How To Budget as a Freelancer


Fempreneur, Money, Work / Tuesday, February 5th, 2019
Reading Time: 6 minutes

Welcome to freelancing where 500 of your well-thought-out words are worth somewhere around $15 to $75 a piece. You might think I’m being facetious here but honestly, I’ve gotten a lot of we’d love to have you write for us, we pay $50 for 2,000 words. And my answer has been hell nah. Because I don’t get out of bed for less than $500 (now I’m being facetious). Honestly, though, the gig economy can be ruthless for those of us trying to pay bills. And if you’re anything like me you don’t just want to be able to pay rent and buy a case of Kraft Dinner Mac & Cheese to eat for the next week… you want to thrive. So how do you budget as a freelancer?

Build some badass budgeting & bookkeeping skillz

If you’re heading out on an entrepreneurial adventure, girl you better get those budgeting and bookkeeping skills up to par. Not only do you need them at par, but you better pencil them in for being top notch.

Look, no one is expecting you to be an accountant or a financial advisor, but you do need to make enough money that you can hire one that knows what they’re doing. So here is my quick (and by no means encompassing guide) on mastering your budget as a freelancer.

Figure out your bottom line

My hope for you, and all of us freelancers out there, is that we can make more money than simply the bottom line. But before we can start raking in the cash, we do need to know what the bottom line us.

For those of us that need to budget as a freelancer, your bottom line is every monthly bill you need to pay, plus your living expenses (groceries, household needs, etc.) and money to pay your taxes… because freelancers are responsible for their own taxes. So gather up all of the necessary paperwork and figure out how much you need. Then, add 20 percent. That is your bottom line.

Separate your personal and business accounting

If you’re like me and you run a sole proprietorship, separation can be a bit of a challenge. Chances are almost everything you make is going to go back to you, but you still need to keep it separate. So go to your bank and open a business bank account, make sure it has either a debit or credit card attached to it as well, so you’re not spending on your personal one. If you don’t have separate accounts, it’s going to make it a pain to properly budget as a freelancer.

Record everything!

Every expense you have that is in any way related to your business needs to be recorded properly. If you review movies as soon as they come out on Netflix, it’s a business expense; do you regularly write and review books or work from your home office… You’ll want to check the business tax breaks for your jurisdiction to make sure you know what you can use as a business expense (personally, I get to expense everything from the square footage of my apartment office to the power and internet I have to use to get my work done, my cell phone and iPad data bills… basically anything I use to operate my business).

Set aside money for taxes

No one is going to put aside money for your taxes throughout the year or remind you to get them done when they’re due (except for the government when they realize you haven’t paid yet). Taxes are solely on you. Personally, I put aside 20 percent of every incoming payment whether it be $50 or $500 for taxes. My tax money goes into a separate bank account and remains untouched throughout the year. Do some research for yourself and see what you need to get paid.

Find yourself a good invoicing system

Invoices are a way of life for business owners, especially if you are providing services. Make sure you find a system that meets your needs, even if you have to pay a bit for it. I personally use Bonsai, though I find it to be lacking in some areas. Some people recommend using Quick Books or Fresh Books, but I work in minimum three (typically four or five) different currencies to meet client needs, so neither of those systems work for me.

Get a few anchor clients

budget as a freelancer

Anchor clients are important for any freelancer, writing or otherwise. They supply a steady, well as steady as you can get as a contractor, stream of money. Anchor clients don’t have to be big fish, I personally try to keep my anchor clients at lower amounts of money (think $500 to $1,000 per month) to ensure that no one person or company pays a significant amount of my monthly income in case something goes awry. And things do, oh boy, they do.

The benefit of having several anchor clients is that you can better predict how much money you are going to bring in per month. I try to make sure my anchor clients cover my bottom line every month, anything extra I make on one-off projects or smaller contracts is just gravy! Sort of, mostly it means I don’t have to eat only mac and cheese…

I also firmly believe that you need to have several anchor clients (not one like a lot of people suggested to me) because if your contract ends for whatever reason — and eventually it will, you’re not hooped!

Find a solid rate & stick to it

There are times where you need to work for a little less, especially if you’re struggling to pay the bills (which hopefully you aren’t). But generally, to budget as a freelancer well, you need to know what your hourly rate is and stand firm on it.

While there are a lot of opinions on what the “standard” hourly rate is, I find that it varies person-to-person. To find your hourly rate I suggest doing the following:

Find out how many hours you can work

Let’s assume for the purpose of this budget, as a freelancer you are going at it full-time, which means you will have as many hours as you want to dedicate to your freelance work as you want to. And for ease of this exercise, let’s say you are going to work a typical 40-hour work week (I personally work closer to 70, but I’ve got a few side projects going on).

Every freelancer has billable and non-billable hours. Your billable hours is when you’re working on actual client work that you get paid for *yay*; your non-billable hours, on the other hand, is when you’re inevitably working on things you won’t get paid for such as client acquisition, general administration, billing and even, in some cases, client maintenance.

Find out your base hourly rate

Depending on where you are in your journey, your ratio of billable to non-billable hours will vary, but for the purposes of this exercise, let’s split them down the middle. Weekly you now have 20 billable and 20 non-billable hours (80:80 per month).

Now let’s take your monthly bottom line expenses, let’s say they’re $3,000 per month. So take $3,000 and divide it by 80 hours, your base hourly rate has to be $37.50, now add at least 20 percent, your base hourly rate is $45 — which in my opinion is a reasonable hourly rate.

Decide what you’re going to charge

Now $45 an hour is great, but charging hourly is not. Charging hourly encourages you to work longer on projects, and drag them out when they could be done quicker and with less effort. You’re not purposely going to kick your heels and take your time, but you are internally incentivized to work longer. In lieu of that, I prefer to work on a per-project or per-article basis. And this is how I figure my costs out:

Let’s say Organization A wants me to write two 1,000 word blog posts with a moderate amount of research per week and I know each blog post will take an average of two hours. That means Organization A gets four hours of my allotted time weekly, I also know that while some weeks it might take me 1.5 hours to do a post, others it might take three… so I take the 16 hours it’s going to take me weekly and times that by the hourly rate I need to make $720 per month, plus 20 percent ($864) which means each post costs $108.

Now, I’m not going to charge a client $108 for a blog post, that’s a weird number… and I want to make more than my minimum monthly, so I might set my “target rate” at $150 per post knowing that my bottom line is $110 per post. But I likely won’t take less than $120.

Your rates depend on what you want out of your freelance business. And when you’re starting out, they’re going to be lower. But don’t be afraid to ask for what you want because no one knows what you need to make but you!

Mastering your budget as a freelancer

Starting out as a freelancer when you have little-to-no experience in business can be terrifying, but we’ve all been there and most of us have made it through. Your biggest challenge to mastering your budget as a freelancer is going to be getting clients who pay you what you’re worth.

Don’t be ashamed to take slightly less paying jobs if you absolutely have to, God knows I have. But don’t be afraid to walk away when you’re in the position to do so. If the work that a client wants to hire you to do was that easy, they’d do it themselves. If they want to hire you but aren’t willing to pay you what you’re worth, they’re not worth it.

Looking for some inspiration?

Let’s talk about the elusive side hustle.