Sarah Coles, Hargreaves Lansdown Senior Personal Finance Analyst and Podcast Host for Switch Your Money On, offers tips to freelancers in times of growing inflation.
BY SARAH COLES
At times of higher inflation, it’s really important to keep on top of your spending. By keeping up-to-date with expenses paperwork, you should have details of everything you spend relating to the business. It will also help you ensure you’re claiming for everything you can.
Keep a spending diary
It’s also important to keep track of personal spending. You’ll need past statements, a list of direct debits, and possibly to keep a spending diary for a few weeks. Then feed this into an online budget planner, and save it somewhere you can easily revisit it when your prices rise.
Balancing your budget, and keeping your business expenses and income in equilibrium means looking at everything you have coming in too, and part of this may well include raising your rates.
What will happen if freelancers don’t raise their rates?
It can be a leap of faith if your clients decide to look for someone cheaper, but if you don’t put your rates up, you’re effectively being paid less and less every time you do a piece of work for them. It’s not sustainable in the long run, so you’ll have to do this eventually. It’s far easier to do it gradually with inflation instead of bringing in a big rise further down the line.
How much savings should freelancers have set aside for emergencies?
Your savings should cover 3-6 months’ worth of essential expenses, and people who work for themselves often err on the side of caution at the higher end of this spectrum. As prices rise, your essential expenses will too. You should check back with your essentials budget every few months, and make sure that your savings are still enough to cover them. When your cash is already stretched, you might not be keen to add something else to the pile, but you’ll be grateful for it next time you’re hit with the unexpected.
Keep paying into your pension
Try not to stop paying into your pension. When you’re being pulled in every direction financially, it can be tempting to cut back on pension payments. However, if you think money is tight now, just think ahead to retirement and how difficult it will be to manage on a smaller pension. It’s worth prioritising pension payments within your budget wherever possible, so you will eventually be able to afford to retire.
In the most recent episode of Switch Your Money On, the topic of rising prices and taxes are discussed along with how they affect your pockets and investments. Sarah also discusses how you can build resilience to withstand the pressure of rising costs.