Many youngsters are taking up freelancing to enjoy financial freedom. Financial freedom is living life on your own terms. It’s having the money to do what you want. Few Indians have the privilege to enjoy financial freedom.
While freelancing gives you an opportunity to pursue your dreams and passion, it comes with its share of risks. In the initial years, projects are tough to come by. You could face challenges while meeting financial commitments. In the absence of regular pay, managing a family can get tough.
Many freelancers put managing day to day expenses first, and savings and investments on the backburner. This could have disastrous consequences and you would be forced to depend on loans to meet financial commitments. A financial emergency like emergency hospitalization for a family member could be a financial disaster. Let’s have a few tips for freelancers to achieve financial freedom.
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Many freelancers have no regular income. They could earn high income in some months and low income in other months. This makes financial planning all the more important for freelancers vis-a-vis the salaried.
Freelancers must invest at least 10% of their earnings to achieve financial goals. It could be more than this, for bigger financial goals. It’s vital that you make saving and investing a habit. You enjoy the power of compounding which is return on return. This helps you enjoy financial freedom.
See Also: Why Women Need to do Financial Planning?
If you are willing to accept risk in investments, try equity mutual funds. This is high return, but at high risk. Freelancers don’t have the time and maybe the knowledge and expertise to invest in shares.
A mutual fund is managed by a fund manager which means you don’t need to dedicate time and effort towards managing it. So freelancers, get mutual funds in your investment portfolio.
Select mutual fund schemes which match financial goals. Financial goals could be buying a car, children’s education and marriage and a good retirement. Consider risk and return, and the impact of tax and inflation on your returns.
Freelancers may opt for fixed deposits, ELSS, PPF or even RDs to achieve financial goals. Seek the help of a financial advisor if you find managing finances difficult.
See Also: What Does A Financial Advisor Do?
Freelancers could opt for savings accounts where if the amount is above a specific limit, excess money gets automatically transferred to an FD which offers higher interest. Freelancers must select a bank which offers the sweep-in facility.
Let’s assume that the threshold limit in your savings bank account is Rs 20,000. You have Rs 70,000 in this account. The amount above the threshold limit of Rs 20,000 gets automatically converted into a fixed deposit.
The way the sweep-in FD works depends on the bank. Check terms and conditions before opting for this facility.
Always take life insurance for risk protection and never as an investment or saving. This is why term life insurance is ideal for risk cover. Premiums are low as they don’t offer survival benefits. You are covered across the term of the plan. On death within the term of the plan, nominees get the sum assured or death benefit. Your family can easily manage day to day expenses on an untimely demise. Children get a good education and there’s money for marriage expenses.
A freelancer must have a health insurance plan. This protects against emergency hospitalization and reduces out-of-pocket expenses. Your savings and investments are safe.
The freelancing journey is full of roadblocks. Many clients don’t make timely payments or could even withdraw midway from a project.
Avoid these uncertainties by using a contract before signing up for work. A contract could offer stability and job guarantee.
Get a written contract before going for freelance work. This could be challenging, but things could soon fall in place.
Get registered with organizations and government bodies to bag more projects. You can also get registered with GST and get the MSME certificate.
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Yes, being a freelancer is not easy. But, these financial tips go a long way in bringing financial freedom.
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