Managing expenses is as important for freelancers as it is for businesses. You cannot offer competitive rates and be flexible on the market when you have a lot of costs to deal with – including both professional and personal expenses. Unfortunately, not all freelancers and professionals manage their expenses meticulously.
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As a freelancer, staying lean is the only way to go. Even those with a steady stream of projects must still take steps to limit overhead costs and manage expenses. These several tips and tricks will help you manage your expenses as a freelancer.
1. Limit Your Overhead
Working from a coffee shop, upgrading your work tools with every iteration, and spending money on software or apps you don’t use – those expenses are actually affecting your profitability as a freelancer. They are overhead costs that need to be managed better.
Starting with overhead costs is easy because they tend to be fixed or relatively measurable. In the case of apps or software, you know exactly how much you spend on them every month. The same is true with external services, work tools, and other cost elements. Taking them into account helps you measure your profit as a freelancer more accurately.
2. Manage Small Expenses
Next, you want to be careful with small expenses. Small expenses add up to a substantial amount when not managed properly. It doesn’t take long for small spending here and there to eat into your profit as a freelancer.
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It may be tedious to write down every expense you make, but the time and energy invested into doing so is well worth the results. You’ll be surprised by how easy it is to cut costs and save once you have everything written down.
For instance, paying interest on a commercial credit card isn’t something you want to do when you can get a much lower interest rate from an El Cajon Credit Union. The money you save can be allocated for other business needs.
3. Treat Tools as Cost Elements
Do you use a laptop for freelance work? Do you invest in specific tools (i.e. a mirrorless camera or a lens) so you can do your job? Think like a business and start treating those tools as cost elements. An easy approach to do so is taking the cost of renting those tools into account when calculating quotes and proposing to potential clients.
You are basically renting your work tools from yourself. As an added step, set aside the money you earn from ‘renting out’ your work tools so that you can repair or upgrade them when needed without disrupting your entire cash flow.
4. Cash Flow as a Foundation
Last but not least, learn about how to best time your expenses to maintain a healthy cash flow. If your invoice is not going to clear for a couple of weeks, for example, refrain from many big expenses until then.
A healthy cash flow is a sign of costs (and revenues) well-managed. Once you start limiting your overhead costs and managing small expenses to stay lean, you will find keeping up with monthly bills and maintaining a healthy cash flow to be much easier to do.
It is easy to implement these tips and tricks and start managing your costs as a freelancer. Now that you have the best tips to use, getting started with managing expenses will lead to you staying lean and effective as a freelancer.