Written by Octavia Ramirez

Monday, February 4th, 2019

Budgeting can be a challenge for anyone, whether you have a regular, steady income from a 9-to-5 job, or a fluctuating, irregular income as a small business owner, contractor or freelancer.

Here's how I've learned how to budget and manage my income while working as a full-time freelance writer.

I Prioritize Tax Savings

Before spending anything, I make sure to set aside sales and income taxes on everything coming in. As a resident of Ontario, I set aside 13% of the Harmonized Sales Tax (HST). This is an expense that I include in the total of my service costs when billing or invoicing clients. When they pay it out, I immediately put that money away in a savings account until I remit it to the Government.

I also set aside at least 25% - 30% of my gross income from every project or invoice into that same savings account. I keep the money there until it's time to file my income taxes and pay what I owe.

My Emergency Fund Really Helps

For most freelancers or contractors, their income can fluctuate depending on the season or the clients they have. During times where I don't have as many projects or clients, my emergency fund is vital to making ends meet. This fund holds about three to six months' worth of of expenses, and I add to when I earn a higher income, have many ongoing projects, or see a windfall from a big account.

I Pay for Essentials First

When it comes to meeting financial obligations, I prioritize spending on essentials first. I do this by creating a list of all my expenses, and assign a priority value on the items that are most important to my survival.

In my lowest earning months, I first budget and set aside money for rent, public transportation costs, groceries, and utility bills. After that, I simply work down the list of priorities as more money comes in. For me, that means putting some money into general savings, investing, and spending on items for my home, clothing, travel, and other non-essentials.

I Save with a Percentage-Based Budget

As a freelancer, contractor, or temporary employee, you may not necessarily know how much money will be coming in every month, which makes it really difficult to commit to a fixed amount to set aside for savings or investments.

Using a percentage-based budget has helped ensure I'm putting something aside in those categories. That way, regardless of the amount I get paid, or how often, I'm always putting something away for my future.

Personally, I invest 10% of my net income into my RSP, 10% into a TFSA, and 5% into saving for travel or other non-essential items.

It's Always Important to Plan Ahead

When you're bouncing from project to project, it can be hard to predict how much you'll earn in the future. By doing your best to plan ahead and having a buffer with an emergency fund, it's possible to weather the tough times and save more during busier times.