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by Maurie Backman | Updated July 17, 2021 - First published on April 2, 2019
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It's hard to save money when your income is variable. Here's how I manage to pull it off.Image source: Getty Images.
As a freelance worker, I enjoy my share of perks. For one thing, I get to set my own hours and take time off from work as I please, which means that if I suddenly get the urge to hit the beach or disappear for a walk in the woods in the middle of a workday, I don't need to ask anyone's permission to do so. I also get to work from home, or from whatever city I happen to be traveling to. And I get to choose what assignments I take on, thereby avoiding scenarios where I'm trapped at my laptop feeling frustrated and bored to tears.
But there's a drawback to being a freelancer, and it's that my income is by no means steady or guaranteed. I might have a month where I do fairly well, only to earn half as much in the month that follows. Because my income varies significantly, I need to be careful with how I spend money. I also need to make a concerted effort to save money -- something that might come a bit easier to folks on a salary. Here's how I manage to pull that off.
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Housing is the typical American's greatest monthly expense -- and it's certainly mine. That's why I made sure not to take on the highest mortgage I qualified for. By limiting the extent to which I spend money on housing, I'm able to free up cash for other purposes, whether it's retirement savings or my kids' college funds. I also have an easier time replenishing my emergency fund when I'm forced to dip into it.
Not only is credit card debt bad for your credit score, but it's also costly. Friends of mine who carry credit card balances pay hundreds of dollars a year in interest alone. That's why I made a policy long ago to never charge more on a credit card than I could afford to pay off by month's end. Doing so has helped me avoid throwing away money on interest, and that's cash that's instead gone into savings.
It's pretty hard to save money when you don't know where yours is going month after month. That's why I set up a budget for myself as soon I got my first job. Of course, that budget has evolved numerous times as my circumstances have changed, but by having one in place, I'm able to keep my spending in check in categories where I might be tempted to overspend -- think dining out, leisure, and even good old coffee.
This is perhaps the single most influential factor in enabling me to save. Before I spend a dime of what I earn, I transfer a portion of my income into either a savings account or a retirement plan. Now, because my income varies, the amount I'm able to save each month follows suit. But I do have a minimum that I require myself to save each month, and I don't let myself spend anything until that minimum is met.
Saving money is not an easy thing to do. Trust me -- I'd rather have more cash to spend on delicious takeout, fun outings with my family, and kitchen gadgets (they're one of my weaknesses) rather than send my hard-earned money into a savings or retirement account where I can't touch it. But here's the thing -- if I don't save that money, I know I'm going to struggle in retirement, or flip out when an unplanned bill comes my way. I'd rather avoid those scenarios and do the responsible thing -- even if it means making some sacrifices along the way.
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