freelance income http://www.wisebread.com/taxonomy/term/11220/all en-US Freelancing: A Beginner’s Guide to Doing It Right http://www.wisebread.com/freelancing-a-beginner-s-guide-to-doing-it-right <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/freelancing-a-beginner-s-guide-to-doing-it-right" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/wisebreadfreelance.jpg" alt="Coffeeshop Telecommuter " title="Coffeeshop Telecommuter" class="imagecache imagecache-250w" width="250" height="168" /></a> </div> </div> </div> <p>Depending on the field you&rsquo;re in, freelancing can be a great way to make extra money or transition into a full-time flexible career. But doing it right takes some planning and strategy. If you&rsquo;re considering freelancing as a way to supplement or replace your current income, here are the basics on how to get started. (See also: <a href="http://www.wisebread.com/30-great-side-jobs">30&nbsp;Great Side Jobs</a>)</p> <h2>Network</h2> <p>As with any other business, <a href="http://www.wisebread.com/15-simple-networking-tricks">networking makes all the difference in the freelance world</a>.</p> <p>Use past work connections, friendships, social media sites, and professional groups to get the word out about your services. Have an elevator pitch ready to explain what you do, your qualifications, and what sets you apart from the competition. Though networking is a never-ending process, it&rsquo;ll become easier as your body of independent work builds and satisfied customers begin spreading the word.</p> <h2>Research and Set Fees</h2> <p>Knowing what to charge can be tricky. Most freelancers make one of two mistakes when it comes to setting their fee structure. Either they underestimate what the market is willing to pay (short changing themselves in the long run), or they price their services too high for their experience level (alienating potential new clients).</p> <p>Use <a href="http://thenextweb.com/entrepreneur/2012/09/08/freelancing-pricing-services/" target="_blank">online research tools to determine</a> what independent contractors are making in your field and in your area. Find the sweet spot based upon your background and skill set.</p> <h2>Establish a Rate Card</h2> <p>Once you know the general range of what you&rsquo;ll be charging, establish a rate card that outlines your menu of services.</p> <p>Think of every potential project you could land.</p> <ul> <li>Will you charge per hour or per project?</li> <li>How might your hourly rate change based upon the complexity of the work?</li> </ul> <p>A clear outline of prices (or even a good estimate) will help clients anticipate expenditures and budget for your services.</p> <h2>Pitch Recurring Projects</h2> <p>Big projects are great, but they&rsquo;re inconsistent. Pitching recurring monthly or quarterly projects to clients will show initiative and help smooth the peaks and valleys in your freelance income. Even a few modestly priced &ldquo;maintenance&rdquo; projects that you can count on every month will make a world of difference financially &mdash; especially in the beginning.</p> <h2>Create an Invoicing System</h2> <p>Once you have a rate card and are assertively pursuing projects, it&rsquo;s time to create an invoice. Here, simplicity is key. Create a one page Word document that includes:</p> <ul> <li>Date</li> <li>Your business name, address, and phone</li> <li>Tax ID number (if applicable)</li> <li>Client name, address, and contact person</li> <li>Project description</li> <li>Date work was completed</li> <li>Agreed upon fees and totals</li> <li>Method of remittance</li> <li>A thank you</li> </ul> <p>For examples of invoices that tick all the right boxes, check out <a href="http://www.smashingmagazine.com/2009/11/05/invoice-like-a-pro/" target="_blank">these slick designs</a> from Smashing Magazine.</p> <p>Every client has a different payment schedule and as your work expands, you&rsquo;ll need a way to track your invoices quickly and easily. I use a <a href="http://www.wisebread.com/excel-the-most-underrated-software-you-already-own">simple Excel sheet</a> with six columns: Client Name, Project Description, Hours Worked, Amount of Invoice, Date Invoiced, and Payment Status. It&rsquo;s a bare bones way for me to check the status of my billings and helps ensure that no client gets invoiced twice for the same job.</p> <h2>Don&rsquo;t Forget About Taxes</h2> <p>Remember, freelance work typically means you&rsquo;ll be receiving a 1099 tax form and will be responsible for setting aside the proper income tax amount yourself. Depending on how you structure your freelance work and how much revenue you&rsquo;re bringing in, you may be required to file estimated taxes quarterly. Discuss the particulars of your business with a tax advisor to make sure you&rsquo;re organized for Uncle Sam.</p> <h2>Create a Freelance Resume and Portfolio</h2> <p>Typically, your first few clients as freelancer will be people who know you and know your work. But once you have some projects under your belt, it&rsquo;s time to formalize it and reflect it in your resume. Create a separate resume or portfolio of work that you can use when pitching projects marketing your business to new clients.</p> <h2>Market, Market, Market</h2> <p>A successful freelance business takes constant attention. The work you&rsquo;re doing today is probably work you pitched three months ago to a client you met last year. That long horizon must be factored into to your daily work and it&rsquo;s a discipline that takes some practice to master.</p> <p>Market your services online, offline, formally, and informally &mdash; always with an eye toward where you want to be in six months or a year. Oh, and don&rsquo;t forget to thank current customers who send new clients your way &mdash; referrals are golden.</p> <p>Are you ready to test the waters of a <a href="http://www.wisebread.com/part-time-jobs-that-can-get-you-serious-discounts">part-time</a> or full-time freelance career? If so, some upfront planning focused on the basics can save you a lot of time and stress later. Happy freelancing!</p> <p><em>Are you a freelancer or have you worked solo in the past? What tips do you have for newbies?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kentin-waits">Kentin Waits</a> of <a href="http://www.wisebread.com/freelancing-a-beginner-s-guide-to-doing-it-right">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-signs-its-time-to-make-your-side-gig-your-career">6 Signs It&#039;s Time to Make Your Side Gig Your Career</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/great-ways-to-generate-passive-income">Great Ways to Generate Passive Income</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-side-jobs-for-stay-at-home-moms-and-dads">12 Side Jobs for Stay-at-Home Moms and Dads</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-truths-from-a-mystery-shopper-you-must-read-before-you-get-started">8 Truths From a Mystery Shopper You Must Read Before You Get Started</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-to-earn-extra-cash-when-money-is-tight">9 Ways to Earn Extra Cash When Money Is Tight</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Extra Income freelance income side jobs start a business Mon, 28 Jan 2013 10:48:33 +0000 Kentin Waits 967361 at http://www.wisebread.com Freelance to Small Business: 10 People Who Made the Transition http://www.wisebread.com/small-business/freelance-to-small-business-10-people-who-made-the-transition <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/innovation/article/freelance-to-small-business-10-people-who-made-the-transition-thursday-bram" target="_blank">http://www.openforum.com/idea-hub/topics/innovation/article/freelance-to-small-b...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/freelance-to-small-business-10-people-who-made-the-transition" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/iStock_000004765169XSmall.jpg" alt="Water bottles" title="Water bottles" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>When you start out as a freelancer, there aren't a lot of options for moving forward: You can increase your rates or land bigger and better clients. But as long as you keep the title of &quot;freelancer,&quot; your path can be very limited. Just a name change can make a big difference. Many freelancers start out thinking of themselves as on their own, but when they start thinking of themselves as small business owners and entrepreneurs, the opportunities available to them boom. These business owners started out as traditional freelancers, but have moved far beyond what that title can describe:</p> <p><strong>1. Andy Hayes</strong></p> <p>While <a href="http://andyhayes.com/">Andy Hayes</a> may have started out as a freelance writer, he's gone on to become a speaker, a consultant, and the owner of Hayes Media Group. &quot;In the beginning, I was blissfully unaware of the difference between freelancer and entrepreneur,&quot; says Hayes. &quot;It didn't take very long for me to realize that I had traded one employer for another (and I wasn't a very kind manager to myself). Being freelance is fairly easy if you've got in-demand skills, but entrepreneurship requires you take risks and leaps. Doing so gives you leverage to start earning a lot more money, dreaming a lot bigger, and most importantly, helping to bring bigger/better change to the lives of your customers.&quot;</p> <p><strong>2. Mason Gentry, Faucet Face</strong></p> <p>Gentry took the skills he learned as a freelance art director and used them to create a line of artistic water bottles. &quot;I started <a href="http://www.faucetface.com">Faucet Face</a> about 20 months ago, working on it at night and during the downtime in between freelance gigs,&quot; says Gentry. Now the business offers artistic drinking bottles that Gentry designed and had manufactured.</p> <p><strong>3. Nathalie Lussier, Raw Foods Witch</strong></p> <p>&quot;When I started freelancing I didn't have a bigger business in mind at all,&quot; says Lussier. &quot;But after a few months of freelancing, also of seeing what other freelancers and business owners were doing, I realized I could start a business that went beyond freelancing. So the <a href="http://rawfoodswitch.com/">raw food business</a> came out of the 'ashes' of my freelancing business.&quot; She made the switch from writing and translating on a freelance business to offering coaching and creating products around raw foods.</p> <p><strong>4. Lisa Tener</strong></p> <p>Getting her first book published tipped <a href="http://www.lisatener.com/">Tener</a> over the line between entrepreneur and small business owner, but it took talking to a coach to help her see it. &quot;Only when I met (and began working with) my first business/life coach did I begin to see myself as an entrepreneur. As a stay-at-home-mom working part-time, I needed to make around $3,000 that summer and had been making just a couple hundred a week. My coach helped me set specific goals (like the $3,000), which opened my eyes to an opportunity to do some consulting in a previous field (nonprofit management) and make exactly what I'd hoped...$3,000.&quot;</p> <p><strong>5. Brian Casel, CasJam Media</strong></p> <p>Many freelancers hit a plateau in their ability to keep growing, and Casel is no exception: &quot;My rates are at a comfortable level, so I needed to look for other ways to grow my business. Releasing products was a way to do that. I've been specializing in designing WordPress-powered websites for clients, so I built on that expertise to <a href="http://casjam.com/">create and sell WordPress themes</a> that meet the needs of bootstrapped businesses.&quot;</p> <p><strong>6. Chris Davis, The Swizzle Collective</strong></p> <p>Just because a freelancer becomes a small business owner doesn't mean that he has to change what he's been doing. Davis moved from freelancer to agency without a big change: &quot;I was a freelance copywriter in the advertising industry, working for any and all agencies that needed creative help. One such assignment was to write some radio spots for Velocity Credit Union on behalf of an agency that went out of business shortly after the spots were produced...But thankfully my relationship with Velocity didn't end when that agency went belly up. In fact, it prospered. I become their go-to guy when it came to concepting and producing their advertising work, and eventually I was able to start <a href="http://swizzlecollective.com/">my own agency</a> because of that relationship.&quot;</p> <p><strong>7. Jennifer Maciejewski, Atlanta on the Cheap</strong></p> <p>Maciejewski started her <a href="http://www.atlantaonthecheap.com/">blog</a> as a way to brush up on her skills and demonstrate her abilities to her freelance writing clients. But her sites have become her focus. &quot;Once I started depositing checks, I realized that I could potentially grow that revenue into a solid income stream, so I started investing more time into the sites. Over the past year, they've taken over the bulk of my work hours, but treating it as a business has definitely paid off,&quot; says Maciejewski.</p> <p><strong>8. Allison Torneros, Circledot</strong></p> <p>Starting as a freelancer in high school, Torneros knew she could fall back on her skills when she didn't have a job offer after graduating college. &quot;Since I had been freelancing for such a long time, the natural step was to establish something more permanent. I began to set up my freelance business as <a href="http://www.thecircledot.com/">a design studio</a> and started building a team, and when I did that, even bigger jobs came in, and the stigma thats usually attached to the word freelancer was gone.&quot;</p> <p><strong>9. Joy Gendusa, PostcardMania</strong></p> <p>As a freelancer, Gendusa wanted to print up postcards to market her services. A run-in with the printer gave her a clear direction for her business: When Gendusa got the proof back, the printer had listed his own phone number and name on the cards and was asking $50 to remove it. That was enough for Gendusa to set up shop in order <a href="http://www.postcardmania.com/">offer businesses better services and marketing help</a> &mdash; at least as far as postcards go.</p> <p><strong>10. Heather Whaling, Geben Communication</strong></p> <p>Whaling took on public relations, social media, and writing projects on a freelance basis before launching <a href="http://www.gebencommunication.com/">her own company</a>. She had to start seeing herself as the client to really succeed with her business, says Whaling. &quot;I knew it would be challenging going from being an employee to being an entrepreneur, so I wrote a marketing plan for myself, had a logo professionally designed, created a website, and implemented a 'launch strategy.' Basically, I tried to think about myself as a 'client' &mdash; how would I advise any other small business to go about launching itself? Looking back, I feel like taking this 'formal' approach to launching a company was invaluable. It helped me hit the ground running and secure new businesses far better than if I had just all of a sudden started calling myself a small business owner.&quot;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/small-business/freelance-to-small-business-10-people-who-made-the-transition">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/coworking-spaces-the-office-alternative">Coworking Spaces: The Office Alternative</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/resources-for-freelancers">Resources for Freelancers</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-find-freelance-clients-part-two">How to Find Freelance Clients: Part Two</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-being-an-entrepreneur-isnt-sexy">When Being an Entrepreneur Isn&#039;t Sexy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center freelance income freelancing small business Wed, 12 Jan 2011 19:38:15 +0000 Thursday Bram 427091 at http://www.wisebread.com Resources for Freelancers http://www.wisebread.com/resources-for-freelancers <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/resources-for-freelancers" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/freelancers-union-logo.gif" alt="Freelancers Union Logo" title="Freelancers Union Logo" class="imagecache imagecache-250w" width="150" height="150" /></a> </div> </div> </div> <p>Changes in the economy have pushed more and more people into part-time, temporary, and freelance work, as more and more companies cut back on traditional, long-term, full-time employees. Recently the Newshour on PBS had a report by Paul Solman on the problems faced by freelancers in a tough economy &mdash; and pointers to some useful resources.</p> <p>The key resource that Paul pointed to in <a href="http://www.pbs.org/newshour/businessdesk/2009/11/freelancers-lack-safety-net-wh.html ">the segment </a>was the <a href="http://www.freelancersunion.org/index.html ">Freelancers Union</a>, an organization that exists to help freelancers buy for themselves the sort of benefits that an employer might offer, such as group health, dental, disability, and life insurance, and a 401(k) plan. I haven't looked over their plans and don't know if they're good deals, but they're certainly worth comparing to your other options.</p> <p>The group also acts as an advocate, pushing the government to expand the support that employees get to cover freelancers as well. Among their issues:</p> <ul> <li><strong>Estimated taxes</strong> It's not so tough to file your estimated taxes if your income is spread evenly over the course of the year. If your income is variable, though, the estimated tax paperwork is a nightmare &mdash; and the penalties for getting it wrong are pretty high. (I wrote a post on this last year: <a href="http://www.wisebread.com/taxes-on-irregular-income">Taxes on irregular income</a>.)</li> <li><strong>Self-employment taxes</strong> If you're self-employed, you have to pay both halves of the Social Security tax. The Freelancers Union isn't sure that double the tax is a fair burden &mdash; and is pushing to get Congress to see it their way.</li> <li><strong>Unpaid wages</strong> Pretty much every state has a department of labor that will come down hard on an employer who doesn't make payroll &mdash; but the state does nothing for freelancers who don't get paid.</li> <li><strong>Unemployment insurance</strong> Employees who lose their jobs can collect unemployment insurance, while freelancers get nothing.</li> </ul> <p>They've also got some cool posters.<br /> &nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/resources-for-freelancers">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/location-independent-career-basics">Location Independent Career Basics</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-find-freelance-clients-part-one">How to Find Freelance Clients - Part One</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/meet-meg-favreau-our-senior-editor">Meet Meg Favreau, Our Senior Editor</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-get-work-experience-without-having-a-job">How to Get Work Experience Without Having a Job</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/replacing-a-crappy-job">Replacing a Crappy Job</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income freelance freelance income freelance jobs freelancing Tue, 10 Nov 2009 17:41:21 +0000 Philip Brewer 3808 at http://www.wisebread.com Saving for Retirement (and Other Long-Term Goals) on a Variable Income http://www.wisebread.com/saving-for-retirement-and-other-long-term-goals-on-a-variable-income <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/saving-for-retirement-and-other-long-term-goals-on-a-variable-income" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/IMG_3570_1.JPG" alt="retirement life" title="retirement life" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p class="MsoNormal">If you have a freelance or otherwise variable (and in many cases &ndash; unpredictable) income, then saving for retirement can be tricky. Setting up an automatic savings program is risky since you may not have enough income to cover your payment on any given month, but leaving the contribution up to disciplined manual contributions could mean discovering that the money has been spent already and there is none left to save.<o:p><br /> </o:p></p> <p class="MsoNormal">Here is a solution that allows you to effectively save for retirement on a variable income while reducing the discipline required to do it all on your own. This solution is best implemented once you have at least a year or two of variable income under your belt in your career, so you can start by making some basic calculations as outlined in the steps below.<o:p></o:p><o:p><br /> </o:p></p> <h2>Step One: Determine What Percentage of Your Income You Will Save</h2> <p class="MsoNormal">Ideally you have already determined what percentage of your annual income you can afford to (and are prepared to) save given the retirement lifestyle you wish to have. If not, now is the time.<o:p><br /> </o:p></p> <p class="MsoNormal"><strong><em>EXAMPLE:</em></strong> Purely for the purposes of this illustration, I will assume that you have an average annual income of $50,000 and are prepared to save 10% ($5,000) per year for retirement. (These are by no means the recommended numbers, as your retirement plan depends on many factors, including your age, income, investments, and financial prospects. Please consult with a <a target="_blank" href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner">financial planner</a> to incorporate this strategy into your personal financial plan).<o:p></o:p><o:p><br /> </o:p></p> <h2>Step Two: Determine Your Lowest Income Month</h2> <p class="MsoNormal">Since this strategy is best accomplished with a history of your variable income to rely upon. Now is the time to review your records. What was your lowest income month? Is this a function of the time of year, or a fluke? If you see a trend of lower-income months, then <strong>identify your lowest predictable income month</strong>.</p> <p class="MsoNormal">If you anticipate that there could be lower income months than what you have historically experienced, then use an estimate of what your lowest income month could look like. Try not to be too stingy with this number though, since an unpredictably low income month can be dealt with at the time of earning (or lack thereof). Adjustments can always be made. Try instead to be realistic, and stick close to your actual lowest-income months.<o:p><br /> </o:p></p> <p class="MsoNormal"><em><strong>EXAMPLE:</strong></em> Although the average monthly income for a $50,000 career is $4167, let&rsquo;s say your lowest income month is $2,000.<o:p></o:p><o:p><br /> </o:p></p> <h2>Step Three: Set up An Automatic Savings Plan</h2> <p class="MsoNormal">This automatic savings plan will go directly into your retirement savings account, and should <strong>reflect your desired retirement savings percentage, applied to your lowest income month</strong>. The reason for this is the assumption that if you saved 10% of your average annual income (which works out to over $400/month in the example), you may find yourself too strapped for cash to keep a standard automatic savings plan in place. If you base it on your lowest income month, then you stand a chance of being able to maintain this automatic savings plan over the long run.<o:p><br /> </o:p></p> <p class="MsoNormal"><em><strong>EXAMPLE:</strong></em> In step one, you decided to save 10% of your annual income. In step two, you determined that your lowest income month is likely to be $2,000. Thus your automatic retirement savings plan should be 10% of $2,000 &ndash; which is $200 per month. This should be affordable, even given the lower income. Read on for variable income management tips to help you navigate fixed expenses and variable income.<o:p></o:p><o:p><br /> </o:p></p> <h2>Step Four: Make Manual Contributions Each Month (or Periodically)</h2> <p class="MsoNormal">Although you are saving $200 per month, this will not satisfy your need to save 10% of your annual income. It is simply a baseline contribution. Thus <strong>each month, you must also tuck away 10% of your income over and above your lowest income base line</strong>.<o:p><br /> </o:p></p> <p class="MsoNormal"><em><strong>EXAMPLE</strong></em>: One month you earn $3,000. This is $1,000 more than your $2,000 lowest-income baseline, so you need to save 10% of the extra $1,000 (which is $100).</p> <p class="MsoNormal">Another month you have a great run and earn $8,000. Subtract your $2,000 base line, and you are left with $6,000. 10% of $6,000 is $600, which is the amount you need to save for retirement that month.<o:p><br /> </o:p></p> <p class="MsoNormal">Note: Although you do not necessarily need to make manual contributions each and every month if it is a huge hassle, it is imperative that you at least set aside this money somewhere that it won&rsquo;t be touched and can be earmarked for your retirement contribution for this year.<o:p></o:p><o:p><br /> </o:p></p> <h2>Step Five: Review the Plan Annually</h2> <p class="MsoNormal">If you find that your lowest-income months are trending higher, then increase your baseline automatic contributions each year to reflect the new low-income month. This way you can continue to save a proportionate amount of your income automatically, and you reduce the amount you will have to save manually.<o:p><br /> </o:p></p> <p class="MsoNormal"><em><strong>EXAMPLE:</strong></em> It has been a while since your income was as low as $2,000. Instead, you are now finding that your lowest months are $3,000. Increase your automatic contributions to $300 per month (10% of $3,000).</p> <p class="MsoNormal">Alternately if times are tough and your income has dropped, you can lower your automatic contributions accordingly.<o:p></o:p><o:p><br /> </o:p></p> <h3><strong>Advantages of This Plan</strong></h3> <ul> <li>Despite a variable income, you can take advantage of dollar cost averaging for retirement.<br /> &nbsp;</li> <li>At least some of your retirement savings is automated, which increases your chances of overall success in saving for retirement. Leaving 100% of your retirement contributions to manual discipline is rarely successful, especially if you are not incredibly fastidious about setting money aside.<br /> &nbsp;</li> <li>When your annual income is higher than expected, you will still be saving an accurate and proportionate percentage. Assuming you can write off retirement contributions, it is beneficial for <a target="_blank" href="http://www.wisebread.com/five-easy-steps-to-keeping-track-of-expenses-for-the-self-employed">tax purposes</a> to be saving a percentage of your income rather than a fixed dollar amount.<br /> &nbsp;</li> <li>When your annual income is lower than expected, you won&rsquo;t have to satisfy retirement contributions that leave you too strapped for cash.<o:p></o:p><o:p><br /> </o:p></li> </ul> <h3><strong>Additional Variable Income Management Tips</strong></h3> <p class="MsoNormal">Since some months have a disproportionately large income and others similarly small, managing all your monthly expenses is tricky. To combat this, you must ensure that you do not spend everything you take in on the higher-income months.</p> <p>Instead, keep the extra income on high-income months tucked away in a high-interest savings account which can be accessed to cover your expenses on low-income months. This is not your <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund">emergency fund</a>: this is your slush fund to cover off your variable income. This is a basic principle of living with a variable income which will help you navigate the stress of managing the expenses during low-income periods.</p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/saving-for-retirement-and-other-long-term-goals-on-a-variable-income">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/peer-to-peer-lending-prosper-marketplace-or-lending-club">Peer to Peer Lending: Prosper Marketplace or Lending Club?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/freelancing-a-beginner-s-guide-to-doing-it-right">Freelancing: A Beginner’s Guide to Doing It Right</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/great-ways-to-generate-passive-income">Great Ways to Generate Passive Income</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Investment freelance income retirement savings variable income Tue, 11 Aug 2009 14:00:02 +0000 Nora Dunn 3483 at http://www.wisebread.com