Empowering the Freelance Economy

Freelancers: How to get financially fit in 6 months

The rules of getting financially fit often mirror those of healthy physical fitness plans: gradual changes that have a lasting impact/ Photo credit: Photo by Heloisa Freitas via Pexels
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As a freelancer, you know the importance of hustle and flexibility. But when it comes to your finances, are you feeling fit and ready for the year ahead? We set out a 6-month plan to help build your wealth and downgrade your debt

New research from Coventry Building Society reveals a sobering truth: over a third of UK adults – that’s 18 million people – don’t feel financially secure. This feeling is especially prevalent among Generation X, the “squeezed middle” born between 1965 and 1980.

The irony? While 72% of Brits feel physically fit, financial fitness seems to be lagging behind. The cost of living crisis has increased the cost of essential products three-fold, which can make many of us believe we can’t afford to save or even start to bring down our debt in a meaningful way. That’s why it could pay to have a deeper sense of hope and motivation – a different way to look at our debt and how we live with it.

3 motivators for freelancers to save and decrease debt in 2024

1. Freedom and Security

  • Financial stability and increased autonomy. Freelancers value freedom and control over their schedules. Reducing debt and building savings can lead to financial independence, allowing you to work on projects you truly enjoy and avoid taking on gigs solely for the one-off paid invoice (that you hope gets paid on time).
  • Peace of mind that comes with having a financial buffer. Freelancing can be unpredictable, with income fluctuating based on project availability and client payments. Having emergency savings or a safety net can reduce stress and anxiety, creating a sense of security and allowing you to focus on work with greater confidence.

2. Growth and Investment

  • Frame saving and debt reduction as a means to invest in career growth. Freelancers should view responsible financial habits as a way to unlock opportunities for professional development. Saved funds can be used for further education, acquiring new skills, or building a better marketing strategy, all of which can lead to higher-paying clients and project opportunities.
  • Debt reduction should be seen as a way to free up resources for future ambitions. By paying off debt, freelancers can allocate more income towards pursuing personal goals, like starting another side business or revenue stream, taking a dream vacation (where you could also try out being a digital nomad), or making a significant investment in equipment or software that enhances your work.
  • Retirement readiness: Starting early with saving and planning ensures a comfortable future, even without a traditional employer pension.

3. Community and Support

How to jumpstart a financial fitness plan

So, how can you get your finances in shape? Coventry Building Society suggests a gradual approach, incorporating healthy money habits into your daily or weekly routine. While we may have heard of the following suggestions before, many of us can be guilty of letting some of these tips slide, especially when we get overwhelmed with work or life “stuff”. But that’s why further in this report, we give more concrete steps to take to build wealth and decrease debt.

  • Budgeting: Track your income and expenses to understand where your money goes. Tools like apps or spreadsheets can help. If you have bought mobile apps, streaming or video game subscriptions cull the ones you do not use daily. See how much you miss it and decide later if you want to re-subscribe. You may find you could get a better deal later down the line.
  • Saving: Start small, even if it’s just a few pounds a week. Consistency is key.
  • Smart spending: Compare deals before buying, prioritise needs over wants, and avoid impulse purchases. Many of us would have spent on impulse over the holidays not just for ourselves but others. If you know you have birthdays coming up, then shop the post-Christmas holiday sales before new stock comes in and have your gifts sorted and at a discount. You can always do the same with seasonal sale shopping throughout the year. Consider apps like Coupert which finds coupons for you when purchasing online and builds up cash credits with certain retailers after you make a purchase. Use the savings towards your business or paying off debt.
  • Debt management: Clear existing debts or create a plan to do so. High-interest debt can drag you down financially.
  • Seek help: Don’t be afraid to seek financial advice from professionals. They can tailor a plan to your specific situation.

Conqueror debt and build wealth in 6 months

Feeling swamped by debt and yearning for financial security? Just like building physical fitness, it takes time and effort. But the rewards – peace of mind, resilience, and the freedom to pursue your dreams – are well worth it. Within just six months, if you take a dedicated and strategic approach you can dramatically shift your financial landscape.

Here’s a research-backed roadmap to conquer debt and jumpstart your wealth. Seriously carry out each step so you can start to see results sooner.

Phase 1: Debt Demolition (Months 1-3)

1. Knowledge is Power:

  • Track your debt: List every debt, including balances, interest rates, and minimum payments. Use budgeting apps or spreadsheets for visualisation, suggests the National Endowment for Financial Education.
  • Prioritise your attack: Choose a debt repayment strategy. Tackle high-interest debt first (“avalanche method”) saves the most money, while the snowball method (smallest debts first) can boost motivation, suggests NerdWallet.

2. Cut Spending, Boost Income:

  • Audit your budget: Track expenses for a month, categorise them and identify non-essentials. Consider using the 50/30/20 rule: 50% needs, 30% wants, 20% savings and debt repayment, according to Investopedia.
  • Trim the fat: Cut unnecessary subscriptions, dining out, impulse purchases, and negotiate bills. Research cheaper alternatives for essentials like internet or phone plans.
  • Boost your income: Look for freelance gigs, a side hustle, or upskilling for a raise. Even raising your rate by £30 can make a quick difference. Every extra pound in your pocket counts. 

3. Debt Payoff Strategies:

  • Increase payments: Strive for more than minimum payments. Calculate debt payoff calculators to understand how much extra can significantly shorten the timeline.
  • Make bi-weekly payments: Divide monthly payments in half and pay every two weeks. This increases the frequency and reduces the overall interest paid, says The Motley Fool.
  • Explore debt consolidation: If eligible, consider consolidating high-interest debts into a personal loan with a lower rate, simplifying repayment and potentially saving money.

Phase 2: Wealth Building (Months 4-6)

1. Build an Emergency Fund:

  • In the cost of living crisis, this may seem an impossible goal, but start little and work your way up. Putting it off will only make you less secure emotionally and financially. If you can sacrifice one thing and put the savings into an account, that is more than you did the day before. It counts for something. Aim for 3-6 months of living expenses. Prioritise this over investments until you have a safety net.

2. Start Investing:

  • If you haven’t already open a retirement account with a SIPP provider or with your umbrella company employer and seek employer and government matching. Make sure your umbrella company employer is delivering what they promise and ask for updated statements on your pension plan with them and others you may have worked through in the past so you have a clearer picture of your retirement savings.
  • Consider investing in low-cost index funds for long-term wealth building. Start small and increase contributions as income allows, suggests Vanguard.

3. Automate & Track Progress:

  • Set up automatic transfers to savings and investment accounts to avoid temptation.
  • Regularly track your progress and celebrate milestones. Staying motivated keeps you on track.

Other things you should consider:

  • Seek financial counselling for personalised guidance.
  • Educate yourself on personal finance through books, podcasts, and online resources.
  • Remember, consistency is key. Small, sustained changes have a powerful long-term impact.
  • Consider how you could use your existing skills to create new revenue streams such as freelancer turned author Sarah Townsend did with her book Survival Skills for Freelancers.

Next steps

Transforming your finances in six months takes commitment and action. This roadmap provides a framework, but remember, tailor it to your unique circumstances. By putting debt reduction first, building an emergency fund, and starting early with investments, you’ll be well on your way to financial freedom. Celebrate progress responsibly, stay motivated, and watch your financial (and emotional) security start to grow.

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