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10 Survival Money Rules for Freelancers

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‘How many of you think that they’ll finish their degree and get jobs as managers?’

This is the question I asked the fifty undergraduate students taking my class on enabling creativity and managing creative organisations.

Hands go up; about 80% of them.

My heart gives a lurch. Do these kids read anything more serious than gossip magazines?

‘Everyone who put their hand up’ – I say – ‘forget it! It’s not likely to happen.’

My students were in a mild shock.

This is exactly where I wanted them to be; because it is my duty to enable them to learn for the world that awaits them. And the world awaiting my students is very different from the one their parents inhabited.

When they graduate it is much more likely that they’ll join the ever increasing number of freelancers and contractors than that they’ll have ‘proper’ jobs because:

These developments show in the numbers.

Did you know that there are 1.4 million freelancers working across different sectors of the economy? This is approximately 4% of the estimated total labour force in the UK (and growing).

Did you know that in 2013, the number of businesses that hire freelancers on line increased by 46%?

Well, now you do.

Labour markets have changed considerably over the last three decades. These moved from:

  • life-time secure employment;
  • though regular job changes;
  • to predominantly freelancing and contracting .

Each of these changes comes with a change of money rules.

These are the 10 money rules of freelancers.

Rule #1: Get broad education/knowledge

In freelance labour markets people need flexibility and adaptability to survive and thrive. You also need to be able to offer creative solutions to the problems presented by potential employers.

Both creativity and flexibility blossom on profound knowledge of different, sometimes rather distant, areas.

For example, knowing how to write code is a wonderful skill but probably not sufficient one. You’ll be much better placed to get juicy freelance work if you also understand a bit of engineering, some physics and also know how to sell. Sell yourself and your ideas, I mean.

Rule #2: Become the best in a narrow field

You may think that this contradicts Rule #1. In fact, it complements it.

Having broad knowledge and understanding of several broad areas will allow you to become an awesome specialist in a narrower field very fast. Aim to be amongst the top five percent of people who are able to complete a specific task and you’ll never wonder where the next pay-cheque will come from.

You’ll need to re-invent yourself as one of the best in a narrower field often – the demand for skills and competencies is changing very, very fast at the moment.

Rule #3: Become an erudite

Erudite is someone who is exceptionally well read.

Yes, to be able to get the next gig – even to be able to create the next gig – you have to become an erudite. Make sure that you have read all that is worth reading in your field of specialisation and don’t forget to keep abreast with developments in the broader area; general knowledge is also important.

Rule #4: Know your next gig

When you have a job, you have to learn to do the same thing over and over again; eventually you learn to do it well.

By doing this your focus narrows down to the small part of the operation that you do.

As a freelancer you’ll have to change your perspective and keep your eye on the ball. Always looking for the next gig, always working out the next opportunity, always coveting the next hustle.

Remember that as a freelancer you are a hustler and…

…Hustlers never sleep, they nap!

Rule #5: Know your cash-flow and expenses

This is always important. It is important for our personal finances.

As a freelancer, you’ll need to balance your ‘work’ and your personal finances.

Keep work expenses low and cash flow high!

Rule #6: Budget like a pro

Budgeting is always important. Still when you have a job with benefits, various other perks and all, you can probably get away with a fairly random budgeting system.

As a freelancer you need to become a master of budgeting. You need to budget your work finances and your personal finances.

Failure to budget can be lethal for your wellbeing, your future and the wellbeing and future of your family.

(Just to remind you that failure to budget got us into all the debt we had to pay; and we paid it only because only my husband works freelance – I have a very ‘proper’ job.)

Rule #7: Take the long view

As a freelancer (contractor) you need to take the long view and start thinking about the large money items in your life well in advance.

One such money item is buying a house. As things stand at the moment in the UK, with the Mortgage Market Review in force since last April, it is close to impossible for freelancers and contractors to get a mortgage.

In this case, there are two ways to buy a house:

  • Save a very large deposit or pay outright; or
  • Use the services of specialist that understand the nature of freelancing and can help you identify the mortgage option and provider best suited to your needs.

Either way, you’ll need to plan the purchase of a house well in advance.

Another big ticket item is your retirement savings and investments. Again, planning well in advance can save you a lot of aggravation and uncertainty later in life.

Where retirement savings and investments are concerned this money rule means that you’ll have to start early, have a plan and stick to it through thick and thin.

Rule #8: Have a substantial holding account

When you are a freelancer you can’t live from pay-cheque to pay-cheque. Your income will be very uneven and unpredictable – when you get a bit job you’ll make a lot of money.

Then you may not get any work for some-time.

This is why it is very important to have a substantial holding account; I’d estimate this one at six months expenses.

And note that I’m not saying ‘emergency’ fund because this is not for emergencies; this one is to live on when you don’t have work on.

Rule #9: Build a credit history

Whether or not you have access to cheap borrowing depends on your credit history.

This is true irrespective of whether you are freelancing or not. It is that much more important if you are.

So make sure that you have an impeccable credit history.

Rule #10: Walk the tight tax rope

This is a tricky one and you’ll be the only one to be able to figure it out.

Here is the thing:

  • For tax purposes you need to optimise your business spending and minimise your profit
  • For borrowing, particularly if you are to be approved for a mortgage, you have to maximise your profit.

How you do this one is very case specific. I still think that nobody has gone very wrong by making a lot of money.


These are the 10 money rules for freelancers I believe can make your life much less stressful and more fun.

If you ask me which three money rules I believe are absolutely essential, I’d say ‘get education’, ‘know your next gig’ and ‘take the long view’.

What do you think? Have I missed any money rules for freelancers?

Please do share in the comments.

21 thoughts on “10 Survival Money Rules for Freelancers”

  1. These are really great tips! I’m a new freelancer and I’m making sure that I’m putting taxes away and always looking out for new gigs. I have found that being consistent and following up are key to getting return clients. Building good relationships is so important!

  2. Freelancing is the new entry level position today! If you do everything right in college by majoring in a high demand area, get an internship, and demonstrate your skills in the real world, you may have a chance at getting full time work. There is no guarantee, therefore freelancing is a good choice.

    • @Krant: Yep. I just had a former student who is job hunting tell me that she’s bee offered a job but it is very, very low pay for the level of her qualifications and experience. She also saw a freelance advertisement that would make her $30,000 in 12 weeks. (This is more than the yearly pay for the job). This about sums it up.

  3. It’s rather terrifying that students live in a bubble that represents a utopian post-university world where they get the job they want, and that too immediately. Lots of graduates spend months hunting for jobs and it’s always to good idea to keep the CV updated by doing bits of freelance work here and there. It’s very important to have a good amount of backup money to service the hard times when jobs aren’t popping up regularly, and budgeting is as vital a skill as any because you need to average out your entire year’s income and expenses, as opposed to monthly income and expenses.

  4. Even though the job market is pretty healthy, at least it’s quite strong in the Bay Area, it’s still hard to get a job. I’m looking myself right now, and am having a tough time being overqualified for some jobs, and not having enough niche expertise for others.

    You highlighted a lot of important realities and tips above. The job market is certainly evolving and employers are incredibly picky!

  5. Excellent tips. I think there’s a similar mental disconnect with a lot of pre-retirees. I talk to a surprising number of people who plan to contract/freelance/something in retirement yet haven’t put together a plan to accomplish it….

    • @Jean: You are raising a very important issue here. Data show that the people who are most affected by these processes (changes in the labour market) are young people (under 30) and people over 50. We really ought to have a plan rather than watching cr*p TV and waiting for the second inevitable event in life. Thing is, people over 50 will have to use a different strategy from the young people (the rules still hold).

  6. Great advice. I know when I was graduating college, I was expecting to land a six-figure job and be a millionaire by age 25. When that didn’t happen, I got depressed and ended up getting into a good amount of credit card debt. While it is great to be optimistic, I think we need to make sure kids know the reality of what lies out there. I am not saying we should tell them there is no point in getting an education, etc. But rather teach them that it takes hard work to get ahead and that is why so many aren’t. They aren’t willing to put in the hard work.

    • @Jon: Quite the reverse: I think young people will survive only by having education (no education means extermination, as was said in the Fox and the Hound, one of my favourite cartoons). Thing is, they need a different kind of education (and we all need to make the shift). The industrial age needed experts; the network economy needs mavericks.

  7. Great post! This will be very helpful and useful information about these 10 survival money rules for Freelancers. I learned and many great ideas here. I will definitely share this information to my friends Thanks for sharing this article.

  8. There is a lot of freelance work online and I think reinventing yourself, learning new things, taking a short course about something, will help you and keep you and your abilities and skills fresh and updated. Saving and starting your own online business is also something to forward to.

    • @Nik: Yes – I’ve been trying to get one of my sons to understand this one for a very long time. He is still looking for a job. At the end, it will trun out that I’m more suited to this life (being 52 and a university professor) than my sons :). Go figure!

  9. I have two successful businesses right now – blog advertising management and pet sitting. We also have a rental home and our friends rent a room in our home. My husband works with me online and is a sports official too. We survive on solely self-employment income. I will say that the keys have been to be good at what we do, have great communication and customer service skills, and to have multiple income streams. That way when the online business is slow, pet sitting or sports officiating can pick up the slack. Rental income fills in the remaining gaps.

  10. I feel like I’m lucky to have gotten permanent positions for all of the jobs that I’ve ever had. When I have looked for a job I see so many more contract positions and the idea of only having a job for 3-6 months seems kind of scary to me. I’m sure you have to have a different mindset in your spending if you know that your paycheck will run out at a certain point. I’m not sure if it’s a good thing or a bad thing that society seems to be moving more in this direction for a lot of jobs.

  11. I love your note about the difference between a holding account and an emergency account for freelancers. I’ve never actually seen someone else designate the difference between the two, but it’s very true!


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