How Freelancers Can Save Money for Investment

What is a freelancer? A freelancer is a professional expert in a field (or a novice) interested in working with a company on a temporary contract. Freelancer wants to avoid becoming a permanent employee. 

Experienced freelancers were most prevalent in artistic professions, such as writers, designers, and photographers. As most companies did not offer long-term employment in these professions. 

However, in recent years, freelancing has shifted to IT professionals and finance experts as individuals have become more focused on independent working relationships. These professions are no longer fascinated by long-term employment. 

Money and Freelancers: Tricky Business!

How freelancers can invest? Financial stability is tricky for freelancers, as they need a consistent payday to look forward to. That is why developing a consistent financial plan and making longer-term financial commitments is hard for them. Hence, freelancers need to have financial planning where the money they save will help them float through times without a paycheck. 

Freelancing in Australia is a better experience because freelancers in Australia get employment benefits to some extent. Although they do not have the traditional employer-contributed superannuation, paid leaves, allowances, and health care coverage, freelancers tend to get much more than their employed counterparts. Hence, the major challenge for the freelancer is to control their spending and save money for retirement, health care, and other expenses all by themselves. 

Investments First:

Although freelancers also have to pay for rainy days of many kinds, they also have to save for investments to meet their long-term financial goals. Long-term safety and a good safety net are only achievable if the freelancers develop a strong safety net. Passive income is also a good way for a freelancer to have a solid financial backup. 

Australia and Freelancers- Match Made in Heaven?

A country’s Economic climate is a significant factor for freelance work or a business to thrive. The Australian economy has not seen a recession in 30 years, and that is a big success considering that the entire world saw a massive slump in 2008 with a Wall Street meltdown. The country has a solid and reliable regulatory setup that helps investors protect their money from any significant hits. 

Most significant economies in Australia focus on major cities such as Sydney, Perth, Melbourne, and others and consist of education, IT, and finance sectors. Freelancers in these three fields will find great work opportunities and ways to build connections in these regions. On the other hand, properties in these cities are expensive and hard to finance. 

Investment in Financial Safety Net In Australia:

Investment is an excellent way for freelancers to grow their safety net in Australia. As stated earlier, the country has a tremendous regulatory setup that allows investors to save and not lose their money through their investments buy and sell. Australian Securities Exchange. government bonds and real estate investments are few significant ways for a freelancer to save money. 

You should know here the superannuation is not exclusive to an employer-based financial arrangement. Freelancers can also set up a super fund where they make voluntary additions and gain impressive financial returns through compound interest rates. These superannuation funds are a good way for freelancers to develop a good nest egg for retirement. 

As they are available at central Australian banks such as ANZ, NAB, Westpac, and Commonwealth Bank, financial products are also an excellent way for freelancers to gain economic benefits. Advisory services available at these banks are also highly reliable due to the perfect regulation of the Australian financial sector. These advisors can help freelancers make excellent decisions about how to grow their hard-earned money. 

Have Financial Goals: 

From the city life of Sydney to the coastal strip of Queensland, the era of freelancers is upon us. Financial goals are the cornerstone of financial protection for freelancers, allowing them to have a strong backup. Develop a precise aim so that you know what you are trying to achieve. Saving money for the sake of ‘saving money’ only leads to missing out on significant, game-changing opportunities for investment. 

Let’s assume a freelancer is based in Melbourne and wants to buy property in the Outback or the suburbs. The property will be expensive, and just putting a small amount out of every paycheck in your bank will not cut it. It is better to use the financial investment options available and make an intelligent investment that will multiply the trinkets in your piggyback to achieve your goal faster. 

How to Develop Long and Short-Term Financial Objectives?

Short-Term Goals: Short-term goals work for immediate benefits; for example, if a person needs a new fridge, saving for that need is a short-term goal. To pacify short-term needs, always have a small amount react in savings or checking accounts so you do not have to touch your investment account to solve a temporary problem or hurdle. 

Long-term objectives: These are your usual vices, such as property buying, developing a mortgage, saving for retirement, saving to start your own business, and other long-term investments. The retirement plan will constantly be beset with superannuation, which you will keep for retirement. For property planning, it is better to invest through ASX as it will have a higher yield. However, it should be noted that ASX investment will also always have risks. 

You should constantly revisit your goals once a year to see what you have achieved so far and how you can improve your chances of gaining the desired results. 

Management of Expense Vs. Budget:

Track your spending:

Everyone has heard this advice before, but you must track your monthly expenditure. If someone spends money on whimsy, they can go through a substantial amounts of money in a week and have nothing to show for it. If you want to invest in your long-term goals, you must keep a weekly list of expenses and review them daily. 

Popular Budget Tools and Tricks for Australia: 

Suppose there is one thing Aussies like, it’s technology. That is why there is a substantial financial app market in Australia. MoneyBrilliant, PocketBook, and other apps allow users to keep track of their everyday expenses

Even central banks like Commonwealth Bank now offer a ‘CommBank app’ that will enable users to monitor their costs at all times. These apps have tools such as bill payments, budget limits, and categories of expenses that help users see their money matters in a different light. 

There are also Excel templates updated on Australia-focused monthly expense reports; you can fill them every week and see a bigger picture of your expenses at all times. 

Cut Down on Useless Expenses: 

Just because you are expected to curb your expenditure does not mean you have to reduce your quality of life. Life in Australia is full of cafe outings, beach days, and art life in Sydney. You do not need to compromise on these activities if you learn to reduce your everyday expenses. 

For example, you can buy groceries at the farmer’s market and skip shopping markets designed to put a hole in your pockets. Melbourne has trams that allow users to travel far and wide without spending money on gas. 

Cooking at home three or four times a week is also a great way to save money. Australia also has beautiful parks, hiking trails, and free beach activities. These are also an excellent way for you to enjoy your time. 

Keep a Portion for Investments: 

Most apps allow you to set up monthly automatic transfers. Please set up an automatic transfer that will send money to your bank every month so that you will save leftover cash and not have it in your expense account. Freelancers can have auto-transfer options that help them send money to their designated savings accounts every month. 

Compounding to Grow Your Money:

More than just saving your money is required; you need to learn how to compound your finances so that the money you have saved grows with time. Just like a coral blooming in the Great Barrier Reef, the long-term compounding process can be fascinating, compounding also increases your financial risk tolerance. There is the option of a high-interest saving account, where your money grows by a certain percentage every month by default, and investment portfolios that are more high-end and have higher risk. 

Compounding is a surefire way to increase your savings and turn a few hundred dollars a month into a formidable nesting egg for you to enjoy in later years. 

How to Manage Irregular Paydays?

A considerable challenge for freelancers is to be able to consistently pay monthly bills when they do not receive a monthly salary. Just like the weather in Melbourne, the regular necessities and irregular paydays can clash badly. Automatic transfers are a great idea, but if you have to pay your electricity bill, you must take some money out of your savings. If you are going through a lean period, you may not do savings until your next paycheck. 

Tax Benefits & Deductions: 

The Australian tax system for freelancers is an exciting phenomenon. Australian Taxation Office sees freelancers as sole traders or independent business owners. The freelancers have to report their earnings regularly to keep up with their tax deductions, and they will receive the same taxes as regular citizens of Australia. However, the freelancer status also gives a few benefits and assumptions that the freelancers can use to their advantage. 

Work-Related Expenses:

A person can claim work-related expenses such as a good internet connection bill and coffee expenses for deductions. ATO has a long and handy list of utility options for a freelancer’s tax deductions, including a small portion of house rent. 

That is because the house is your workspace, and everyone should earn a tax deduction. Neat, right? All you need to do is keep detailed records of freelancers’ financials that are under tax deduction, and you will save considerably by the end of the month. 

Self- Managed Super Fund and Long Term Savings:

First, we all need to save for our retirement, and you have a good payday today, but what if you hit a wall tomorrow? You have to start saving for your retirement as soon as possible. But far more importantly, if an asset or an investment is placed in your superannuation fund, it will give you considerable tax breaks. 

These are tax breaks not available to an average freelancer under usual circumstances. Not only a retirement plan but the fact that your assets will significantly benefit from being placed in a super fund should be why you open an SMSF today!

Choose Low-Cost Investments:

The most common mistake inexperienced investors make is making one significant investment, believing it will give them a high yield. That is a risk never worth taking, and it is always better to make numerous, small investments that are safe at ASX- Australian Securities Exchange so that you will have a diverse and safe portfolio. 

Why Low-Cost Investments?

Now that we have tickled the hornet’s nest let’s talk about why low-cost investments are a better option for you. Index funds and low-cost Exchange Traded Funds are a great way to begin investing for freelancers. These investments work identically to markets like S&P/ASX200, but the only benefit is that they are low-cost and always affordable. 

As we all know, lower the cost of an investment, hire the return on profit percentage. It also saves you from risking your entire investment on one fund that, if it tanked, will take your egg’s nest right with it. And the different profit ratio for your investment also means that your investment money grows exponentially and at all times. 

Alternative Investments:

Now that we have over-explored investment opportunities, let’s talk about alternative investment options. Peer Lending has emerged as the winner of the alternate investment game in modern times. Plenti and RateSetter are standard portals in Australia where freelancers can lend their money to a peer or a small business and gain significant interest when the money is returned. 

Compared to traditional banks, these websites are simple and easily allow lenders to connect with borrowers. But like any unregulated investment, the significant risk in peer-to-peer lending is that the investor may get stuck with a borrower unwilling to pay. So be careful who you choose as your borrower. 

Stay Updated:

Freelancers must keep up with the market research and learn continually to take advantage of the available opportunities. In finance, your market research is a good SPF for sunbathing at Bondi Beach. The global financial spectrum evolves continuously and profoundly impacts Australia’s economic policies. Here are a few ways you can stay on top of the latest financial news:

Enroll in Seminars and Courses: 

Many different seminars, webinars, and courses are available to the masses in Australia to help you dive deep into financial news analysis. Financial analysis is a complex process that requires more than just reading news on smartphones. You need more profound knowledge. For example, the ASIC provides informative resources and tools that will allow you to understand financial investments. 

With these resources, you can learn tax plans, invest in deep dives, and much more. When making an investment decision, you must see it like a carpenter making a chair. If you watch a video about chair making, it will not make you an expert. 

Similarly, reading and watching financial material will not make you a financial expert either. So make good use of your financial advisor and ask him before making any decisions. 

Tailored Advice for Freelancers Based on Their Unique Financial Circumstances:

In contrast to traditional salaried individuals, freelancers often grapple with irregular incomes, variable expenses, and distinct tax implications. Given this unique set of challenges, more than generic financial advice is needed. Australian financial advisors, recognizing these specific needs, often provide bespoke guidance for freelancers. This tailored advice can span from tax-saving strategies, investment recommendations suited to fluctuating incomes, or even insights into government schemes and benefits specifically designed for freelancers.

Diversifying Investments

“Never put all your eggs in one basket.” This age-old adage holds particularly true in the world of investments. Diversification is about spreading investments across various assets, ensuring that potential poor performance in one area doesn’t spell disaster for the entire portfolio. 

For freelancers in Australia, who might not have the safety net of regular salaries, this strategy is all the more pivotal. By diversifying, they can aim for consistent returns, cushioning themselves against the volatility of any single market.

Understanding the Australian Markets – Real Estate, Stocks, Corporate Bonds, etc.:

Australia’s investment landscape is as diverse as its ecosystem. The opportunities are vast, from the bustling real estate markets of Sydney and Melbourne to the dynamic world of ASX-listed stocks. 

Then bonds, typically considered safer bets, provide fixed returns over time. Some research can go a long way for freelancers keen on exploring these avenues. Each market has its nuances, pros and cons, and understanding these can help make informed decisions.

Balancing Aggressive and Conservative Investment Strategies:

While the allure of high returns might tempt one towards aggressive investment strategies, balancing this with conservative bets is essential. Think of it as the equilibrium between the energetic hustle of Australian city life and the serene calm of its countryside. 

Aggressive strategies, like investing heavily in high-risk stocks, might promise greater rewards, but they also come with increased volatility. On the other hand, conservative approaches, like parking funds in fixed deposits or bonds, offer stability but might not yield high returns. For freelancers, striking the right balance based on their financial goals and risk appetite can be the key to achieving long-term financial success.

Conclusion

Navigating the freelance landscape in Australia, with its dynamic opportunities and sporadic challenges, necessitates a solid financial plan. One cannot overstate the importance of saving and investing, especially for freelancers. These aren’t just prudent financial practices; they form the bedrock of a secure future. With Australia’s robust financial markets, diverse investment opportunities, and a supportive freelancer ecosystem, there has never been a better time to prioritize economic well-being.

Australians have always shown a spirit of resilience, innovation, and determination in sports, arts, or entrepreneurship. The same spirit is now called upon for freelancers in their financial journey. With the tools and knowledge at their fingertips and the vast Australian economic landscape beckoning, freelancers can sculpt a prosperous future. The journey starts with informed decision-making, understanding risks, reaping rewards, and being agile in changing circumstances.

So, dear freelancer, the canvas of your financial future awaits your strokes. Whether you’re just starting this journey or looking to fine-tune your strategies, remember every step counts. The expansive Australian financial ecosystem offers myriad pathways. With the proper planning, determination, and a dash of Aussie grit, you can chart a course toward a secure and prosperous future.

But remember, every journey is unique, and every experience is invaluable. So, if you’ve had your eureka moments, faced those daunting challenges, or discovered a hack that’s worked wonders for you, do share! 

Drop your insights, stories, or even a word of encouragement in the comments below. After all, the freelance community in Australia thrives on mutual support and shared wisdom. Let’s navigate this exciting journey together, mate!

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