She Makes Money Moves is a new podcast from Glamour and iHeartRadio. Hosted by Glamour editor in chief Samantha Barry, the podcast shares intimate, unscripted stories from women across the country along with advice from financial experts to help guide those women—and women everywhere—forward. Download a new episode every Tuesday, then visit glamour.com/money for an article like this, with more insights from that week’s expert.
57 million Americans are freelance workers. That's 35% of the U.S. workforce. And according to a survey from Upwork and the Freelancers Union, more people are beginning to view this work as a long-term career choice than ever before. While freelancing has a multitude of benefits—flexible work schedules, for one—it can also be tough to navigate from a financial standpoint. Money is hard enough when you have a W-2 income with regular paychecks. Adding the volatility of freelance life to the mix makes it that much more complicated.
This week's guest on the podcast has been a full-time freelancer for two years. While she loves the freedom it provides her, she's about to have her first child. So she's currently evaluating the trade-offs of the freelance lifestyle compared to working in an office to determine what's best for herself and her family. To help her weigh her options Barry welcomed Ashley Feinstein Gerstley, founder of the Fiscal Femme, back to the podcast. Here Feinstein Gerstley offers five tips to maintaining a stable budget in the freelance economy.
Set aside money for taxes.
One of the most common pitfalls I see freelancers (and all entrepreneurs) make is that we don’t put money aside for taxes and we end up with a big tax bill at the end of the year. This can wreak havoc on our cash flow and cause us lots of financial stress. The good news is that taxes are something we can plan for. Freelancers can create a fund for taxes by opening a separate online savings account and labeling it "taxes." You can either put aside a percentage of every check you earn or a percentage of your profit each month, but regardless of your approach you want to get it into your tax fund as soon as possible so the money is there waiting when it’s time to pay taxes.
Charge what your work is worth.
I've found that many freelancers aren’t charging enough for their services. One of the reasons is that when we price out a project, we only take into account the hours we are physically working on it. We don’t consider the administrative tasks that goes into working on that project, the cost of gaining the expertise to be able to take it on in the first place, and all of the work in between. This can leave us with a much much lower hourly rate than we anticipated. I’ve found one of the most helpful resources is to band together with a group of people in a similar field. Ask each other about pricing for projects and get a clear sense of what the market rate is in combination with what your requirements are as a business owner. (One Glamour contributor made an extra $10,000 through her "whisper network" of skilled peers.)
Create a rainy-day fund for your business.
For most freelancers, there will be fluctuations in your income. Summer is often a low-income season for many types of businesses. This makes cash flow feel plentiful in the good months and restricted in the quieter months. In order to avoid the feast-and-famine cycle that so many freelancers experience, we can build a rainy-day fund for our business. This functions exactly like our personal rainy-day fund but will serve to cover salaries and business expenses in the case of a low-income month (or three). This will likely take time to build. It’s okay to start small and put money aside over time.
Agree on workable terms.
A big complaint I hear from freelancers (and have experienced myself) is how long it can take to get paid. If we’re unsure about when we’re getting paid—or not getting paid for work until two to three months after a project wraps—it can be straining and hard to plan for financially. You can negotiate payment terms with your clients and see if there are ways to be paid thirty days out or even get a deposit for half the amount upfront. You can also create a policy where you charge a late fee for payments made past a deadline.
Have a simple invoice system in place.
As a freelancer, you’re wearing many hats and one of the easiest hats to forget about or put off is collecting money from your clients. I’ve worked with freelancers who are stressed about cash flow but haven’t invoiced their clients for work they completed months ago. To stay on top of invoicing, it’s helpful to have a system. Send out the invoice as early as possible, and set reminders to check in with clients about payment if you haven’t heard from them after a certain number of days. It’s important to set an additional reminder in case the first follow-up went unanswered.
According to a survey by Fidelity, the sponsor of She Makes Money Moves, 80% of women aren’t talking about money with the people closest to them. Today Glamour invites you to the conversation: Subscribe on Apple Podcasts, in the iHeartRadio app, or wherever you listen to podcasts, and join us as we help women raise their voices and make money moves.