Managing Finances While Freelancing
CALL it freelancing, casual or part-time employment, being free to fleet from one job to another does have its appeal. Time flexibility and the opportunity to expand one’s work experience or horizon are some of its main attractions besides being able to choose the lifestyle that one wants to lead.
However, it does come with some risks. One of the hazards of freelancing is that payment may not always be on-time unless one is recruited through a temp agency. Furthermore, work may not always be available, especially during recessions.
Chan Li Jin, 39, a freelance writer for the past nine years and also a former freelance tour guide from 1994 until 2000, says it is crucial to be financially organised and disciplined with spending. Interestingly, she says it was easier to manage finances as a freelancer than when she was working on a full-time job.
Chan is also a mother of four kids whose husband is a freelance tour guide.
‘When I worked full-time, even briefly, there was the tendency to spend on impulse simply because I knew there will be money coming in the form of the next monthly cheque. But since I started freelancing, I ask myself at least three times whether I really need something before buying it. Otherwise, it will sit there as a horrible reminder of how I’ve wasted hard-earned money,’ Chan says.
She says finances ‘were a bit tight in the initial years, but in retrospect, I think it was due to the fact that I was starting a family’. ‘That means having to be careful with the money when the kids were younger. Initially, I found it frustrating because whatever money my husband and I had, it always seemed to disappear,’ Chan recalls.
She says she started drawing up the numbers – the family’s fixed expenses every month and how much they could save. ‘In the early years, I relied on a simple principle. I’ll use my husband’s revenue to pay off all expenses every month while whatever I made went into a savings account for us to buy a house,’ Chan says.
She says as her revenue grew, enough was saved to pay off the house entirely. ‘The bank officer who processed the release papers for the total loan settlement told me I saved myself RM15,000 by paying off my loan and I’m now able to upgrade to a bigger and more comfortable house using the same principles, keep fixed expenses within control and save the rest for other goals,’ Chan says.
In case anyone wants to know, there were no problems getting house and car loans. Chan says the only problem was getting a credit card. ‘I only managed to get my first credit card in 2003 when I was full-time editor of a health magazine,’ she adds.
Ooi Ying Nee, 25, a freelance public relations consultant, copywriter and magazine designer for the past year says all that is needed for a loan is proof of income through invoices, receipts and stubs. As for credit cards, she got hers while working full-time for a weekly business publication.
Ooi agrees with Chan on managing expenses especially in the absence of a steady pay cheque. ‘I make sure my expenses don’t exceed my income and I try to save as much as I can,’ she says.
Fortunately, most of Ooi’s clients have been good paymasters. ‘They’ll pay within a month of the invoice issued, but there are some that take more than three months. And horror of horrors, some have taken more than six months!’ she says, adding that she has provisions for late payments.
On the subject of savings, Chan says she is heavily invested in insurance and unit trusts. ‘I keep a reasonably diverse portfolio and have three different agents to advise on different trusts,’ she adds.
Chan says insurance, especially for those with families, provides crucial protection in the event one is unable to work due to accidents or illness.
‘My kids are all covered with the same policy, as well as education, for their future needs. Although paying all those policies is financially taxing, they all form part of my forced savings for the future,’ she says.
Ooi, on the other hand, has not thought so far ahead but is in the beginning stages of investment planning. ‘My human capital is still one of the biggest contributions to my income and I will always invest in that.’
Chan says the advantage of being a freelancer is that it gives one the opportunity to plan one’s life. ‘You can choose to slow down a little or speed things up, as dictated by your life priorities,’ she says.
YourPartTime.com director Gerard Lim, who is a founder of an online service for part-timers, says the basic rule in life is ‘to work within the lifestyle you want’.
Chan agrees, saying that not everyone is cut out for the freelance life. ‘If you don’t have a compelling reason why you prefer not to work full-time, you’ll find yourself sending out job applications very soon,’ she says.
‘There are individuals who work part-time or freelance and make good money, especially if it’s skilled work like designing, programming, writing, professional or consulting services,’ Lim says.
He says most people who get a part-time job do it because of the extra income but most actually work part-time while waiting for a more permanent job. ‘However, there are also individuals who work part-time because of passion and not necessarily for the money,’ Lim says.
Chan says the most important factor for a good life in the golden years is to be debt-free. ‘As long as there are no more loans to service, I believe retirement can be quite comfortable if it means living a simple life but being the perpetual optimist I see myself writing well into my golden years!’
Source: Article by Fintan Ng from The Star, 16 May 2009