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Budgeting for freelancers

I was thinking the other day about a recent post I wrote about how I became a freelancer. I talked about the anxiety I felt not having a steady stream of income, but I didn’t talk about what I did to remedy the situation.

Last year I created monthly budgets like I normally do, but with irregular payments coming in (and no full-time salary to anchor my income), it ended up being a somewhat frustrating experience. I didn’t have enough cash flow to bridge the gap between payments, so sometimes I was caught a little short on cash. :| It would have been relatively easy to dip into my (non-EF) savings account, but with PC Financial, taking money out of a savings account takes one business day. Besides, I had to figure out a better way.

Related: When does a freelancing career take over?

After the first few months, I realized I needed a better system that accounted for income fluctuation. The first step was to project my monthly income, and there are generally two methods to doing that:

  1. Average monthly income. Add up your monthly income from the past year, divide by 12.
  2. Minimum monthly income. Take the lowest earning month you have had in the past year.

When I was working a full-time job and freelancing, I based my budget on my minimum monthly income – which usually ignored any freelance income I earned. That way, I was sure I was satisfying my budget, without having to look at fluctuating secondary streams of income to compensate my spending.

However, as a freelancer, I didn’t have anchor income (or even many anchor clients) that would provide me a steady stream of money I could rely on. So I decided to change my approach and work my budget around my average monthly income instead. Then, I would pay myself a bi-weekly salary, as if I was still working for someone else – instead of just randomly spending/saving the money as it came in. So I went back and added up my freelance income from the past 12 months, and divided by 12 to get my average monthly salary.

That made me feel really good. I knew approximately how much I would bring in each month, and I felt secure that I could meet all of my financial obligations, and still have enough left over for the fun stuff – like travel. :) But my only problem was, if I was already starting short on cash flow, how would I build up a salary base so that I could start giving myself a bi-weekly salary?

It was then I realized why I’m always so overly cautious when it comes to my money – for exact reasons like this. I had about $5,000 set aside in a savings account (my $10,000 Emergency Fund is separate from this). I took out enough to pay me a bi-weekly salary to start, and started to used that savings account as my business account.

Related: Time management for the freelancer

This was a good short-term solution, but if I were going to make freelancing a full-time career, I would have done a lot of things differently:

  • Set up a separate business chequing/savings account. I should have done it before I left, but it just wasn’t a priority (even though it should have been).
  • Stay more on top of admin work. I’m still guilty of this. I have a really hard time replying to e-mails (especially advertisers/sponsors) in a timely manner – because all I want to do is write, write, write! But when I’m my own business, no e-mail can go unanswered.
  • I would have cared more about making money from my blog. Monetization has never been a big thing for me. A lot of bloggers make a killing with sponsors and banner ads and affiliate marketing. Sure, the money would be nice. But it’s just not something I care enough about. I’d rather cultivate personal relationships with companies. That’s why I focused on my partnership with HostelBookers, and a few other smaller companies last year.
  • I would have worked harder. Okay, well maybe. Last year I worked about 25 hours/week and earned about $57k. That’s a pretty decent salary, but if I were going to make freelancing my career, I would have gone at it harder. Pursued more opportunities. Said yes to all media interviews (I said no. Often.) Worked a full 40-50 hour/week. Of course, that was impossible to do while I was traveling so much… and that’s a choice I made.
  • Saved up for a business emergency fund. The only thing that was keeping me calm was my $10,000 personal Emergency Fund. I should have had a savings account set up for my business – so that if I lost a big client (I did while I was away), I could supplement my bi-weekly income until I found a replacement income stream. Thankfully I had additional savings outside of my EF that I could use if needed.

Anyway, that’s how I dealt with money during my year as a freelancer. Like I mentioned in last month’s post, freelancing gave me so much anxiety. But, I think that if I had created a better game plan (aside from: yep, I make enough money to quit my full-time job!), I would have been more successful at being less stressed out about finances last year. :)

Freelancers – do you have any budgeting tips to share?

How do travel bloggers support themselves?

Okay, I get how full-time travellers support themselves. They get sponsorships, volunteer in exchange for accommodation, they teach English, work odd jobs, travel slowly, they sell photography and ebooks, make a bit of money freelancing or from their blog… but for those that have been doing it for years – I’m talking about at least 2 or 3 years, I’m wondering… how are they saving for the future?

Clearly this is me being nosy. But don’t you wish they would talk about their finances? In fact, not only do I wish travel bloggers would talk about money, but I wish full-time travel fashion/style bloggers would as well. Seriously. I just love reading budgets and financial reports – which is why I do monthly goals and weekly spending recaps. :)

I’m sure that some travellers out there are making it work because their careers are location independent. But what about the majority of the full-time travellers? The ones who pick up the odd job working on a farm or serving at a bar – saving enough money to get through the next few months of travel, before they have to get a job again.

Most full-time travel bloggers talk about money in the now – how much it cost them to do something, how to find work while travelling, or how much income they need each year to keep on travelling. But very few (I haven’t found any) full-time travel bloggers talks about money in the future. Especially the ones who have plans to travel the world “forever.” I want to know how sustainable full-time travel really is. Because sure, you can likely scrimp and get by for quite a while, but I don’t consider that “sustainable” because you’re essentially living hand to mouth.

Because, eventually most travellers will have to stop moving, settle down, and resume a somewhat normal life at a certain point, right? I mean, they can’t keep moving and backpacking until they’re 90, can they? How will their children go to school? What about an emergency fund in case they injure themselves, or can’t make enough money to support themselves? How will they fund their forever travelling lifestyle when they can no longer work and are essentially “retired” from the workforce?

This is something I’ve been thinking about over the past few months, and I’m genuinely curious. After spending the last year in Europe, I liked having a “home base” to look forward to coming back to after each getaway. I don’t think I could ever be a full-time traveller. While I think I made a decent living, my priorities lean too far in the other direction. I truly admire those that can make a life out of travelling, and I’m intrigued by the financial aspect behind their everyday lives, as well as their plans for the future. But the PF blogger in me wants to see numbers! Is traveling “forever” actually possible, while also saving for retirement?

Do you ever find yourself wishing travel (or fashion) bloggers would post real budgets/numbers/plans? Or am I the only nosy one around here… :)

Autumn travel expense total

In the summer, I posted my mid-year travel expense total. It was a really good snapshot of how much I’ve spent, broken down by category… and it made me realize that I couldn’t keep spending at the pace that I was going.

Changes needed to be made, and I had to cross some trips off my list. If you click through to the old expense total, you will see that upcoming trips included Ireland, Scotland, and Bulgaria. Well those got scrapped in favour of spending more time in Turkey, an additional trip to France, and a trip to Oktoberfest in Munich (both relatively cheap b/c they’re close to Stuttgart). My Iceland trip got put on hold, but that will be happening in about 3 weeks because I was able to get a free stopover on my way home to Vancouver, and my accommodation is being sponsored.

Here is my updated travel expense total (click to make bigger):

So you’ll see that I will have traveled a total of 78 days in 2012, for a rolling total cost of €7,127.13 or $9,071.41.

Of course, I still have to factor in the cost of Cologne and Reyjavik. Cologne will be relatively inexpensive as we are only there to check out the Christmas market – and any presents that I buy aren’t reflected in my travel expenses. Reyjavik will likely be costly, but I haven’t booked anything yet, so it’s all up to me.

$9,000 is a lot of money, and I certainly would have loved to see that amount added to my RRSP or in a TFSA. But, this year my net worth has actually risen +$8,876, so I feel like even though my financial progress has significantly slowed down since quitting my full-time job (my net worth rose +$22,813 in 2011), I’m still doing well. I was able to take an entire year to travel and write in Europe – without incurring debt, and saving a little bit in the process.

Anyway, here is the cost break-down per trip, and per day:

Obviously I can’t talk about travel expenses without mentioning my partnership with It has saved us well over $3,500 combined this year, so it’s quite a significant chunk of money I’m saving.

However, for those who think the numbers above might be unrealistic for someone without an accommodation sponsor, it’s worth mentioning that almost all of my trips include round-trip travel expenses – whereas someone on vacation or extended travel likely wouldn’t have to spend round-trip costs because they’ll be continually traveling, not based out of one city like I am.

Also, even though I saved a lot on accommodation, I still had to spend almost €1,000 on accommodation myself, with an average price per night of €20.56 or $26.18. A few times, we stayed in hostel dorm rooms to save money, but 90% of the time we had private accommodations.

Here are a few other bullet points that are worth mentioning:

  • My 6-day trip to Toronto is not listed in the above spreadsheet because it was a business trip.
  • Some of my travel expenses will end up being tax deductible because I was writing stories about the trip for publications, or reviewing services for publication.
  • Day trips are also not listed b/c they didn’t include an accommodation component. I would estimate we went on 6 or 7 day trips.

I’ll do a final recap of my travel expenses at the end of December. :)

Let me know if you have any questions. I’d be happy to answer them!

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