The Golden Pencil: The Freelance Writer’s Resource

Income Ups and Down

by Anne Wayman on March 5th, 2007

Freelance writers have many advantages, and a few challenges as well. One of the major challenges I face is the up and down nature of my income. Here’s my current approach to solving this problem:

• Put aside at least 10% of every penny into an account I call Prudent Reserve. This is separate from the two savings accounts I have, one for taxes and the other to buy my own home. The goal for Prudent Reserve is six months income, but the truth is, I’m in and out of that account way more than I like.
• Track all my expenses – I do this in Quicken and it helps me spot money leaks.
• Create an earning plan – each month I update a spreadsheet that shows two areas of income: income that’s actually contracted for and income that I think is coming in, but isn’t contracted for yet.
• Create a spending plan – each month I update a spreadsheet that shows my projected expenses… both those that are musts like rent and utilities and groceries, and another that are optional, like the new computer I want.

This system means I actually know where I am money-wise. It helps me in lots of ways.

For example, I may be taking on a new ghostwriting client. Before I set the price and payment schedule in the proposal, I spent some time with my earning plan to see both what I needed and what I can actually do, time wise. It helps with the balancing act freelancing and self-employment actually is.

Another obvious plus is as quarterly self-employment tax payment time approaches, I actually have money set aside to make the payment.

Getting clear on finances has become an important part of my success as a freelance writer.

Write well and often,

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POSTED IN: Business of Freelance Writing, The Kitchen Sink