Budget on the floor, not the average
Fit your fixed costs inside your floor: what you earned in the weaker months of the last year. Rent, insurance and the subscriptions you can’t pause belong there; an average hides the months that hurt.
Everything above the floor is a good month. It pays for the things you can postpone and fills your reserves.
Sort your income by certainty
Not all expected money is equal. Give each income one of three labels:
| Certainty | Examples | Counts |
|---|---|---|
| Certain | Signed retainer, subscriptions already renewing, a payout already on its way | In full |
| Half | A regular client without a contract, steady platform work that isn’t booked yet | Half |
| Uncertain | Proposals, a launch, a client who “will probably come back” | Nothing |
Plan only with what counts. When uncertain money arrives it simply lands in your balance. The safe to spend calculator does this month by month.
Pay yourself a salary
Let every payment land in one account, and once a month move the same amount to the account you spend from. Irregular income becomes regular on the way to you.
One account for income
Clients, platforms and subscribers all pay into it. Tax money is set aside from here as soon as a payment lands.
A fixed monthly transfer
Size it on your floor: what you could have paid yourself even in a weak month.
A buffer in between
Good months grow the balance of the income account; lean months use it. When the buffer is large, raise the salary.
An emergency fund of 6 to 12 months
Six to twelve months of expenses is the usual advice for the self-employed, not the three to six suggested to employees. Freelancers carry risks employees don’t: gaps between clients, late payments, platforms that change their rules, no sick pay.
- Closer to six if you have several steady clients and low fixed costs.
- Closer to twelve if one client is most of your income, your work is seasonal, or you live in a country where you have little public cover.
Keep it apart from the money you spend, and don’t count it as spendable. Freeboard sets it at six months of expenses unless you write an amount.
Set tax aside from every payment
Move a share of every payment out of reach the day it lands. Ask your accountant for the share that fits your country and your regime; until you know, a cautious figure is better than none.
Watch the calendar too. In several European countries the self-employed pay advances on the current year on top of the balance for the last one, so the second year often costs more than the first. In Italy, for example, the tax due in June and November can almost double in the second year: the Italian guide explains why, with a calculator.
This guide is not tax advice.
Several currencies, one base
Choose the currency you live in and convert everything else to it at a reference rate. Plan with what lands in your account, after fees and conversion, not with the invoice. The multi-currency budget guide has a worked example in dollars, pounds and euros and a free spreadsheet.
Platform money: count the payout, not the invoice
Upwork, Fiverr and Stripe each take a fee, hold the money for a while and convert it on the way. A 1,000 dollar job is never 1,000 dollars in your account, and never on the day you finish it. See how to track Upwork, Fiverr and Stripe payouts in euros.
Look twelve months ahead
Put the big one-off expenses in their month, then look for the lowest point of the year: tax advances, annual subscriptions, insurance, a flight home, a new laptop. They break budgets far more often than the monthly ones.
That lowest point, minus your emergency fund, is what you can spend today. If it is below zero, you know now, not in the month it happens.
A spreadsheet or an app
A spreadsheet works, and costs nothing: start from the free template. It needs you to type in every transaction and to keep the rates up to date.
Apps differ in what they start from. YNAB budgets the money you already have; PocketSmith projects your account balances far into the future; Lunch Money keeps a budget in many currencies. Freeboard starts from one number: what you can spend today without going below zero in the next twelve months. See the honest comparisons.
Questions
How many months of emergency fund does a freelancer need?
Between six and twelve months of expenses is the usual advice for the self-employed, more than the three to six often suggested to employees. Aim for the top of the range if one client is most of your income or your work is seasonal.
How much should I pay myself each month?
A fixed amount you could have paid yourself even in your weaker months of the past year, after setting tax aside. Good months top up the buffer; lean months draw on it.
Should I budget money I haven’t received yet?
Only what you can rely on: certain income in full, half-certain income at half, uncertain income not at all. The rest becomes real when it lands.
- Safe to spend calculatorThe whole method in one number, in your browser.
- Multi-currency budget templateA free spreadsheet in dollars, pounds and euros.
- Upwork, Fiverr and Stripe payoutsFees, timing and conversion.
- Freeboard comparedYNAB, PocketSmith and Lunch Money.