Being a freelancer gives a lot of freedom, a possibility to work from anywhere – like on the beach with a drink or in pajamas from bed. That sounds good till the moment one finally tries to work as a freelancer – it doesn’t take long to see the downside of this undertaking. 

Income volatility is a major one – before you cover your next trip to Bali, you still have to pay an accountant, taxes, cover professional tools for work, and get ready for the times when no clients come with new gigs. 

There is definitely more worry compared to a nine-to-five job. In this article, we want to show you how managing expenses the right way can help you regain predictability in the next day and keep doing what you love without worrying about tomorrow. Shall we start? 

1. Keep business and personal accounts separate

When being self-employed or managing a small company, you won’t see a big difference between your personal and business finances – anything you earn you would record as remuneration. However, it’s important to divide your business and personal expenses to avoid problems with accounting and your local tax office.

Through buying a product or service using a business account, your expenses become a business cost. By generating an expense, you also reduce the income which is taken into account to calculate the taxes you pay. While this is the case for many expense invoices, you have to remember that the trips and dinners won’t always be considered as a business expense.

To keep accounting clear, make sure you divide your business and personal accounts and spend only the money you transfer to your personal account after paying all business expenses. Also, make sure you know where the line between personal and business lies in the country where you have registered your company or are self-employed. These rules can differ, so instead of examining this topic on your own, ask your accountant or a legal advisor. 

2. Build your emergency fund

A freelancer’s income is often volatile and as in any business, you can’t be sure what the next day brings. That’s why instead of pinning your hopes on having a stable income, prepare for the times when clients resign from projects or no new gigs come up (if you are not ready for these situations, it’s time to find a stable job). 

Make sure you freeze the money you would need for at least three months to cover expenses – both business and personal. In some cases, to be safe, you would want to increase your emergency fund for up to 9 months (if you have a mortgage or other regular expenses).

Every month, you should be sending some money to your savings account, so when your major client suddenly suspends cooperation, you have enough time to hunt for new freelance projects. 

Check these tips below to learn more about the main principles of creating an emergency fund. You should consider being realistic when spending money, start small, establish a routine of saving, and make it available in case some emergency arises.

emergency fund

Building an emergency fund – main principles

Source: One Cent at a Time 

Also, when building your emergency fund, don’t de-prioritize your well-being. If you start spending less money than you need for the basic expenses in an attempt to save more, you will quickly notice the drop in life standard. It’s good to save between 10 to 20% of your monthly income – depending on your savings goal.

3. Learn from others

Understanding how others are managing their expenses is another way to grow your freelance business while avoiding costly mistakes. Make a list of resources that can inspire you with the ideas on cutting expenses and landing more high-margin clients. 

Here are just a few ideas you can consider:

  • Find blogs written by freelancers just like you and learn how they deal with the freelance challenges connected to finance.

  • Search for relevant finance book titles on Amazon, read their review, and choose those that are the most actionable and tip-focussed.

A quick search on personal finance books for freelancers


  • Go on Apple Play or Spotify and research the personal finance podcasts – listen when you are on the go – driving a bike or cleaning up.

  • Attend meetups (also those conducted online) where you can talk to your peer colleagues and ask about their tips on saving more.

4. Invest in the right tools

If you do simple math, whenever you cut spending, you can start generating a higher revenue. However, it is only true if you look at the revenue you receive now. 

When thinking of expenses, freelancers would want to cut them as much as possible. They miss something else – expenses is one side of the equation and the other one is your revenue. By growing your revenue, even if your expenses stay the same or slightly increase, you would still earn more. 

Before you start cutting your expenses, think of how you could raise your productivity, so you can take up more projects and increase your profit margin. It’s worth considering remote work apps that can help you get more out of your time. 

Some tools can have a tremendous effect on the time you spend to finalize a task. Just think of using Google Translate when translating from English to Spanish. Well, it never gives you a perfect translation – you still have to edit the copy. However, you would spend much less time polishing the translated text than doing everything from the beginning – typing words does take time! 

If you extensively work with text – let’s say you help write university essays – and need to rework a pdf document into a Word document, using a PDF to Word tool can speed up your work and can do all the heavy lifting for you. So next time, you are thinking of cutting expenses on online tools, think of productivity first – sometimes, spending more on them can help you earn more.

Check out what tools you could use to reach your goals faster when working remotely.


Online tools to use when working remotely as a freelancer

Source: Pinterest

5. Remember about taxes

Before you read any advice on managing your taxes, consult with a professional – a legal advisor or your accountant. Here, we want to give a perspective on how important the knowledge about taxes is for freelancers – not legal advice.

While an accounting professional can manage all taxes for you, you have to remember one key thing – freeze enough money for the tax time, so you can make a payment to the tax office. 

Taxes for the self-employed vary across countries, there are different tax-free thresholds, and accounting requirements. If you don’t have the required education and experience in these areas, it’s absolutely a necessity to work with a person who can explain it to you in-depth and help submit tax to the tax office in the periods required by the country where you reside or register your company. 

6. Keep track of your time

Make sure you know how much time you spend on each project and that you bill clients fairly. Without recording the time spent on your project, you won’t even know if you charge clients the right amount of money. It can happen that you spend the most time on the project that never pays off. 

When keeping track of the time by using time tracking tools, you will be able to learn what projects generate the most revenue and what you have to suspend because they are too time-consuming to ever pay off. Remember that every minute spent on top of what’s been agreed with the client initially and accounted for in the estimate, is your expense. 

You can always spend that time on the other project and earn more, instead of subsidizing the projects that go beyond the framework you have agreed upon with your client.

7. Diversify your income

Income volatility is one of the main fears you could have when considering working as a freelancer. If you want to gain more stability, you could look for other ways to earn during the low-income seasons. For example, you could set up some small business such as dropshipping and develop it while working on growing your freelance client base. Every little counts!

Here are a few ideas to get you started: 

  • Resell things – some people buy things in garage sales to sell it more expensive later on

  • Affiliate marketing – help sell someone else’s products

  • Test digital products – take part in usability testing and provide feedback online

  • Lease your apartment or room

  • Offer English copywriting services to companies from abroad

  • Become a tutor – teach others what you can do

  • Become an influencer – grow your social media following and sign influencer contracts with big brands

Wrapping up

There is always a chance that you end up with less projects than you need to cover your personal and business expenses. While you should always be working to grow your customer base and making your freelance income more predictable, you have to get ready for the times when you need to tighten the belt. 

By keeping your expenses under control, you won’t worry next time a major client suspends cooperation. Consider at least testing out the tips we have covered and see for yourself what difference they can bring to your freelance business.