How Do You Save Money Fast on a Low Income (As a Freelancer)?

Freelancers are resourceful self-starters.

They’re business owners and solopreneurs who know how to manage many different aspects of business.

One area where many freelancers stumble, though, is with personal savings and having low income when they begin freelancing.

Becoming a frugal freelancer requires a high degree of organization and a well-established internal financial system.

If you’re struggling to budget your low income — especially with an inconsistent contractor’s income — here are several suggestions for ways to regain control of your finances and start saving money fast on low income, even while you’re freelancing.

1. Create Financial Structure

If you want to save money fast on low income, you need to be more careful with your spending.

Becoming a frugal freelancer requires a high degree of organization and a well-established internal financial system.

Fortunately, it doesn’t take a degree in finance to do this.

All you need is a little intentionality and some basic first steps:

Start by truly separating your work and personal finances. Don’t cash client checks in your personal business account. Don’t use your business credit card to pay for non-work-related expenses. You get the idea.
Next up, pay yourself consistently. If your freelancing income is inconsistent, that’s okay. Look at your past cash flow and try to project roughly what you’ll get in the months ahead. Once you have a good idea, pay yourself an average paycheck each month. This allows you to prepare for things like slumps in your income as well as schedule planned time off.
Pay taxes quarterly. Don’t wait until the end of the year to pay your taxes all at once. Make estimated payments every three months to spread out the financial burden. If you aren’t sure how to handle this, find an accountant who can help you. It’s worth it.

If you want to be able to save while you’re freelancing, the first step is to get a firm handle on basic items like these.

This gives you a chance to establish your own predictable way of doing your finances.

2. Organize Your Time, Too

Along with organizing your finances to help you save money fast, it’s important to consider the time and effort that you’re putting into your freelancing.

Tracking your time spent working can reveal a couple of potential issues.

On the one hand, it may show that you’re not putting in enough deep work time to generate a good income.

If that’s the case, use that knowledge to better structure your workdays and eliminate distractions.

On the other hand, you may find that you’re working too much.

If so, use this information to create a quality-of-work improvement plan.

Can you better structure your day to provide more time for rest? Can you pursue higher-paying clients?

Organizing yourself and tracking your schedule may not feel closely connected to saving money.

But it’s actually a powerful way to ensure that you ultimately set money aside in a manner that is sustainable over the long haul.

3. Practice Frugal Budgeting

Next up, consider your budget to help you save money fast on low income.

If you don’t have one yet, creating a comprehensive personal budget should be your top priority.

Having a budget in place helps you get a 10,000-foot view of your income and expenses.

You can see fixed costs in your life (things like paying rent or making a car payment) as well as variable costs, like eating out or going out with friends.

A good budget also helps you see if there’s any money left over to allocate toward paying off debt more aggressively or saving for the future. I

f you find that you don’t have enough left over, this can be the wake-up call to change how you’re living. Look for areas of your budget that you can slash in order to free up funds to save.

Budgeting also gives you the ability to make sure that you’re living frugally within your average income.

As a freelancer, it’s wise to plan on spending less than you’re actually making.

That way, if you lose a client or a payment is held up, it won’t significantly impact your lifestyle.

You can also use any excess income that may be left over to establish a rainy day fund and help with any future shortfalls in your freelancing income.

4. Research and Prioritize

At this point, you’ve created a financial infrastructure, organized yourself, and budgeted your income to ensure that you have extra money beyond your budgeted wants and needs.

If you’ve gotten this far, you should consistently have excess cash that you can, you know, save.

The question now becomes, what do you funnel this extra money toward?

Do you let it sit and make minimal interest in a bank account? There are three other ways to allocate your excess cash that are likely better options:

Invest your money: This could be anything from buying stocks and bonds to alternative investments like cryptocurrency or real estate. Just make sure to do your homework before you buy an asset!
Pay off debt: Saving money may not be helpful if you’re paying steep interest rates on something like student loans or a personal loan. If that’s the case, consider paying down debt sooner rather than later.
Save for retirement: If you find that you don’t need cash in the short term, consider setting up a retirement fund. This could be done through freelancer-friendly channels, like an IRA or a self-directed solo 401(k).

Deciding what to do with your savings is nearly as important as setting the money aside in the first place. Make sure to take the decision seriously.

5. Set Goals

Finally, once you’ve set the stage and decided how to direct your money, consider setting up specific goals to help you get some momentum so you no longer have low income.

Having an end goal in mind as you work can help motivate you to earn more and spend less.

Don’t set pie-in-the-sky goals like “saving a million dollars.”

At the same time, generic goals like “save as much as I can” won’t help you feel too motivated either. Instead, set SMART (specific, measurable, achievable, relevant, and time-based) goals.

For instance, if you’re saving for a new car, it’s wise to put as much as a 20% downpayment down up front. Once you know this figure, you can set it as a SMART goal that you’re saving toward. This will help you stay focused over time.

Smart Savings as a Freelancer

Saving isn’t a primary goal for most freelancers — but it should be. Contractors are able to control their own schedules, hours, workflow, and so on. But if they don’t plan for the future, they’ll end up paying the price down the road.

Instead, use your freelance freedom to take a greater sense of ownership over your personal finances. Get organized, create a budget, set goals, and start saving in the name of a brighter financial future.