Freelancing offers you flexibility, but there is one major problem associated with it: your earnings are never consistent from one month to another. You can earn Rs 70,000 one month and only Rs 25,000 the next month. When your income and expenses are uncertain, investing becomes the first thing you skip.
The solution is not to invest an equal amount every month. The plan should be to create a mechanism that will work according to your income.
Set Minimum Investment Amount
Instead of investing a large sum of money monthly, start with an amount that you can afford even when the income is less in a particular month.
If your basic monthly expenses are Rs 20,000 per month, you can start with Rs 2,000 even if you have earned less in that month. As your income increases, you may increase your investment amount. The objective is to form a habit without straining your daily expenditure.
Income Allocation Before Spending
Let's say you have received Rs 60,000 from a client. Don't consider the entire amount as your expenditure. Allocate the money as follows:
Rs 25,000 towards expenses,
Rs 10,000 towards tax payments and other liabilities,
Rs 15,000 towards saving,
and Rs 10,000 towards investments.
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Build An Emergency Fund First
Freelancers should build a financial safety net because clients may delay payments or projects may suddenly end. Building an emergency fund of three to six months of expenses.
If your monthly essentials cost Rs 20,000, an Emergency Fund of Rs 60,000 to Rs 1.2 lakh can give breathing room when work slows down.
Invest More During Good Months
If you get more money, try not to increase all expenses right away. After paying your expenses and taxes and saving for an emergency fund, consider investing part of the surplus.
Keep Investments Flexible
Pick investment options based on your goals and risk tolerance. If you are using mutual fund SIPs, make sure your contribution aligns with your cash flow and can be adjusted if required.
Consistency in investing does not mean investing the same amount each month. For freelancers, consistency would mean an investment strategy that works regardless of the season.
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