One of the biggest challenges of becoming a solopreneur is sacrificing that steady paycheck. It can be tricky to anticipate your income and expenses without a regular salary, but you can take control of your finances with the right strategy and a firm commitment. We consulted Ashley Feinstein Gerstley, founder of the financial coaching company The Fiscal Femme and author of The 30-Day Money Cleanse, to find out how to reach – and exceed – your financial goals as an independent professional or freelancer.
What are your three top personal finance strategies?
1. Get conscious about where your money is going.
I have every single one of my clients and Money Cleansers keep a money journal to keep track of everything they spend and earn. We have a tendency to not want to know where our money is going—imagine ostriches with our heads in the sand— but technology makes it that much easier to ignore. We hop in and out of Ubers without paying, click a button and items show up at our door, and swipe credit cards to buy most things. It’s no wonder we have no idea where our money is going! Keeping a money journal sounds so simple, but magical things happen when we become aware.
2. Show your money some love.
We tend to put our financial to-dos on the back burner because we’re busy and have lots of other things going on. Then they hang over our heads and stress us out. In order to have a good relationship with money and finally get our financial to-do list done, we have to create the time. I recommend having a “money party” every other week where you tackle your financial to-dos, including tracking your expenses and checking in on your goals and all of the one-off things that come up.
3. Pay yourself first.
How most of us are currently saving doesn’t work. We prioritize paying everyone else first and wait to see what’s leftover for us to save. Guess what? There’s never any money left over to save. Open an online savings account, and set up an automatic transfer to pay yourself first. If you have no idea how you would actually save, start small. Set up an auto transfer for as little as $5.
How do you keep track of your financial goals and stay motivated to achieve them?
We have a tendency to want to give up on something as soon as we’re not perfect at it. It’s kind of like when we make a mistake on a diet – “I ate a piece of cake so now I might as well eat the whole cake.” Giving up on ourselves when we’re not perfect is a very sneaky way of cheating ourselves of what we want most. I recommend playing the role of detective. If something doesn’t work or we make a mistake, we don’t want to punish ourselves – we want to learn from it and figure out how we can support ourselves to make it easier for next time. It’s how we get on our own team.
What advice would you give to solopreneurs or freelancers trying to reach the financial goals they have set for themselves?
Create an annual plan by month. Money is tough enough when you have a steady salary, not to mention when you add variable income to the picture. It’s important to map out the next 12 months (it won’t be perfect!) to see how your income and expenses will ebb and flow, and then you can plan accordingly. Project your income, your business expenses, and then your personal expenses so you can see the whole picture.
And don’t forget about taxes. I recommend having an online saving account specifically for a tax fund. You can transfer over a percentage of each check you get or a percentage of your profit each month. That way when it’s time to pay your quarterly or annual taxes, the money is available and waiting.
Speaking of goals, you talk about the importance of setting SMART financial goals in your book. How should a solopreneur or freelancer set SMART financial goals?
One of the reasons the SMART goal setting method works so well is that it’s very specific. If your goal is to “make more money,” what does that mean? Would $1 more achieve that goal? $100,000 more? The good news is that any goal you have can be converted into a SMART goal.
A SMART goal is:
Specific: What do you want to achieve?
Measurable: How will you know when you’ve reached it?
Attainable: Is it possible and in your control?
Relevant: Is it something that’s worthwhile or motivating for you to go after?
Time-bound: When will you achieve it?
Is there any other personal finance advice you’d like to share?
Start with one action. I think it’s easy to get overwhelmed when there are so many things that we can do, and feel like we should do, in our money lives. Take one small step and it will snowball.
What advice would you give other people who want to become an entrepreneur?
Take small steps toward your goal each week or, better yet, each day. With any big goal we have, figuring out how to get from A to B can feel really daunting. With entrepreneurship, I’ve found that taking steps toward where you want to be without seeing the whole staircase is imperative. It’s the willingness to do something when you have no idea how you are going to do it that makes it exciting and helps you be successful.
Have you learned any helpful techniques for managing your finances? Tell us in the comments below!