the pandemic and all, there’s a good chance you haven’t raised your rates in at least two years, so it really could be time for a review, especially with the cost of living rising so rapidly. Do a bit of research and check the industry average and demand for your role and, when weighted with your experience level, decide if you’re underselling yourself. Location matters too. A London-based contractor will likely be expected to charge a lot more than a Liverpool-based contractor, for instance.
If you do feel you’re due a raise in your rates, take a look at our blog to find out the best way to go about this without alienating existing clients.
4. Keep track of your spending habits
Everyone’s done it at some point. You’ve started the week with a nice healthy bank balance and then you go to check your account on Friday and your balance has severely dwindled and you don’t know how. But then when you take a look at your transactions you realise it’s been gradually chipped away by a coffee here and a new top there… All little spends that you didn’t think anything of but that have really added up.
A solution to this is to keep track of your spending using a spreadsheet or even the notes app on your phone. When you spend, just make a quick note of the amount and keep a running total It’s easy to see if your spending for the week or month is getting a bit out of hand.
5. Look into budgeting apps
If you’re someone who likes an app to help out with tasks, you’re in luck when you come to budgeting as there are a lot of good ones out there. Some are free, some are paid so you’ll need to work out which is right for you, but look for apps that can track your bank accounts and debt. These will help you see where you’re spending, where you could make savings and can help you pay off any debts. Some can even be set up to automatically put money into your savings accounts for you so that you save without having to think about it.
6. Consider the 24-hour rule
While online shopping is convenient, it’s taken away the ‘buffer’ of having to wait before spending. Pre-online shopping, if you saw, say, a piece of furniture you liked in a TV advert, you would have to sleep on it, wait until you could get to the shop. In many cases, this gave you a chance to decide if you really needed it or if you just liked the look of it. Now, though, you can order the furniture on your phone before the advert has even finished playing.
The 24-hour rule says that unless the item is something you actually need, then you should wait 24-hours before buying it. If you still want it in 24-hours’ time, fair enough, but if you don’t then you’ve saved yourself an unnecessary expense.
7. Make the most of offers and referral schemes
Offers and referral schemes are now a regular part of our shopping experience and they’re there to be taken advantage of. 10% off for signing up to a newsletter? You can always unsubscribe later. 20% off because it’s your birthday? Happy birthday to you! An extra saving for referring a friend? Well, you are a very good friend. They’re such easy ways to make savings, and you could even pop the money saved into one of your savings pots.
Referral schemes are available on all kinds of products, including business insurance – something contractors and freelancers should be familiar with. Kingsbridge’s refer a friend scheme means that you will receive an Amazon voucher worth up to £40, and your friend will get 10% off their premium. You could use the voucher as a birthday gift for a friend or family, use it to buy some essentials, or treat yourself to something you’ve fancied for a while. However you choose to use it, you can find out more here.
This article is for information purposes only and should not be seen as financial advice.