If there’s one theme that connects all of the financial advice that I’ve ever heard or read in my life, it’s this: savings.
We’ve heard one savings strategy tip for freelancers after another: Shop smart to save money, put 15 percent of what you earn towards retirement, learn to cook at home so you don’t spend as much by eating out every single day, download Honey so you don’t miss out on any possible savings from your online purchases and make sure you live below your means so you can set aside a financial cushion for a rainy day.
You get the idea because you’ve heard this advice over and over and over again too. And as self-employed people without predictable or guaranteed incomes, it’s advice that we heed. Due to the nature of our work and how we make money, it’s even more important for us to save because we never know when a “dry month” is going to come along. And save we must — because if we don’t and things really hit the fan, we’d be in a bad place financially.
But here’s the thing: In modern society we can only reduce our expenses by so much. Yes, we can save money by cooking at home, but we still need a decent budget to buy healthy ingredients. We can buy out-of-season clothes and have tiny capsule wardrobes, but if you fall and tear a hole in your favorite (and only) pair of professional-looking jeans, you’ll need to invest in a new pair ASAP.
Saving is great, but in the long run it can only take us so far financially. As self-employers, we’re in control of the raises we get and how much we make from year-to-year, and consequently, so is the amount of money we have left to put towards our savings goals (though really, you should still download Honey.)
The Great Freelancer Savings Strategy: Earn More
Speaking from my own experience, I’ve made the biggest strides towards my financial goals not from cutting costs, but from focusing my energy towards earning more for my business. And being committed to it worked.
Before I quit In 2014, I earned about $3,000 from my traditional job, but then only made an additional $7,000 from my freelancing work for the rest of that year. Luckily, I had really low living expenses. But this obviously wasn’t sustainable for living long-term, let alone saving for anything — be it a vehicle, a home, or even a penny towards retirement.
I set my sights much higher for the next year, raising my prices to levels that I felt reflected a professional rate, and got busy networking and finding jobs. My baseline goal was $3,000 per month; however, I persevered and beat my goal, earning $38,000 in 2015.
I was thrilled. Beyond affording a much more comfortable life, I actually had retirement savings and could purchase a used vehicle with a 10 percent down payment. I was so thrilled with the saving power of earning more, that I decided I wanted more of it. If possible, I’d save even more and retire early.
I went through another round of raising my prices, and hired a business coach to improve my networking to attract better clients. I decided to increase my goal to $5,000 per month in income, and by the end of the year, my accountant estimated that I’d totaled $69,000 in income that year.
By the end, I’d not only saved so much for retirement that I had to open an SEP IRA in addition to my Roth IRA, but I also saved more than $8,000 towards a home purchase, and felt super empowered about the possibility of retiring early (if that’s something I wanted to do in the future).
Savings Strategy Follow-Through
This year, I fully expect to earn six-figures, or really close to it. Only four months have passed since writing this, and I’ve paid-off more than $7,000 in debt (not to mention saving loads in interest by paying-off my car loan 21 months in advance).
To say that I’m obsessed with earning more as a method of increasing my savings is an understatement. Yes, I still love to find everyday items that I need on sale, religiously cook at home instead of eating out, am super disciplined about not buying things that I don’t need and am living below my means. But the “raises” that I’ve gotten throughout the last three years have been far and beyond anything I could have ever hoped for from traditional employment — making this the most amazing savings strategy tip for freelancers that I can think of.
For more information on raising your prices and booking more clients, read my post on raising prices and booking retainer agreements.