Several years ago, I got tired of the feast or famine cycle and not being able to predict my income from month-to-month. I couldn’t create a budget, couldn’t plan for retirement or large purchases, and I found myself spending money I shouldn’t be spending when money was rolling in.
This need for a consistent, predictable income is something that I missed from my prior employments and something I desperately wanted back in my freelancing life. Plus, I wanted to leave my emergency fund alone, keeping it funded but not having to dip into it just to pay my bills.
[author_more]
It was then that I decided to pay myself a flat amount each and every month, just as employers do for employees. This allowed me to get paid a flat, predictable amount every month and help iron out the financial woes and stress from the freelancing feast or famine cycle. It also allowed me to save for things such as major purchases, taxes, and keeping a solid emergency fund.
If you’ve been a freelancer for any length of time, or are hoping to become a freelancer soon, you are probably well aware of the feast or famine cycle that comes with this lifestyle. Some months you will have a lot of income rolling in, while others you are barely making enough to cover the bills (or even less).
Freelancers are often told that they (and everybody, really) should have an emergency fund that can cover expenses for six months set up for when emergency strikes. If some crisis hits you or your family and you’re unable to meet your financial obligations, you have some money set aside to take care of the situation.
These emergency funds come in handy when you lose a job or client, or experience a health crisis, natural disaster, fire or damage to your home, or a car wreck, among other things.
Freelancers should keep an emergency fund for these events, and continuously keep that fund topped up at a pre-determined amount. How much money you allocate depends on your family size, your level of insurance (health, life, home, and business), how strong your savings account is, and how regularly you experience emergencies — not always a predictable factor, but you’ll have some insight based on your circumstances, such as the age and state of your car.
With all of this time and effort put into saving for a disaster or crisis, freelancers shouldn’t depend on their emergency fund to help pay everyday expenses when they find themselves in a shortfall month. Emergency funds are for emergencies, and a cyclical pattern such as feast or famine doesn’t and shouldn’t constitute an emergency.
For freelancers, the system I describe below works well for those who find themselves constantly dipping into their savings or emergency funds just to pay ordinary bills when they’ve had a bad month or two. While you should still be working to find new clients, continually marketing yourself, and always managing your cash flow, sometimes it just isn’t enough and you need extra help.
The way to do this is to create what I like to call a “backup paycheck fund.” For me, this fund ensures that I can pay myself a flat rate every month on which my budget can depend. During good months, income that exceeds the flat rate is set aside, and during bad months that stockpile tops up the flat rate.
To get started, determine the amount you should pay yourself every month that will keep you living comfortably. This will take some math and require tweaks here and there, but since you’re your own boss, it’s important to determine how much you will be paid monthly.
Start by calculating your personal bills and expenses (whether they are annual, monthly or weekly or strike on some other schedule), how much you want to put into your savings, and any other financial requirements you need to keep in mind. Add it all together for a year (or six months then multiply by two), then divide by 12 to get your average monthly expenses.
Another way is to find out exactly how much you took from the business to pay your personal bills over the last six months, multiply that number by two (to get an estimate for the year), and then divide by 12 to find out how much on average you needed to pay your bills per month.
I recommend trying both of those methods to see how close those numbers are. It’s likely that the money you took out of your business is higher than the amount you paid in expenses. You can ensure that you don’t have a leash around your neck nor make too much money available to yourself to spend by taking those two numbers and calculating the average to arrive at your paycheck amount. This should serve as a great starting point.
Once you have that number, make sure your income can support it. Take your income for the past six months, multiply that by two (to get an estimate for a year), then divide by 12 to get your average monthly income. Is the number you came up with for your paycheck more or less than the average monthly income you currently receive?
If your paycheck amount is more than your average monthly income, then you need to look into either finding more clients to earn more income, or reducing your personal expenses (or a combination of both).
If your average monthly income is more than your paycheck amount, will you still have enough left over from your income to pay your business expenses, put money aside for emergencies, and pay your taxes? If not, then you should look into cutting expenses and/or increasing your revenue.
It takes some math, some time to take stock of your financial situation and its trends, and practical testing to make sure that you can pay yourself the same amount every month and still meet all of your personal and business financial responsibilities. You’ll likely have to adjust this number as you get familiar with this system, but don’t use this as an excuse to dig into your stockpiled cash.
Continue reading %The Backup Paycheck Fund: How to Beat the Freelance Feast or Famine Cycle%
Rails 5, a new major release of the popular web framework, is coming soon and, of course, we are looking forward to it. Refer to this article if you want to read on overview of some new features that will be introduced. Today, however, we are going to dig into some technical details, discuss which methods were removed or deprecated, which settings have been changed, and how to migrate your existing Rails 4 application to version 5.
Don't forget that after the release of Rails 5, all bug fixes will only be introduced for Rails 5.0.x, whereas regular security fixes will be applied to Rails 4.2.x, as stated in the official maintenance policy.
The source code for this app is available at GitHub.
Continue reading %Onwards to Rails 5: Additions, Changes, and Deprecations%
Some of the best game development courses out there…all in one place? That doesn’t come around often. Paying what you want for all 10 of them, valued at $1,601 total? Even rarer. Don’t miss your chance to pay what you want for the Hardcore Game Dev Bundle at SitePoint Shop.
Whether you’re a total beginner or have some experience in game development already, you’re bound to pick up some new skills. Learn your way around Swift, C#, Unity, HTML5, Corona SDK, JavaScript, and more—all as you get hands-on experience build games from scratch. You’ll create menus, write scripts to track scores, add animations and music, create in-app purchases, source free game art, and plenty of other skills that’ll serve you well long pas this course bundle. There’s even advice for running your own indie game dev studio.
Told you this was a can’t-miss deal. Pay what you want for the Hardcore Game Dev Bundle at SitePoint Shop.
Continue reading %Pay What You Want for 10 Game Development Courses%
Marginotes takes your jQuery selection and adds notes to the margin with the text provided in HTML attributes.
