Why the "Little Pleasures" That You Allow Yourself Might Be Hurting Your Cash Flow

As a freelancing professional, you work hard and are extremely dedicated. You always think of ways to craft a marketing strategy to attract new clients. You return your clients' calls as soon as possible, and you submit your work promptly.

But here's the deal: you realize that while "dry spells" are happening a lot less often in your career, your cash flow could still benefit from, well, a few tweaks here and there.

Plenty of people have aspired to turn freelance, but the ones who manage to stick and thrive in this business of being your own boss did several things radically. There will be a time when projects and assignments fly left and right, raising your confidence in your abilities and earning capacity.

But beware. This self-confidence might border on complacency, leading to a lack of budgeting and planning your finances.

Here's what you may need to do if your savings aren't as huge as you'd like it to be: evaluate your spending habits and see if you've been spending on items that may not cost a lot, but when added up after, say, a month, three months, or even a year, would have put a huge dent in your income.

To illustrate, when I started supplementing my writing with designing and selling greeting cards in 2007, the money came pouring in in ways I could never have imagined. I hit a nerve among employees in a corporate office that needed my prototype paper product, the gift card, and I found myself with a constant supply of jobs. 

I set aside small amounts with every sale, but I didn't think twice about shelling out Php200 on a thin-crust pizza and Coke every time I went out to replenish my supply of cardstock. My magazine reading habit reached an all-time high at that time, too.

For other freelancing professionals, three-figure lattes or having a sweet snack all too often might be the culprit. And think about this: a bag of potato chips might not cost much at Php14-Php16, but if you buy two bags a day, seven days a week, you would have spent roughly Php224.

So what's the solution to these "little holes in a freelancer's ship that might cause it to sink"? I'll give you a hint: it doesn't involve depriving yourself. Next week I'll give you practical tips on how you can enjoy on a freelancer's wages.

Want A Month's Worth of Paycheck by Year's End? Reduce Your Overhead Expenses (Part 3)

This is the last installment of this three-part article series, and I'll talk about two essential elements that comprise part of the routine of a freelancing professional.

Here's how to save up on --

Transportation and Meals

There are times when you have to go out and do research in a public library, or venues that allow access for research. You would need to plan your course of action carefully in order to maximize your days out. 

Setting a budget for transportation fares and meals is very important, especially if it will take more than a few days for you to find all the resources you need in libraries and other venues. 

A budget will prevent you from spending unnecessarily, causing you to deduct very little amounts from your cash flow. Consider the following in order to cut costs:

• Pack a water bottle in your bag.
• Bring a couple of sandwiches so as not to be tempted to turn to vending machines for soda and salty chips. Whole-wheat bread is best because it's extra filling.
• Take the jeepney, bus, or train whenever possible. Riding taxi cabs can rack up horrendous amounts of cash.

I have talked about this in greater detail in a previous post (click here to read).

Want A Month's Worth of Paycheck by Year's End? Reduce Your Overhead Expenses (Part 2)

In this next article installment, I'll cite additional ways for you to have a substantial amount of savings by year's end. Here's how you can save on --

Health Care

• If you're freelancing in the Philippines, I strongly suggest that you start making contributions to Social Security System and PhilHealth. Google "SSS contributions" for further details.
• If you started freelancing in your 20s and 30s, you will probably be less likely to be prone to serious illnesses. Still, you should think about getting yourself covered for routine check-ups like annual physical exams and dental and ocular inspections. When acquiring health insurance, simply settle for the one that would be most affordable given your monthly cash flow.
• The cheapest health insurance still remains to be eating healthfully and exercising moderately. Make physical fitness a part of your daily routine.

Equipment

• You need not spend Php40,000 or even Php30,000 on a new computer. Pre-owned desktop and laptop computers that are still in good condition can now be bought at olx[dot]ph (click here to view site). Be forewarned, though, that making transactions in this site would mean complying to certain guidelines.
• There are a multitude of free software that can be downloaded from reputable websites. Be selective enough, and make sure to choose the ones that are virus-free and will be most practical for you.
• Forego furniture stores and visit garage sales, or ask friends or relatives if they have an old desk that you can repurpose.
• If you would need to send your manuscripts and CDs through snail mail, National Bookstore sells brown envelopes with bubble wrap inside in various sizes. Apply for a Laking National Bookstore card to accumulate points for your other purchases, like pens and stationery.
• Save up on folders and brown envelopes by buying a separate USB for backing up files like copies of your Freelancer's Contract, collection letters, replies to promissory notes or negotiation letters, and records of transactions. 

Want A Month's Worth of Paycheck by Year's End? Reduce Your Overhead Expenses (Part 1)

Would you like a cool, one month's worth of salary (around Php12,000-Php15,000) by the end of 2015? Take time to re-evaluate your overhead expenses, and see where you can cut costs.

Here are several suggestions:

Bills

To save on electricity:

• Unless you're a film critic or you write guides to increase one's chances in winning video games, limit screen time (TV, internet, video games, etc.) to no more than two hours a day. 
• Limit the time you spend on social media (Facebook, Twitter, Instagram, etc.) unless you use these sites as platforms to promote your freelance business.
• Make it a habit to unplug appliances from their sockets when not in use. A MERALCO advisory claims that this will save you Php300 monthly.
• Have your meals planned a week or even two weeks ahead, and then assign Saturday or Sunday afternoon as the time when you cook food in bulk. You can freeze them in the refrigerator, and then, come meal time, heat just enough portions for you and your family.
• If you prefer to have your meat, chicken, and fish grilled, invest in an electric grill to save on charcoal (this would also mean less time cleaning up). Consider grilling huge portions of chicken and fatty fish so you can have enough for lunch and dinner.

To save on phone bills:

• Consider getting a telephone-and-internet "bundle," and opt for the cheapest plan. You can make and receive phone calls at home, and setting up a free Skype account would mean additional ways to get in touch with you.
• If you have to be on the road a few days a month, get a post-paid plan that allows you a free cellular phone. Settle for the most affordable plan that will bring you the most benefits.

To save on utility bills and home maintenance expenses:

• Always have a couple of LED bulbs handy. LED bulbs come cheaper since they're lower in wattage, but they give off more than adequate lighting.
• Plan your laundry and ironing. Since freelancing at home may mean a lighter load, you can limit the frequency of laundry to twice a week at most.

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.