You’re Rich! Never Mind — You’re Broke! The Ups and Downs of Freelancing

pic1  According to Gallup, the number of Americans who feel disengaged at their jobs outnumbers happily employed people by a two-to-one margin. If you want to become a freelancer because you hate your current job, you could end up being really happy. However, if you’re assuming that becoming a freelancer will lead you to a four-hour work week and a Mai Tai in your hand at the beach, especially during the early years, think again.

The biggest challenge that freelancers face is the ebb and flow of monthly income. One month, you’re so buried in work that you can barely find time to shower. The next month, your email inbox sits empty, and your bank balance is depressing. If you’re already buried in debt, you might want to wait to quit your day job. Then, when you’re ready to strike out on your own, you can handle freelancing’s ups and downs by following a few smart tips.

Don’t Start Full-Time Freelancing When You’re Brokepic2

A lot of freelancers are able to quit their full-time jobs if they have partners who can financially support them. However, if quitting your day job would mean feeding your family nothing but Ramen noodles, then you’re not ready to quit your job. Racking up your credit card bills to pay for groceries and other necessities will bury you under mountains of debt. If you’re unsatisfied with your current position, but not totally put-off by the idea of working in an office, you might be better off getting an MBA or other degree to move upward in a traditional job instead of steering yourself toward bankruptcy.

What to do: Start exploring freelancing as a part-time side gig while you save some money for emergencies and pay down your debts. Then, once you understand the business and have some financial wiggle room, you can take the full-time freelance plunge.

Manage Your Fluctuating Income

When you graph out your expected freelance income over the course of a year, some months will look amazing. Others will make you wonder whether the graph actually goes that low. To survive those leaner times, average your expenses out over the course of a year. Set aside enough money from the good months to tide you over during the bad.

What to do: In addition to having a checking account, open a couple of savings accounts. You might be better off opening an account at a different bank than the bank where you keep your checking account; this makes it harder to tap your money impulsively. Once your accounts are set up, follow these steps:pic3

  • Set aside your taxes first. No excuses. There’s nothing worse than realizing in December that you didn’t save enough for taxes. To avoid this nightmare, set aside your taxes in a savings account every month as clients pay you. If you’re not sure how much you’ll owe, fill out a 1040-ES. Then, every three months, make your quarterly IRS payments.
  • Put enough to cover your monthly expenses into your checking account. In addition to the bills you always pay, including your housing, your utilities, and your debt payments, set aside enough to cover periodic expenses like paying your personal property taxes. Also, set aside what financial planner Sophia Bera calls a “curveball fund.” This fund will cover unexpected car repairs, pet emergencies, or other unexpected events.
  • Save your leftover money. After you’ve paid your taxes and covered your expenses, put the money that remains into another savings account. Try to save enough to cover three to six months of your living expenses. When you experience lean times, you can tap into your savings, and you won’t have to hide from your landlord.

Build a Hedge Against Disaster

Hopefully, you won’t experience a major medical crisis or a disability that keeps you from working. If you do, then you either need a massive nest egg or a strong portfolio of insurance.

What to do: Make sure to buy enough medical, dental, life, disability, and liability coverage to protect yourself and your family in case of an unexpected financial shock.

Take a Deep Breath, Then Jump

Start by getting your financial house in order. While you’re doing that, freelance on a part-time basis. Then, when you’re ready to be your own boss, give your two weeks notice and start your entrepreneurial adventure.

Have you considered getting started with freelancing?

About Kayla

Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at ShoeaholicNoMore or follow her on Twitter.


  1. I might venture into the world of freelance after Christmas – it’s a very daunting step but I think I’m getting ready to give it a go! These are some very helpful tips – especially the one about saving for taxes.

    • Luckily, I started saving for self-employement taxes from the very beginning of my freelancing. I’d be stressed out now if I hadn’t!

  2. Great advice! I don’t think I’ll ever quit my day job, but this is still good advice if you have a side hustle that’s going to stay on the side. It’s easy to get sucked into the mentality of having tons of money when you have a good month and going out and splurging on something. Instead, it is better to put that money away for a rainy day – or to make a huge debt payment!

    • Unfortunately, I’ve fallen for that before – using my side income for eating out and shopping instead of the real reason I started side hustling in the first place, to pay off debt and put more into savings. It’s a work-in-progress… Sigh!

  3. This is a great post! I think a lot of people start freelancing as a side hustle, then get all starry-eyed and quit their day jobs. You really have to be able to handle the lean times, because they will happen. There’s a lot to be said for having a steady paycheck.

  4. Like you mentioned, there are pros and cons to both. I work your standard 9-5 office job, receive a steady pay, but most days feel like I’m serving a prison sentence. My cousin is a realtor and gets to call all the shots from her home office in her pajamas but weeks can go by without any business. She loves her job but constantly stresses out about money. I still have $5k left to pay off my student loans so I think the steady pay is best for me now.

  5. You really need to consider if, how, and when you will make more money than your day job with freelancing. I am starting to now, and wasn’t making a ton before, so I knew I could do it. I think saving for taxes upfront and also having a nice savings are so important!

    • That is exactly right! I have thought long and hard about how much I will have to make freelancing (after taxes) in order to make up not only for the (after tax) income from my FT job, but also the benefits I receive through my employer, like retirment contributions and matches, sick leave and PTO, health benefits, etc.


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