The Free Creatives

May 16, 2010 in Finances, How To, Lifestyle by Crystal

Having a bit of debt as a freelancer can be troubling, stuck in a career where we never get a set paycheck. It can be difficult to plan ahead to beat the debt, and work your way out. With such an unpredictable lifestyle, how can one create a plan that will solve their financial problems forever?

In this post, we’ll talk about how to tackle debt while still maintaining a fulfilling freelance business. Keep in mind that this post will not help those in serious debt, but instead those that would be able to solve their debt problems with a few extra hundred a month. However, the tips and guidelines in this post can really apply to everyone, whether the money-building tips are meant to climbing out of debt, or just saving more income.

Keep in mind everyone must deal with their debt situation in their own way, because each situation is individual. However, here are some key actions I had to take at one point, and anyone can use them as guides:

1. Cancel those Credit Cards

If you have credit card debt, you’re only digging deeper into debt if you keep using them. At one point, I was one of those people that were literally living off my credit card — paying rent, buying food, etc. It wasn’t like I was going on $500 shopping sprees every month; I was using my credit card on the necessities.

So, I thought that canceling (or at least not using) my credit card was not an option for me.

Well, I was wrong. I was still getting enough income; I just had a poor view of where it was all going. Credit card interest anyone? Overdraft fees? Other bank fees? When I hit just over $2,000 in credit card debt (not much debt in retrospect), I was already paying about $50 a month in interest, and $30-$50 in overdraft fees or miscellaneous charges.

My bad habit: using my credit card first, then ‘paying it back’ once I actually had the money in the bank.
The problem: by the time I had the real money in my account, I had already increased my interest charges, paid them, and possibly some other fees.
The final fix: Stopped using my credit card, cold-turkey. I had to use it a few times (perhaps while I was only still trying to break the habit), but eventually I learned to only spend money that I actually had in hand.

Never pay for things with a credit card, even if you think you’ll have the money in a week or two. Many times when I did this, payments would not be sent in time, or I wouldn’t even make enough. A nice trick would be to cash all income that you make, and use the envelope system.

2. Eliminate Business Expenses

It is possible to maintain a freelance business for free. Anyone can expand their business with paid web hosting, their own domain name, premium services, and fun tools, but it’s never needed.

I always recommend spending a bit on your business, because to make money you have to spend money. However, if you’re in a desperate situation of needing more money, investing in your business can wait. Use free tools and services to manage and market your business. By doing so, you will only be making an income and not spending any, on your business anyway.

Below are some free alternatives to what you may already be spending too much on:

Free Internet:

Use the library, cafes, or other wi-fi. Of course, the availability of free Internet can depend on your location, the size of your city, and your location with in that city/town. It can also depend on if there are others in your home that depend on Internet.

When I was starting out, though, living on my own, I could have saved $50/mo. by just canceling my Internet and heading on over to our local campus library for a year. Sure, it would have been more inconvenient, but with a monthly savings of $50 and an excuse to get out of the apartment, it really wouldn’t have been that bad. Many freelancers love working outside their home anyway, whether it is in a cafe, library, or a park. If you can save an Internet bill while doing so, then why not?

Free Invoicing/Timetracking Tools

There are plenty of invoicing, time tracking, and project management tools around that are completely free of charge. While there are more features to paid subscriptions, any freelancer for a time being can get along just fine with free alternatives. Once you get more clients, then you can change directions or upgrade a subscription to suit your needs. (In which case, more clients = more money anyway!)

There are many options, but I personally use Freshbooks’ free plan, which I plan to upgrade eventually.

Free Portfolio

One can use free web hosting and a sub-domain to host their portfolio, but even I have to admit that looks unprofessional. If going in that direction, at least buy a domain name and link it to free web hosting. However, websites like Carbonmade and the Krop Creative Database are great places to create your online portfolio for free. As a bonus, they’re easy to set up and you already have a bunch of traffic able to find you.

This is one thing I never gave up when I was reaching out of debt because 1) my debt wasn’t so terrible that I couldn’t spend $70/yr on a domain name and hosting and 2) I depend way too much on having my own server to test out things like WordPress themes and other development projects. However, depending on what you do exactly and how you need to present yourself, a free portfolio can still be a great option. It all just depends on your own business needs.

Free Supplies

To get free supplies, just don’t use them! When I started out I bought a brand new printer, a ton of folders/binders and pens/pencils. I never used most of it. Being a freelance web designer, many of my files are online. Long ago my ink ran out of my printer, and I have yet to refill it because I just don’t use it enough. I’ll go to a copy place and print something off for 10 cents instead.

By storing everything digitally, you can save a ton of miscellaneous expenses on office supplies and equipment. Use something like Dropbox to store everything on a server (for syncing or just for security), and everything else just on your hard drive.

3. Cut Out Personal Non-Essential Expenses

Everyone knows freelancers need to live frugally, because you never know when that famine cycle is going to hit. So it is likely that you’ve already cut out a lot, right?

Well, could you eliminate more from your expenses? Below are some ideas for things to cut out, that you may want to give a try:

Cable

Another $50 a month, just like the Internet bill likely. I’m not big on watching TV, but when I decided to go cable-less, I wasn’t sure if I could do it. Well, I did, and I was weirdly zen about it. So yes, it is possible to live without TV! It’s amazing how much extra time I found I had as well, and I soon started picking up new (and of course healthier) hobbies. I also found I had a lot more energy, as watching TV can be a huge mental and energy drain.

Again, this may depend on others in the household and their dependence on precious cable TV. However, if just you, I suggest trying it out. If there is ever a need to watch a favorite show, there are many online TV websites now, for free. Plus, when I did this for a year I got plenty of TV time at friend’s places or otherwise — and it was still nice not having TV every night, as it broke that bad habit.

Eating Out and Fast Food

Cut out fast food and eating out for one month, and save at least $100 a month. I never knew how much I spent on stuff like that until I decided to absolutely refuse to spend money on it. We all know it costs more to eat out, but I don’t think many of us realize how much more it costs.

Just try it for one month to see how much of a difference it makes. You’ll probably also feel a lot healthier too!

New Clothes, Jewelry, Products

Are there alternatives you can give up on? Do you need a new outfit every month? Probably not. (And yes, I’m a girl, so I LOVE buying a new outfit every now and then.) If you’re trying to work out of debt fast, then what’s more important: getting out of that debt or looking ‘new’ every few weeks?

Bring life into old things, you may find you already have what you want.

Alcohol and Cigarettes

Quit smoking and cut back on drinking. Stop going to the bars (or at least stop buying drinks at bars.) All of these items are overpriced and unneeded. Feel free to get loose every once in awhile, but don’t make these expensive habits a part of your lifestyle. If they already are, change yourself.

4. Consolidate & Plan

Consolidate loans, bills, and other debts into one low-interest payment. By organizing your debts, you can save on interest charges and know exactly how much you owe. You’ll also have a better outlook on how to reach your goals for beating the debt.

After consolidating your debt, create a plan for how to get out. Create a budget for yourself for how much you need to spend, how much you can spend on recreation, and how much you must give back to your debts. Grow your self-discipline muscle and stick to the plan, no matter what.

5. Make More Money as a Freelancer

Back to our specific situation: freelancing. As a freelancer it can be difficult to get the money you need to pay off debts in the first place. It can at least be difficult to get this kind of money consistently.

Cutting out expenses is only half the battle. You must also earn more income to beat the debt and have a steadier lifestyle. So how can one do that?

Get More Clients

If you find you have too much free time, then you need more clients. Rethink your marketing strategy and apply to more jobs every day. Also consider advertising your services locally, as these types of freelance jobs can be easier to win over. If you must, also re-do your brand and better its consistency.

Get a Part-time Job

If you’re having a difficult time keeping up and are only able to take on enough clients so that you’re a part-time freelancer anyway, fill up the rest of your time with a part-time job. Remember, it’s only temporary, and don’t feel as if you’re the only freelancer to go running back to a part-time solution! For more consideration on this, check out our post, “Should You Run Back to a Part-time Job?”

Charge More

Are you already working hard and not seeing results? Raise your rates. You may be charging to little. To charge more, always be expanding your skill set and improving so you can stand up to your rates fairly.

Create Alternative Incomes

There are other things you may be able to do to bring in more dough. Check out our post, “10 Ways to Make More Money as a Creative Person,” to discover other viable options.

Conclusion

Beating debt in such an uncertain world and an uncertain career can be challenging. Believe me, though, it can be done. As a few precautions:

• Never start a freelancer career while you are already in any kind of debt. You will lose money the first few months as you’re organizing your business and still trying to find a steady client base. This will only dig you deeper into debt.
• Don’t expect to change your spending habits overnight, or be debt-free in a month. It does take time. Just make sure you’re consistently on the right path (decreasing your debt) and you’ll be fine.

Hopefully this guide can be helpful to specifically freelancers. This has just been based off of my own experience, and a bit of research on top. However, if you’ve ever been in a similar situation, please share with us how you dug your way out, or share any current troubles you are having while still in debt. We’d love to hear alternate stories and solutions!