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3 Budgeting Tips for Singaporeans Who Aren’t Earning a Steady Paycheck

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Joanne Poh

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The life of a freelancer is distinctly different from those of his office-going, salary-earning peers.

While the freelancer might enjoy the perks of late breakfasts at 11am unperturbed by the thought of having to rush back to the office before his boss notices he’s gone, he’s confronted every month by the possibility of his income taking a huge dip.

It’s often feast or famine for freelancers. One day you’re swimming in champagne bottles, the next you’re using said bottles to collect rainwater for your next shower. Here’s how to budget for survival.

Your nest egg needs to be big

Everybody, freelancer or not, needs some amount of emergency cash savings in case their expenses rise unexpectedly in any given month.

As a freelancer, you not only have to contend with the possibility of your expenses rising, but also your income falling.

That’s why you need a bigger emergency fund than most of your salaryman peers. How big depends on how variable your income is and how much you spend.

If you spend only 20% of your average monthly income, which only varies slightly, you’ll need a much smaller emergency fund proportion-wise than, say, someone who can go months without closing a case, and who spends 60% of his average monthly income.

 

Try to keep your monthly spending below what you’d earn in your worst month

Considering there are some freelancers who can earn $1,000 one month and then $10,000+ the next, it can be difficult to figure out how much you can afford to spend.

When you’ve been in the freelancing game for more than a year, start monitoring your income and taking stock of how much you earn on average each month. You also want to know, in a worst case scenario, how low your income can fall in a month.

For instance, a tutor who earns an average of $5,000 a month may actually make between $2,000 and $7,000 each month–$7,000 during exam time when students ask for extra lessons, and $2,000 during the school holidays.

For this tutor, the ideal situation would be to keep his monthly spending to below $2,000. That way, he knows that even in the lean months when he doesn’t have much work, he’ll be able to comfortably cover his monthly costs. He can then feel free to save and invest the balance, after putting some cash aside in his emergency fund.

Avoid getting bogged by too many commitments and recurring payments

Commitment is a freelancer’s biggest fear—that could be the very reason you’re not signed up to a full-time job like other people your age.

Well, you want to be just as wary of financial commitments. Only sign up for something like a gym membership, a spa package or a magazine subscription if you’re sure you can get a lot of utility out of it, and you’re certain you can easily take on the financial burden without having to sacrifice your savings and investments.

When you do come face to face with an unavoidable financial commitment, such as the purchase of a home, it’s always a good idea to err on the side of caution.

While you might be able to easily afford mortgage payments on a particular property right now, remember that as a freelancer your income depends on how much you work.

Should you fall ill, lose an important client, face a family crisis or even take a friggin’ vacation, your income falls accordingly. Take all that into account when deciding how much of a financial commitment you can realistically take on not just now, but years into the future.

What budgeting rules do you live by as a freelancer? Share them with us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.