There is a ton of advice I can give, and have given to freelancers.
But I think the best advice I can give is this:
Always put aside an emergency cash fund equivalent to about two months of earnings.
Why? Because there are always ups and downs in the life of a freelancer, whether you are just starting out, or have been freelancing for years.
It doesn’t matter whether you are just doing OK as a freelancer, or you a superstar. You will always have an occasional month that doesn’t deliver the money you need to cover the bills. Or maybe one month you have an unexpected expense. Or maybe you are sick and can’t work.
You need to have a cash reserve to make up for those months. This is a simple business practice. It’s called cash flow management. Every company, large or small, has to manage its cash flow.
When you have good months, you put some money aside for your cash reserve.
Why is it so important? Well, the first and obvious answer is that you need to pay your bills. But, just as important, you need to KNOW you always have enough money to pay your bills, and have some extra cash left over. You need to FEEL relaxed about your money.
When you are short of money in your business, or even coming close to being short of money, you will feel the stress and become distracted.
As soon as you feel stressed and distracted, your productivity will suffer. You may also start making bad decisions about which jobs to take on – simply because you are feeling desperate.
That feeling of desperation will then undermine your ability to do a good job estimating for projects. You will submit low estimates, just because you need some cash coming in quick.
When you estimate too low for jobs, you undermine your feelings of self-confidence, and undermine your brand.
Suddenly you find yourself in a downward spiral, low-balling on your estimates and having to work even harder to make enough money.
Yes, this is a bad place to be.
For this reason, it is essential you create that cash reserve. Do it before you pay off your credit cards, before you buy the flights for your next vacation.
As soon as you have a cash reserve, everything changes. You dip into it during bad months, and build it up during good months.
Most important of all, you never feel desperate for work.
This means there will be no negative pressure on your productivity, and you can always remain focused on building your business, and seeking out the best, high-paying engagements.
If you don’t have a cash reserve yet, make it a priority, and start working on it today.