I Made $55,000 as a Freelancer Last Year. Here’s How I Budget, Save, and Spend My Money

A photo to accompany a story about budgeting as a gig worker Photo courtesy of Jasmin Shah Photography
Ines Bellina recently took the leap to full-time freelancing. Here's how she made it work for her finances.

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When I was laid off from my last full-time job, I realized that the security of the 9-to-5 job was slightly overrated. 

For years, I had fantasized about striking out on my own, casting off my annoying commute, and leaving the confinement of the cubicle behind. My layoff was the chance to have the freelance lifestyle I had always wanted.

So I took the leap — once I had the financial foundation to do so. My savings — which were enough to cover about 10 months’ worth of expenses — were crucial in fighting off the “should-I-apply-for-a-full-time-job” scaries. But I was also diligent in living within my means and considering how much to save, and what was worth spending on. If you’re eager to work for yourself, but are intimidated by money management as a gig worker or freelancer, I hope you can learn from my experience. 

How Much Money I Made in 2020 as a Freelance Writer 

Through a combination of content marketing, reporting, translations, and social media copywriting, I earned $55,027 in 2020 as a freelancer. That’s a 76% increase from my first year as a freelancer when I made $31,184. And it’s exactly $27 more than my yearly salary at my first full-time office job when I was getting paid $55,000. What I made in 2020 as a freelancer is slightly above the average of what most freelance writers earn in the U.S., according to Indeed and Glassdoor

But here’s the tricky part: That income was not evenly divided throughout the year, so my income was always fluctuating month to month. And there were certain factors I had to keep in mind as income trickled in, like taxes and ongoing expenses. But with a little organization and preparation, I was able to manage my money without panicking about any overwhelming uncertainty. 

How I Budget When My Income Changes Every Month

During my highest grossing month as a freelancer last year, I earned $10,857.70. It was a big change from the $150 I earned one month during my first year as a freelancer. The money fluctuation is real. Beyond hustling down new assignments, you also have to account for minor inconveniences, like post office delays, or major ones, like clients ghosting on payment. 

Here’s how I weather the feast-or-famine cycle — and how you can, too:

  • Calculate your fixed expenses (such as rent and utilities). I also estimated the average amount of money I spent on variable expenses such as groceries, dry cleaning, and going out. With those numbers in mind, give yourself a fixed salary. Last year, that was $4,000 per month for me. 
  • Save any excess income you earn one month for when you don’t earn as much as you need. During what I call “famine” months, paying my salary requires dipping into savings. But during “feast” months, I save any excess income to protect myself in the leaner months.
  • Make sure to put money toward your future. My budget includes contributions and payments toward my IRA, my Vanguard Federal Money Market Fund, my savings account, and health insurance. I consider these non-negotiable. Failing to save for my future could easily come back to haunt me, and I prefer to make the sacrifice now.
  • Track everything. I’m an analog kind of gal. Every morning, I sit and track my spending in a notebook and calculate how much I have left over for the month. My bank apps do the heavy lifting and I use Mint to keep an eye on where my money is really going.

How I Save Money on a Freelance Writer’s Income

Yes, it’s possible to save as a freelancer. But the old adage remains the same: You must pay yourself first. 

Here’s how to make saving as easy and uncomplicated as possible:

  • Set up a rainy-day fund. My Citibank account functions as my personal checking and savings account. Every month, I deposit at least $40 into my savings. 
  • Save for retirement and other life-changing expenses. My Vanguard accounts function as my retirement fund and my emergency savings account. I put at least $100 each into my IRA and my Money Market Fund every month. You’ve gotta make that interest grow.
  • Open a separate account for your business. My Schwab bank account functions as my business checking and savings account. This is where my clients deposit payments and where I pay for business expenses like new software. It’ll be easier to keep track of payments and tax deductions this way. Which leads me to my next point …
  • Set aside a portion of each paycheck for taxes. They are by far your biggest burden to set aside money for. The amount of money you’ll pay the government will surprise you if you’re not prepared. For that reason, I save 30% of any payment I receive and put it into my business savings account. (Many freelancers save between 20 to 25% of their paychecks for taxes, but I prefer the extra cushion to account for any big business splurge, like my new iPhone Pro 12.)
  • Online banking will save you time and prevent headaches. I have all the bank apps on my phone so transfers between the different accounts are seamless. I also deposit any physical check I have through the apps. I rarely need to bother with in-person bank branches. 
  • Make sure every dollar has a purpose. At the end of the month, any leftover money I have in my personal checking account goes toward either paying down credit card debt, or my different savings accounts. This practice is similar to zero-based budgeting; I make sure no dollar goes to waste. 

How I Spend Money on My Business

As much as the IRS makes me want to cry sometimes, there’s one tiny source of comfort every April: tax deductions. There are a lot of deductions available for self-employed folks, from the use of a home office to supplies like printer ink, and even subscriptions to magazines or tools you use to further your career.

Here’s how I think about spending money throughout the year to maximize my tax deductions:

  • Keep your business expenses separate from your personal expenses. I charge any business-related expense to my business account. This makes it easy to assess my deductions during tax season.
  • It’s OK to spend money to make money — just be savvy about how and when. I have a clear idea of what I consider a worthwhile investment. Anything that makes my work easier is usually worth the expense to me. Some investments are obvious and necessary, like a new laptop if yours died an untimely death. 
  • But don’t think you need every new gadget to maintain a successful business. Other expenses might be harder to determine. For example, do you really need to upgrade your current timetracker? This is where knowing yourself is important. Consider whether it’s a ‘nice to have’ or a ‘need to have.’ I like to take advantage of free trial periods whenever I’m eager to try a new tool. If I find it saves me time or money, it stays. If not, it goes. 
  • Pay a tax accountant. Seriously, just do it. Accountant fees can range from a few hundred to a thousand dollars per year, depending on how complicated your taxes are, but a certified account can spot deductions and offer advice you otherwise might miss on your own.

Bottom Line

Money management as a freelancer doesn’t have to be scary. It requires having a good grasp of your cash flow and being aware of where your money is going at all times. But as long as you stay organized, it’s possible to budget, save, and spend wisely on your business — and yourself.