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How to Save Money in 2014: 5 Finance Tips for Freelancers

Posted by Money Crashers on Tue, Dec 31, 2013 @ 03:00 AM

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how_to_save_moneyIs one of your New Year's resolutions to learn how to save money? Read on for five smart finance tips.

If you're earning an income as a freelance creative, you've risen to the top of a very ambitious group. Merging creativity with commerce, however, is not an easy task. If you want to succeed and grow your business, you're going to have to fine-tune your budgeting and money management skills.

With the right planning and proper research, you can live a financially successful life and continue to enjoy all the perks that a consulting lifestyle offers. To help you keep "freelance" in your title, consider these tips:

1. Create a Personal Budget 
A budget is a necessity if you want your career to prosper. Choose your format of choice: an Excel spreadsheet or dedicated software like PearBudget or Mint, or an old-fashioned pen and paper. In one column, list your monthly expenses. Start with fixed bills like cable, housing and cell phone. Then move to variable costs, like groceries, entertainment and gas. Don't forget to include, and prorate, annual expenses like auto insurance. Then, weigh that sum against your projected monthly income. Base this estimate on the average of your past 12 months of earnings. If you err on the conservative side, reduce that number by 10 percent. If your expenses outweigh your income, start making cuts.

2. Reduce Monthly Service Bills
Look in detail at every monthly service bill and investigate ways to save. In many cases, it's as simple as switching to the competition (if you're not locked into a contract). Do this with cell phone and Internet plans, and even extend the idea to your car and home ­– there's competition in every sector. To reduce home energy costs, for example, contact your provider and request an energy audit where a representative comes to your home, inspects it and presents a report detailing ways you can save. If you come up with five ways to save just $10 a month, that's an extra $600 by the end of the year.

3. Reduce Personal Spending
You can't simply stop spending money, but what you can do is look at every purchase you make on a daily or weekly basis and decide if you truly need it. If you can brew coffee at home, get your news online, and give up those convenient store purchases like candy, newspapers, magazines and lotto tickets, you may be surprised how much money you're going to conserve.

4. Pay for Everything With Cash
If you have a hard time controlling that instinct to reach for your credit cards, park them in a drawer for a few months and commit to paying for everything with cash. Get your fixed bills paid first to ensure you don't run out of money. Once you have to depend on a finite, tangible amount of cash for all your purchases, they're going to take on a lot more significance.

5. Save First
The moment any income hits your bank account, devote a portion of it to your savings. If you have any steady paychecks you can rely on, set up automatic contributions to your IRA or emergency fund. If you're paid solely on a sporadic, project-by-project basis, do this manually. After you've done that each month, and covered your monthly expenses, you can spend what's left with more freedom.

Once you've trained yourself to handle your credit cards responsibly, switch back to using them ­– and use them for everything. Decide on the best rewards card for your situation. If you travel frequently for your business, select a card that offers miles and bonuses for the airline you fly most often. If you simply want to earn cash back on purchases, the Chase Freedom card is a popular option.

Discipline yourself and put every bit of this rewards cash toward your emergency fund or retirement savings. You've got to know where spending money can hurt you and where it can benefit you. Master the art of managing your finances and your career is going to be a long and prosperous one.

Are you a frugal freelancer? What additional tips would you share on how to save money?

Topics: Career Advice, Freelancing