How to save when you work freelance

When you make the jump to full-time consulting, you’ll find your earnings may not be the same every month. You might have lean times during the winter holidays, but go gangbusters in the spring. After a while, you get used to it and you’ll be able to budget accordingly.

But how do you save when you have such an unusual cash flow situation?

  1. Add up your monthly revenues for the past 12 months
  2. Divide by 12 (this gives you the average)
  3. Build a budget around that average
  4. Dip into your emergency fund or use your line of credit during months where you fall below the average
  5. Top up your emergency fund during months where you exceed the average

So, let’s say that you had the following situation:
January    2000
February         0
March       6000
April          1100
May           3300
June         4000
July           8000
August        200
Sept.         1200
October    7200
Nov.          3500
Dec             400

If you add all that up, you’ll get $36,900.

Divide by 12. That’s $36,900 / 12 = $3,075 per month.

So you should base your budget on monthly earings of $3,075 per month.

If, in February, you have a slow month, you can dip into your emergency fund. Then you can top it up with your March earnings.

I manage my finances pretty diligently and I always have an emergency fund to cover six to 12 months of expenses. That way, I never come up short of cash. What do you do to manage your consulting or freelance income?


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