A significant shift in how COVID has impacted the job sector is that many people are now shifting to become full-time freelancers. While freelancing is immensely satisfying, the absence of a steady cash flow and work pressure can quickly take your focus away from your financial goals. This article will explain some easy tips so that as a freelancer, you can do your work and at the same time take care of your family’s financial well-being.

Tip # 1: Have a decent emergency fund:

As a freelancer, you don’t get various benefits that come with a salaried job. Hence, it is all the more critical for you to have a substantial emergency fund. Apart from saving you from costly personal loans and credit card debt, it also gives you peace of mind that really helps your day-to-day work. As a freelancer, make your number one priority to create a fund of 6-12 months of your expenses and EMIs. Preferably have a separate fund for personal and business. You can invest this emergency fund in liquid schemes of mutual funds or sweep-in fixed deposits.

Tip # 2: Be financially secure with proper insurance covers:

A salaried employee is usually covered by group life, health and personal accident coverage by the employer. However, a freelancer doesn’t get these benefits. And that is why a freelancer must have basic term life insurance, medical insurance, personal accident insurance and home insurance (for both home and office). Additionally, buy property insurance for your own house as well as your office premises. Regarding life insurance, if you are a married man, you can protect the interests of your wife and children by purchasing a pure term plan under Married Women Property Act, 1874. As per MWPA, proceeds of that life insurance policy will be deemed to be a trust for the benefit of your wife and children. This will protect the insurance money from any claims made by creditors on your estate after your death. This will prevent creditors and banks from claiming life insurance proceeds instead of your outstanding debts. Don’t forget to include your business loans and liabilities also while calculating the amount of term insurance.

Tip # 3: Pay yourself first and invest in the right avenues:

As a freelancer, you need to put a lot of effort in the initial years to get your business to take off and reach new heights. This can take your focus off your financial goals in this rush. You can take the following steps:

  • Make a target to pay yourself first – invest 10% of your income every month towards your financial goals. Go ahead and make that SIP.
  • Accumulate your savings in a suitable liquid fund. Every quarter or so, you can take stock and invest that money in the right avenues for your financial goals.
  • Have a system of an annual financial review. Do the necessary portfolio rebalancing and perform a gap analysis of where you are right now and where you need to be.
  • If you feel the above activities cumbersome or don’t find enough time for them, don’t mind paying a small fee and getting advice from a trusted investment adviser.

Tip # 4: De-risk yourself:

You automatically add a certain amount of risk to your financial profile when you start out as a freelancer. However, you can balance this risk by proactively taking the following steps:

  • Do not go overboard on equity and other risky investments in deciding your asset allocation.
  • Diversify your clients and income sources. Try to have not more than 25% of annual revenue from a single client. This will help you reduce your dependency on that client and will not cause a financial upheaval if you lose that client.
  • Keep exploring market trends and learn additional skills so that you can stay relevant and continue to get good quality work
  • As a freelancer, don’t be shy of promoting yourself. Make a dedicated marketing plan and spend some time every day towards getting new clients.
  • Try to close all high-cost personal loans and credit card overdue. Also, ensure that your EMI is less than 20% of your monthly income.

Tip # 5: Take care of your compliance responsibilities:

As a freelancer, you are the accounting and tax head of your company. Most freelancers get so neck-in-deep in work that they miss out on doing proper accounting and tax management. This backfires in the long run in the form of interest and penalties. New laws like GST have increased the compliance responsibilities manifold. You should structure your work schedule to set aside a dedicated time every week or every month towards accounting, tax, and compliances. Some helpful compliance tips as follows:

  • Keep your business and personal funds separate. Open a business bank account and maintain separate accounts for your business. If possible, subscribe to good accounting software.
  • Prepare a calendar for tax return filing and other compliances as applicable for your business. It is also wise to outsource these compliances to a trusted service provider for a small fee.
  • Be aware of the requirement of filing your advance tax, maintaining books of accounts, TDS etc. If in doubt, check with your CA.

Tip # 6: Take care of your mental and physical health:

Freelancing is a long-term game. You are not bound by the retirement rules in the case of salaried employment. But to make maximum use of your extended work life, you need to be in good physical and mental health in your senior years. To achieve that requires a daily commitment towards meditation, physical exercise and a balanced diet. To avoid burnout, you need to set certain healthy boundaries between your work and personal life. Include some dedicated family time in your daily schedule and periodically take some time off to vacation and recharge your batteries.


Freelancing is an exciting journey. You get flexibility and freedom to decide your own clients and type of work. However, you also need to effectively cope with the financial anxiety of an irregular income stream. Learning more about personal finance and outsourcing non-core activities can help you immensely and secure your financial future.
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