If you’re an entrepreneur or self-employed, you’ve probably had your fair share of having to deal with an unpredictable cash flow. This may include facing a low-income over holiday periods, especially if you’re a freelancer.
Managing cash flow begins with setting your minimum financial goals. What do you need every month to cover your expenses? Do you have a six-month emergency fund that you can draw on during the lean times? Do you have a savings plan?
Control what you can
You could use a zero-based budgeting approach. This method starts with a zero base and every expense has to be justified over a given period of time. What this means is that every need and associated cost has to be analysed. A budget can then be drawn up accordingly. This could be higher or lower than one’s previous budget.
Luxuries are not permitted until there is enough hard cash to pay for them.
Allow for savings
The amount you can save will depend on what your financial goals and earnings are. When you receive large payments in one go, put that money away so that you save it rather than spend it. Keep working at your spartan budgeting approach and reward yourself when you feel it is appropriate. The more you get used to living on a freelancer’s budget, the better you’ll feel about sticking to it.
Automate, save an invest
Allow for a fixed amount of savings every month. Arrange with your bank to facilitate an automatic transfer to your savings account. By doing this you get to treat your savings as a fixed bill. Start small and increase your savings over time. When you have a fair amount to invest, look at putting your money into a good investment.You could invest in the money market over the short term or buy CDs on three- or six-month terms. Do this regularly and you’ll soon be earning interest which you can then re-invest. When you’re feeling more confident, explore other investment options according to your risk and time preferences.
You could invest in the money market over the short term or buy CDs on three- or six-month terms. Do this regularly and you’ll soon be earning interest which you can then re-invest. When you’re feeling more confident, explore other investment options according to your risk and time preferences.