This post hasn't been updated in over 2 years.
Even in the best of economic times, freelancers often walk a tight financial edge—some months you may be flush with money, while other months will leave you searching under the couch cushions just to make sure you have food in the house.
Here’s are some frugal tips to help you save money—and your sanity—while you are building your freelance business.
- Have an emergency fund. Unfortunately, it isn’t if but when an emergency will come up. With a financial cushion you will be able to meet most emergencies without incurring exorbitant interest fees or loan costs.
- Don’t quit your day job…yet. Launching yourself full time into your freelance business sounds like a great idea but if you have bills to pay, don’t give up your day job just yet. Don’t quit your regular job until you have a consistent freelance income (or a very big emergency fund) that can easily cover your living expenses.
Be debt free. There is nothing that will sink a new business faster than a massive amount of debt (credit card payments, loan payments, etc) that needs to be paid each month.
Go all “gazelle intense” on paying off your debts before you launch into your freelance career (or, as stated above, keep your day job while starting your freelance career and don’t quit that steady income until you are debt free).
Incur the least amount of overhead possible. Overhead (office rent, office utilities, employees, etc) is one of the biggest money sucks on your fledgling freelance income.
Work at home if possible, or try a co-working space. Use contractors instead of hiring employees. Basically, anything that keeps your monthly expenses as low as possible will benefit the bottom line of your freelance business.
Buy the least that you need. Do you need a fancy, expensive smart phone or will a basic $30 pre-paid cell phone suffice? Do you need a computer that could give NASA a run for its money or can you get by with a $400 big box special?
It’s nice to have the very best that money can buy but when money is tight, you need to look at your needs logically and purchase items that will meet your needs instead of items that will stroke your ego.
Back up your work religiously. If you have ever been on deadline when your computer crashed or had to pay the exorbitant costs of recovering data from a dead hard drive, you will never complain about backing up your work again.
Regularly backing up your work can save you a great deal of stress, and a massive amount of money, should your computer ever greet you with the blue screen of death.
Look for cheaper options for critical software. I was half way around the world when my computer died. Talk about a panic attack. A computer can be replaced but the expensive software on a computer…not so much. Take the time now to look into cheap (preferably free) replacement software that is critical to your work. You may love MS office but LibreOffice is a really good (free) alternative.
When I had no hope of replacing the (expensive) Dreamweaver software on my computer I used a hybrid of Kompozer and FileZilla (both free) to get my websites updated. And then looked into WordPress to fix the problem of needing expensive software all together.
- Buy stuff cheap. When you have a list of supplies you need for a project, start by finding the items at the cheapest places possible. The Dollar Store has many supplies that cost a fraction of what you would pay in a regular office supply store. Need a desk that no one but your cat will see? Check out the Goodwill or other local thrift stores before turning over big bucks to a fancy office furniture store. CraigsList also offers great deals on equipment you may need.
- Don’t go too cheap. While saving money is necessary for small businesses, that doesn’t mean you want to look cheap to your clients. Spend your money on things that make a difference to you and/or your clients (ie: order professional business cards. Don’t you dare print up your own business cards on your computer and tear them off along their perforated edges…that pretty much screams ‘unprofessional’).
- Just because you can write off business expenses on your taxes doesn’t mean you should incur these expenses in the first place. Yes, there is a huge list of things you can write off on your taxes (business trips, fancy office furniture, restaurant meals) but all of these expenses take away from your bottom line. Tax write-offs aren’t a free-for-all when it comes to increasing your bottom line, so keep your expenses under control, even if they are considered deductions.
- Keep immaculate records. As a freelancer there are plenty of things that you can legitimately write off on your taxes. When it comes to tax time, you can decrease stress and maximize deductions by having all of your financial records ready to go (this means you keep your expenses and income updated at least weekly in a professional accounting program).
- Have multiple streams of income. It’s nice to have a big client that provides steady work and pays on time. Yet when the worst happens–the client suddenly closes up shop with no notice and goes out of business–you will thank yourself for putting in the extra work necessary to develop multiple clients and multiple streams of income.
- Expand your business off of your current work. You don’t want to keep reinventing the wheel, that takes a lot of time and effort. Consider instead ways to expand your business from work that you have already done. For example, if you are a freelance photographer, consider adding photography classes, articles on photography, and perhaps an e-book to your repertoire.
Get free publicity. Can you write a guest post on another website with a link to your business blog or website? Can you get a mention in a local or (better yet) national publication that will drive traffic to your business?
There are literally hundreds of ways that you can create free publicity for your business, word of mouth and positive online reviews being two of the most effective.
- Develop your network. Fortunately this is easier than ever what with FaceBook, Twitter, Piterest, and other social media networks available for the cost of keeping them updated. You never know when you will need to marshal your (network) forces. Maybe you are releasing a new e-book or running a Groupon special. What better way to reach the masses, and move your message exponentially, than by sending out information to everyone connected to your social network?
- Collaborate with others. If you are a photographer, consider collaborating with a maternity or baby store—both of you will reap the rewards of collaboration. Also, consider some sort of affiliate marketing deal with others who use your product and can send referrals your way.
- Take calculated risks. Playing it safe often leads to…keeping the status quo. Things like expanding your business into a completely new market or setting up a brick and mortar shop after years of successful freelancing can reap big (financial) rewards, as long as you calculate your risks to maximize your odds on success.
- Continue your education…for free. There are untold numbers of resources available to help you improve your craft. Should you pay out the nose to go back to college and get a CS/IT degree to increase your success in your freelance business? Or should you save your hard earned money and devote yourself to studying online resources every day, as well as practicing what you learn, in order to keep ahead of the curve and serve your clients better? I vote for the latter.
- Find a mentor…or two…or three. I love mentors and they usually come for free (or at most the price of a cup of coffee, sometimes lunch). Mentors can help you to improve your craft and your business acumen because they have been there and done that. They can share their knowledge with you which can benefit your business financially.
Don’t be afraid to quit. Many businesses fail. Often people will go down with their business or keep throwing time, effort, and money into a failing business for reasons that totally defy financial logic (they don’t want people to perceive them as failures, they are sure a big break is just around the corner…year after year, etc).
Sometimes you need to cut your losses and let your business fail so that you can both stop your financial hemorrhaging and allow you to move on to a possibly different but even better business.
While saving money is necessary for small businesses, that doesn’t mean you want to look cheap to your clients.
Can you get a mention in a local (or better yet) national publication that will drive traffic to your business?
The name of the freelance game is money. Without making money from your freelance work you have an effort and time-consuming hobby. Make the most of your freelance business by reigning in expenses and searching out free and low-cost ways to improve your business.