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Side Hustles

You’re Rich! Never Mind — You’re Broke! The Ups and Downs of Freelancing

According to Gallup, the number of Americans who feel disengaged at their jobs outnumbers happily employed people by a two-to-one margin. If you want to become a freelancer because you hate your current job, you could end up being really happy. However, if you’re assuming that becoming a freelancer will lead you to a four-hour work week and a Mai Tai in your hand at the beach, especially during the early years, think again.

The biggest challenge that freelancers face is the ebb and flow of monthly income. One month, you’re so buried in work that you can barely find time to shower. The next month, your email inbox sits empty, and your bank balance is depressing. If you’re already buried in debt, you might want to wait to quit your day job. Then, when you’re ready to strike out on your own, you can handle freelancing’s ups and downs by following a few smart tips.

Don’t Start Full-Time Freelancing When You’re Brokepic2

A lot of freelancers are able to quit their full-time jobs if they have partners who can financially support them. However, if quitting your day job would mean feeding your family nothing but Ramen noodles, then you’re not ready to quit your job. Racking up your credit card bills to pay for groceries and other necessities will bury you under mountains of debt. If you’re unsatisfied with your current position, but not totally put off by the idea of working in an office, you might be better off getting an MBA or other degree to move upward in a traditional job instead of steering yourself toward bankruptcy.

What to do: Start exploring freelancing as a part-time side gig while you save some money for emergencies and pay down your debts. Then, once you understand the business and have some financial wiggle room, you can take the full-time freelance plunge.

Manage Your Fluctuating Income

When you graph out your expected freelance income over the course of a year, some months will look amazing. Others will make you wonder whether the graph actually goes that low. To survive those leaner times, average your expenses out over the course of a year. Set aside enough money from the good months to tide you over during the bad.

What to do: In addition to having a checking account, open a couple of savings accounts. You might be better off opening an account at a different bank than the bank where you keep your checking account; this makes it harder to tap your money impulsively. Once your accounts are set up, follow these steps:pic3

  • Set aside your taxes first. No excuses. There’s nothing worse than realizing in December that you didn’t save enough for taxes. To avoid this nightmare, set aside your taxes in a savings account every month as clients pay you. If you’re not sure how much you’ll owe, fill out a 1040-ES. Then, every three months, make your quarterly IRS payments.
  • Put enough to cover your monthly expenses into your checking account. In addition to the bills you always pay, including your housing, your utilities, and your debt payments, set aside enough to cover periodic expenses like paying your personal property taxes. Also, set aside what financial planner Sophia Bera calls a “curveball fund.” This fund will cover unexpected car repairs, pet emergencies, or other unexpected events.
  • Save your leftover money. After you’ve paid your taxes and covered your expenses, put the money that remains into another savings account. Try to save enough to cover three to six months of your living expenses. When you experience lean times, you can tap into your savings, and you won’t have to hide from your landlord.

Build a Hedge Against Disaster

Hopefully, you won’t experience a major medical crisis or a disability that keeps you from working. If you do, then you either need a massive nest egg or a strong portfolio of insurance.

What to do: Make sure to buy enough medical, dental, life, disability, and liability coverage to protect yourself and your family in case of an unexpected financial shock.

Take a Deep Breath, Then Jump

Start by getting your financial house in order. While you’re doing that, freelance on a part-time basis. Then, when you’re ready to be your own boss, give your two weeks notice and start your entrepreneurial adventure.


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Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
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The content on is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.