One of the greatest myths (and lies) of society is this:

The more you earn, the richer you will be.

My answer?

NONSENSE

It honestly doesn’t matter how much you earn… You might be earning a six-figure income and still be broke.

One thing I personally didn’t enjoy about school is the fact that the education system does not prepare you for ‘real-life finance management’. That’s a broad statement, I know, and maybe it’s not true for you, but this is a very important topic to discuss.

I will mention 3 examples of people I know/knew very well:

Someone who retired with well over $1,500,000 and spent it all within 7 years and now literally has to borrow money for food every month.
Someone who earns a big salary (well over $20k per month) and is so deep in monthly debt he can’t afford to pay the essential expenses.
Someone who literally has a blank pay-check every month and lives a very humble life.

What is one common denominator in these 3 examples?

HOW THEY HANDLE THEIR FINANCES…

I’m no financial expert by any means, but I will give you the best financial advice out there (for free):

MAKE SURE YOU MANAGE YOUR FINANCES, DON’T LET IT MANAGE YOU.

A lot of people complain about their financial challenges but if you see how they spend their money (when they have it) you will see why they are so prone to struggling in the ‘financial valleys’.

A freelancer’s income is generally more unpredictable than he/she would like it to be, but there are many ways one can enjoy even these phases…the solution lies in ‘smart spending’!

I often hear of people who struggle to afford the basics each month. What is amazing is in almost every one of those instances you will see that they have the top of the range iPhone or some other expense which would be considered a luxury or something one can do without.

I’m sorry if this offends you, and I’m not expecting everyone to agree with me, but if you have cable, go out for dinners, have the latest tech gadgets and you are in credit card debt or struggling more than you would like to then you seriously have some financial issues that you need to look into.

Another MAJOR issue is that many people want to keep up with their peers. A lot of financial mismanagement is psychological, and in many cases, it boils down to insecurities.

If you find yourself in a similar predicament and you are desiring and willing to change, then I would suggest it is much better either to cut some things out completely or to find cheaper alternatives.

For instance; cable can be replaced with Netflix or YouTube, eating out regularly can be replaced with cooking easy meals, all the branded shopping and latest gadgets can be replaced with the simple (still effective) things.

I do not mean all these things are bad and you must not ever do it… What I am saying is do it when you can and when circumstances improve.

On a practical note, this is what you need to keep in mind for when you get paid and when you start earning a good income:

PAY THE BILLS
pay-bills
Very simple, but make sure you know the exact ‘break-even point’ on what you need to cover all your necessary expenses like rent/mortgage, food, medical, car, etc. and also the additional services like hosting, email marketing, productivity apps, internet, etc.

Added tip I learned from a wise man:

Take your annual expenses like domain renewals, banking fees, accounting fees, vehicle fees, birthday gifts, home repairs, etc. and divide it by 12 months and add it to your monthly expenses so you are well prepared for the annual fees.

After speaking to a quite a few people, I find that most don’t budget for annual expenses which often leads to costly surprises, but if handled and planned correctly, it will be much better on monthly budgeting.

SAVE FOR REPAIRS AND UPGRADES

Make sure you save for laptop/PC repairs, new upgrades in software, new laptops/PC’s, new hard drives, new tools, new apps, etc.

EDUCATION
education
Why’s this here?

Because you need to keep learning. It doesn’t matter if you are a grandmaster at programming, you need to keep learning. Save for online/offline education and invest in yourself.

NETWORKING
networking
Pay for conferences and social events to meet businesses and make connections. This is important to do and often neglected when things are going well.

If you are an introvert like I am, this part will be quite challenging for you. It’s important to keep interacting with others – especially at networking events.

You can go to developer networking events – which you should, but what is often overlooked is going to networking events for business owners and small businesses. After all, you would like to go to get new business – that’s the whole point of networking (without the fluff).

So who is your client? A developer or business? Of course the business, so make sure you are approachable and you interact and talk to those involved in business. Don’t go thinking you may get clients at every event, but eventually you may click with someone and then you never know what it can lead to.

TREAT YOURSELF
pay-bills
Take a break and go for a weekend away or aim for frequent mini-holidays throughout the year. I struggle with this because I am very goal and project orientated, but I am working on it too since it is really important.

So let me be hypocritical here and say you need to save for these times away to travel and take your family with you. Life should be full of memories to cherish, not full of memories behind a laptop screen. Otherwise, what’s the point of working so hard? 🙂

SAVE FOR RAINY DAYS
save-for-rainy-days
Did I mention, saving for emergencies? Because it is extremely essential.

What would happen if you had to go into hospital for 3 months? What would happen if you lost your 2 big monthly clients?

Try save as much as you can. By this I mean cash in the bank… don’t think that because you are earning a lot you can upgrade your lifestyle – refer to my 3 examples above to illustrate this point.

From a personal perspective, I actually didn’t handle my finances well a few years ago. I used to be really reckless and I wanted a fancy sports car and all the rest of it. A lot has happened within the last 4 years (mentally, emotionally, spiritually) which has influenced me and now I drive a modest car and live in a very humble home and that is by choice.

I’d like to end off on this:

Make sure you manage your finances, don’t let it manage you.

Don’t neglect what is truly important in life. All that is tangible will perish. Live your life with that in mind.

Please let me know if you need any help with the above, I’m here to help.

HOW TO SPEND YOUR MONEY AS A FREELANCER

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