Sofia's Freelance Finances

My name is Sofia, I'm 38 years old, a graphic designer, and I've been freelancing for about 5 years now. Last year, I took a leap of faith and quit my stable job to pursue my passion full-time. Financially, it's been a rollercoaster. Some months I earn upwards of $6,000, but there are also dry spells where I barely scrape together $2,000. On average, I'd say my annual income hovers around $50,000 before taxes. I'm single, which means I'm managing my finances alone, and lately, it's felt more like a tightrope walk than anything else.

The challenge I face isn't just the fluctuating income; it's the debt I've accumulated over the years. I have about $15,000 in credit card debt, a $20,000 loan I took out for a professional development course, and I'm still paying off my $30,000 student loan. My rent, utilities, insurance, and basic living expenses consume most of my earnings, leaving me with little to nothing at the end of the month to chip away at my debt.

I've tried various budgeting methods, from the envelope system to budgeting apps, but the inconsistency of my income makes it hard to stick to a plan. I've even considered going back to a full-time job, but the thought of giving up on my dream is heart-wrenching.

I feel stuck in a cycle of earning and owing, with no clear way out. My stress levels are through the roof, and it's starting to affect my work and personal life. I need a strategy that accounts for my unpredictable income but still allows me to make headway on my debt.

Dear Sofia,

Navigating the unpredictable waters of freelancing while wrestling with debt is no small feat, but there's a way through this. Let's streamline your approach to forge a path towards financial stability.

First, solidify your financial footing by establishing a more predictable budget. Consider your income on an annual basis to determine your average monthly earnings, which will help you plan more effectively. From there, prioritize an emergency fund—aim for $1,000 initially, aiming to expand it to cover several months of expenses. This will be crucial during those leaner months.

Next, tackle your debts with a strategic approach. The debt snowball method—focusing on paying off your smallest debt aggressively while maintaining minimum payments on the rest—can be particularly effective. It provides psychological wins and simplifies your debt over time.

To complement your income, think about creating passive income streams. Leveraging your graphic design skills can provide additional financial stability. This might involve selling digital products, templates, or even courses related to your expertise.

Consider also the potential for reducing your living expenses. Whether it's moving to a more affordable space or exploring co-living situations, decreasing your monthly overhead can free up funds for debt repayment.

Lastly, don't discount the possibility of supplementing your income with a part-time job. It can provide a financial buffer without requiring you to abandon your freelance aspirations entirely.

Sofia, the journey might be tough, but it's navigable with determination and strategic financial planning. Keep your passion for graphic design at the forefront, and use it as a driving force to propel you through these financial challenges.

Best,

Robert Langweil, CFP®, CMFC®

At Langweil Wealth Management