Very Variable

As a freelancer, every month can feel like a new financial adventure. Your constantly changing income streams are definitely a big part of the story, but so are your various expenses. Let’s dive deep into where exactly all of that variable income is going.

1)    Think of your expenses in two categories: fixed and variable

Items like rent, loan payments, gym membership and even your Netflix subscription are fixed expenses, meaning every month you owe the same amount. On the other hand, items like utilities, groceries, and clothing are variable expenses, the amount you pay each month can fluctuate significantly.

2)    Scrutinize your fixed expenses

You’ll likely find that fixed expenses account for the majority of your monthly budget. But fixed doesn’t necessarily mean permanent. Because these expenses make up such a large portion of your budget, it makes sense to spend some time really thinking about the cost of each. Perhaps there are reoccurring expenses that you don’t even realizing you are still paying for. Maybe you’re not using that fancy gym membership they way you originally thought.

Many of your fixed expenses are also negotiable.  Credit card interest rates, phone bills, car insurance, and even your rent are all expenses that you can negotiate – sometimes all you need to do is ask the right way. When signing a lease, if financially possible, offer to pay several months up front in exchange for a lower monthly rate. As for your phone bill or car insurance, call the company to let them know that you’ve seen more competitive rates offered by other providers. Sometimes that is all they need to hear to knock your price down. Because these expenses recur each month that 10-minute phone call could you could easily save hundreds dollars in the long run.

3)    Limit your variable expenses

Putting a strict limit on certain variable expenses is a simple first step in building a robust budget. Start with a category or two and devise some rules. For instance, try separating your grocery expenses from your food expenses (eating out and delivery). Set a reasonable monthly limit for those two categories and stay diligent. At the end of each month adjust your limits until you find something that fits your lifestyle. When you find the right limit you’ve essentially transformed a variable expense into a fixed expense.