Monday, July 21, 2014

Savings, Investments, and Growing Old Wealthy

While I'm all for establishing regular cash flow as soon as possible in your freelancing career, I would also recommend the habits of saving and investing, even when you're just starting out in your career.

A good number of freelancers eventually make six-figure incomes, but more often than not, it doesn't depend on how much money you earn, but how much money is left after paying for your overhead expenses and drawing up a budget for the basic necessities of rent (if you don't own a house), meals, clothing, water, electricity, telephone bills, etc., that will spell out the difference between poverty and financial wellness in the long run.

Employees are advised to set aside 10 percent of their salaries for tithes, 10 percent for savings, and another 10 percent for investments while living on 70 percent of what's left.

While freelancing may offer us the flexibility and privilege of working at our own pace and charging more for a specialized service, we do not have the security derived from a regular paycheck.

And it's a fact in a freelancer's life that he may earn different amounts every week, every two weeks, or monthly, depending on how often he lands lucrative projects, and how often his pay-out is.

This is the main reason freelancing professionals need to learn to manage their money well. While freelancing is retirement-proof, the desire to work less and less as we age and, eventually, depend on our pension and passive income, plus savings, exists among freelancers, not just employees. 

Having said all of the above, it's wise to set aside around 15 to 20 percent, regardless of the amount you've been paid for each project.

This may leave you wondering, "Why that much money?" 

Simple answer: the faster we grow our cash stash, the quicker we can give investing a serious consideration. Also, you have to deal with "dry spells," at least during the first few years of your career, when jobs and projects won't always be available. Extra cash will ensure us of comfort until work comes rolling by again.

And saving is just the first step towards achieving financial wellness in freelancing. I strongly advice you to start doing research now about how much it would take for you to be able to invest.

You can seek the help of a financial adviser, who has all the credentials and is therefore qualified to orient you towards the right mindset in making investments, and possibly present you with a range of options.

Also, Google "frugal living," and decide to give up a few luxuries, or cut back on habits or expensive recreational activities that, in the long run, will surely put a hole in your pocket.  

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