How to Manage an Unpredictable Cash Flow – Tips for Freelancers

Tips for Freelancers managing money

This Image Has Nothing to Do With Managing Cash Flow – I Just Love It!

The worst part of freelancing (or any self-employed home-based business) is managing an unpredictable cash flow. These tips for freelancers are from a financial expert (not me) and an experienced freelance writer (me!).

First, here’s a cool quip from a writer:

“Writing is turning one’s worst moments into money,” said Irish American author J. P. Donleavy.

The more you can turn the most miserable moments of your life into writing fodder, the happier and wealthier you’ll be as a writer.

One of the most important things I’ve learned as a freelancer is that writing is a business. It is my career. So as much as I love reading books about writing, I also have to read books about running a self-employed home-based business — such as Creative, Inc: The Ultimate Guide to Running a Successful Freelance Business.

But it never hurts to read books like Writing Movies for Fun and Profit: How We Made a Billion Dollars at the Box Office and You Can, Too!

On to the boring-but-important stuff: managing cash flow for freelance writers…

How to Manage an Unpredictable Cash Flow

These tips for freelancers aren’t just for writers; they’re for all entrepreneurs. Freelancers have to adopt a long-term view of their money, because their income fluctuates monthly (sometimes even weekly!).

You may be observing a pattern by now: lower income around the holidays or in the summer, for instance. You may also know that you’ll almost always earn a typical monthly minimum income. For instance, I always earn at least $2,000 per month. Last month, I earned over $4,000. Next month I hope to earn over $5,000.

No matter what your minimum monthly income is, your budgeting, spending and saving should be done with that “base” in mind.

And that’s what these tips are all about! To manage an unpredictable cash flow…

Set your baseline writing and financial goals

What are your minimum financial goals? Establish your bottom line: the absolute bottom limit that you need to earn to cover expenses.You need money for rent/mortgage, household bills, your nasty writer’s habits (red wine? cool hats? gourmet coffee?). And you need six months’ living expenses in an emergency fund at all times. If you’re a freelance writer, you can use this account as a “floating” fund. Pull from it during leaner times, then replenish when your cash flow increases.

Don’t forget about your tax bill; I just paid $3,500 in taxes to cover next year’s tax bill — a prepayment! For tax tips for freelancers, read Income Taxes for Working Writers (it’s not just about doing your taxes in April, fellow scribes).

Try “zero-based budgeting”

According to Investopedia, zero-based budgeting is “a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a ‘zero base’ and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.”

This means you can’t buy luxuries (wine, cool writers’ hats, gourmet coffee) until you have the cold hard cash in hand to pay for it.

Save a percentage of your freelance income

Need I say more?

Yes. Yes, I do.

The percentage you save depends on how much you earn, what your future financial goals are, and how unpredictable your cash flow is.

Sock away financial windfalls

When you earn or receive extra money from a big magazine assignment or a generous child who earns more than you, save rather than spend the excess money.

Once you get used to living on a freelancer’s unpredictable cash flow, you’ll feel better sticking to your budget than spending your excess money on stuff you don’t need. Get used to stashing your extra income, in addition to the normal pre-determined amount you save. Keep your eye on the ball: financial security (or that Hawaiian cruise!).

Set up an automatic deduction plan

The best way to manage an unpredictable cash flow is to make everything automatic. Some banks and financial institutions let you arrange automatic withdrawal from your checking account to a savings account. Record this expense like a bill every month, and you’ll painlessly accumulate savings!

If necessary, start with a small amount like $25 or $50 per month and increase it whenever possible, such as when you pay off a credit card bill and have an extra $50 a month floating around.

The Best Online Banks for Writers will help you figure out which banks charge the lowest (or no) fees.

Find a good investment account

Finding a strong-but-safe investment is easier said than done, but it’s worth the effort! Don’t let your money rot in a savings or checking account. If you don’t want your money tied up long term, choose a money market account that allows withdrawals only at certain minimum levels. Or purchase short-term CDs (three- or six-month terms) on a regular basis. You’ll get interest earnings, which you can constantly reinvest.

The best way to manage an unpredictable cash flow is to consistently control what you can control. Freelancing isn’t that tricky once you get the hang of it – but it does take time to get your financial ducks in a row.

Or you could marry rich, and not worry about money at all.

Have you tried and failed to make money blogging? Read 6 Reasons Your Blog Isn’t Earning Money.

If you have any financial tips for freelancers, please comment below…

Partial source: Brad Stroh,

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14 thoughts on “How to Manage an Unpredictable Cash Flow – Tips for Freelancers”

  1. Hi Olufemi,

    Thanks for sharing! I do not have a travel blog, but have gotten discounts on vacation packages in exchange for writing about hotels. It is a great deal, but it does not help with cash flow. Like you said, the writer you mentioned still struggles with making money freelancing.

    I think there are hundreds of travel blogs, which makes it more competitive.

  2. While traveling for I ran into a writer who had turned is passion for traveling into a career. He had a nice travel review blog that was basically earning him free stays in hostels and hotels in exchange for reviews. He did have a major cashflow problem and I helped him with some of his financial issues in exchange for the privilege of hearing the secrets he had for going from 0 to popular on the web in about a year in an extremely crowded space – not trying to market anything here 🙂 just sharing that it is possible.

  3. This post of yours is really motivating, I earn at least $500 per month and the biggest of all is $800. I am new in Article writing and still haven’t able to build a reputation online. But soon I will one of those dependable Article Writers. Even though I earn enough money every month, I have been able to save some for me, since my money goes to my family. I guess it is proper management and discipline are essential when saving cash since I have bigger responsibilities.

  4. I like the idea of making your minimum income your base amount. You should budget to where the amount you spend each month is no higher than your minimum income. Then you can save anything more that you make.

  5. Laurie this is a very useful post. There are a lot of things to learn, your blog is a good source. Thanks for sharing the tips.

  6. I’m not a freelancer but I believe that budgeting your finances is the best move you can make. You need to ensure that you don’t get caught short and when you do get unexpected cash flow, you should spend and save it wisely to make sure you don’t squander it all.

  7. Very useful tips. I also work as a freelancer, but not as a writer. But, I am sure, these tips can be implemented to my job too.

  8. Manjusha@English Grammar

    I am a blogger and a freelance writer. I wasn’t fortunate enough to get married to a rich guy so I have to depend upon my earnings. I make around $1500 a month. During some months I earn even less, but for the past year or so I have always managed to earn at least $1000 per month.

  9. Managing an unpredictable cash flow is tough for freelancers. but I don’t think it’s the most difficult part of freelancing.

    Finding steady work is the hardest part of freelancing.

  10. Vidya Sury, Freelance Writer and Professional Blogger

    Very useful article, Laurie. I like the zero base budgeting tip best – it seems like it will take care of most other things. Sock away financial windfalls is a MUST-Do. It can be so easy to blow it on something and regret it just a teeny bit later.

    Great read.

  11. This tips are really helpful. I always look at my budgeting sheet for all of my income and expenses. Having an outline of your budget will help you know and control your expenses and income. Thanks for sharing some ideas.