Here's How I Manage Income Fluctuations as a Freelancer

Freelancing allows me to live a more flexible lifestyle. I control my work schedule, and I can prioritize interests and activities that matter to me, like traveling. But when it comes to my finances, things look very different than when I worked a traditional job, and I've had to adjust how I manage my money.

If I'm not working, I don't get paid. My income can also be inconsistent, especially when I take time off or decide to lessen my workload. If you hope to become a freelancer, it's essential to consider how your finances may change so you can adjust your money management strategies. Here's how I manage income fluctuations as a freelance writer.

I take on extra projects before a planned vacation

If my schedule allows, I do extra work before taking time off. Spending the month before a vacation working extra hard ensures I can fully enjoy my upcoming vacation without worrying about answering emails or writing content. Instead, I can truly enjoy my travels and give my brain a much-needed break.

This also allows me to increase my checking account balance before I go on vacation so I can continue to pay my bills without stress.

I continue to save regularly

I like to prepare for the unexpected; having extra cash in the bank is one way to do that. Throughout the year, I regularly contribute to my savings account. I save for upcoming travel, taxes, and planned upcoming expenses like car registration fees and yearly membership dues.

But I also continue to stash cash in my emergency fund because I never know when an unexpected bill will come my way. Another reason I continue to contribute to my emergency fund is to have extra money available when my income fluctuates. This way, if I'm not working or don't have payments coming in soon, I have money that I can use to pay my bills. I don't want to risk taking on credit card debt.

I automate the savings process to cope with forgetfulness. I set up automatic withdrawals through my bank so money is transferred from my checking account to my savings account automatically. Since I keep my extra money in a high-yield savings account, I also earn interest.

Here's what I'm changing in 2024

I'll be starting my eighth year as a full-time freelance writer in January. I've learned a lot throughout my journey and made my fair share of mistakes. When I discover a better way to do something, I make a change. One adjustment I'll be making in 2024 is to change my savings strategy.

I'll add another savings bucket to my Ally Savings. I plan to set aside money bi-weekly to cover my pay when I'm on vacation or off work due to sickness. This strategy can help me avoid doing extra work before I leave for a trip and will ensure that I still have money to pay for my regular expenses. It'll help me keep my work-life balance in check, too.

Here's how I'll calculate how much money to save: I'll take my usual weekly income goal and then estimate how much vacation time I plan to take. For 2024, I plan to spend five weeks away from work. So I'll save enough money to pay myself for five weeks. I'll divide my total goal by 26 weeks, and that's how much I'll stash in my savings account bi-weekly.

This change will allow me to prepare for my time away from work and help provide more consistency with my pay. When I take a week or two away from work, all I have to do is transfer some savings to my checking account. Even if I don't take all five weeks of vacation, extra pay will be there if I need a mental health day or sick day or if a work project slows down.

Keep your finances in mind

If you're considering starting a small business or becoming a freelancer, keep your finances in mind. Your money habits will likely need to change. If you experience income fluctuations, you'll want to have a plan for how you will cover your bills when work or money isn't as plentiful. For additional money management tips, check out our personal finance resources.