Financial Goals for Freelancers: How to Create and Build Wealth

Updated June 2024

Freelancing offers an unparalleled amount of freedom. From going on impromptu vacations to hand-picking your clientele and projects, freelancing is a career choice that’s worth the gamble. A steady paycheck, retirement planning, and other wealth-building tools are another story. Unlike a typical employee, you’re responsible for every step of your financial goals and financial planning. Starting with what to charge to how you invest or save your earnings, you’re in the driver’s seat.

For the frugal freelancer, money management isn’t always an issue. But if you’re a person who doesn’t maintain a budget, must have the latest gadgets, or hasn’t thought about the future, financial management can become burdensome to the point of ignoring it altogether. Even freelancers with steady or high incomes can still struggle with this aspect of adulthood. 

But don’t fret. All is not lost.

The first step toward becoming a financial success as a freelancer is to create short-term and long-term financial goals. With clearly devised objectives tailored specifically to your level of minimalism or sense of financial well-being, you can start contemplating where to put your hard-earned cash instead of worrying about paying your monthly bills.

How to Create Short-Term Financial Goals as a Freelancer

To accurately set and attain short-term financial goals as a freelancer, define “short-term” as any fiscal objective you can complete within one to two years. This idea is twofold. First, you can see achievement within a small period of time, which helps build confidence and actualize the method of building wealth. In addition, you can use these short-term goals to vault yourself into long-term goals you simultaneously set for yourself.

Focus on Your Actual Needs

One of the biggest drains on your bank account is differentiating between wants and needs. However, overexposure to advertising can seep into your subconscious, turning a materialistic item into a need rather than a want. Combat this as strongly as possible. As a general rule, bring a minimalistic approach to your life. Shelter, food, clothing (in moderation), and a computer/Wi-Fi connection are the only things you need to become a successful freelancer while saving money. While it’s alright to splurge on an item every once in a while, don’t make it a habit. Your savings account will thank you.

If you find the wants-versus-needs predicament particularly troublesome, use the 50/30/20 principle. This approach sets measurable amounts to your budget:

50% of your after-tax income goes to living expenses
30% goes to extraneous items and wants such as entertainment and gadgets (however, you may want to tweak this on a downward slope to save even more in the short- and long-term)
20% goes straight into your savings account

By using the 50/30/20 rubric, you can curtail unnecessary expenditures while reaching your short-term financial goals.

Define Your Short-Term Financial Goals

Unfortunately, there is no one-size-fits-all plan for defining your short-term financial goals as a freelancer. Maybe you want to pay down your student loans, or perhaps you want to travel while you freelance. Either way, you’ll need to have a clear idea of what you want to achieve. To come to a solid conclusion, analyze your lifestyle or where you want to be in a few short months. Dream it and actualize it. If you’re feeling stuck, some of the more common short-term goals for freelancers include:

Saving for vacation or a digital nomad lifestyle
Building an emergency fund
Repaying debt
Reinvesting in your freelance business or yourself such as upgrading your computer or getting an online certification

This isn’t an exhaustive list of short-term financial goals, but it should give you some direction when it comes to planning.

Set Realistic Short-Term Financial Goals

If the idea of short-term financial goals leaves you overwhelmed, chances are you’re not making your goals realistic. The idea of saving up $10,000 in three months is tantamount to losing 30 pounds in three weeks. You’re setting yourself up for failure.

As an alternative, use SMART goals to implement your short-term financial objectives. SMART stands for:

Specific
Measurable
Attainable
Relevant
Time-bound

In a short-term sense, this means that you come up with a feasible course of action based on your income. Instead of saying something such as, “I’ll save $3,000 in the next few months,” create a more measurable and specific plan. Say “I’ll save $3,000 in the next three months by cutting back miscellaneous expenses and not eating out.” Not only is this a measurable goal, but it sets out a clear-cut route for you to save money. Combined with the 50/30/20 principle, this one-two punch should help you carve a path toward your short-term goals.

Expand Your Client Base

Expanding your client base hits the underlying problem of solving both your short-term and long-term goals. But in the short run, it can help you hit your objectives while building your income. Use the same SMART goals outlined above to help you find new clients. For example, say “I’m going to find two to three clients within a month by cold-pitching two prospective companies a day” instead of “I’m going to find a few clients in the near future.” Once again, setting attainable and measurable goals will make a world of difference.

How to Create Long-Term Financial Goals as a Freelancer

Creating long-term financial goals as a freelancer is a bit trickier than the short-term, especially if you’re part of the digital nomad horde. You aren’t guaranteed a steady paycheck, nor are you sure where you might end up in a year’s time. To exacerbate problems, you’re also without pension programs, retirement plans, or other investment options typically provided by an employer. Nevertheless, you can craft long-term goals that fit your earnings and plans three or more years into the future.

Even when you feel as though your steady-income, employed friends are living the good life with financial security, your success isn’t far off if you make the right financial moves. You made it this far on your own, right? Take these suggestions to heart and prepare for the next chapter of your life without having a meltdown about working until you’re 75.

Put Your Money in the Right Investments

To get started in sound investing, you’ll need about $2,500. Some companies such as Acorn or a similar investment website/app will let you start for $1 to $100. Regardless of which one you choose, investing this amount will pay dividends — literally and figuratively — down the road. A balanced portfolio of small-cap stocks and large-cap stocks will get you rolling. Or if you aren’t the financially minded individual, a mutual fund will take care of the work. Mutual funds blend a number of stocks into a fund that’s balanced by professionals, typically for a decent return.

For the more frugal investor, American T-Bonds or certificates of deposit will pay between 1 and 3% — far more than the 0.1% you get in most U.S. banks.

No matter what you choose to invest in, keep a watchful eye on the markets, but don’t freak out if they fall a bit. That’s all part of building long-term wealth.

Don’t Let Taxes Become a Burden

One could argue that paying quarterly estimated taxes falls under the umbrella of short-term financial goals or at least avoiding penalties and an audit from the IRS. Yet it’s paying these taxes that could keep you from a massive debt in the future.

In some cases, the IRS could take years to catch up with an underpayment of taxes. Then, bam. You’re hit with the balance plus interest and penalties. When in doubt, pay every cent of your estimated taxes on time at each required period (April 15, June 15, September 15, and January 15) to avoid a situation that can curb your long-term earnings. If you’re not used to paying taxes, figure out the basics and how much you’ll need to pay to successfully navigate your payments to Uncle Sam.

Figure Out What You Want Out of Life

Figuring out what you want out of life — especially financially — can be excruciatingly difficult. Do you want to buy a home? A rental property? Start a family? These are questions only you can answer. Whatever you decide, you need a plan. You can’t readily save for any of these situations in a few months or even a year.

If you want to start a family or buy a home, begin by researching the statistics. According to the U.S. Department of Agriculture, raising a child to the age of 18 in a middle-income household costs $233,610 — without college. Okay, you probably choked a bit on that one. But realistically, you’ll need to save money for your child on top of your own nest egg. That’s quite a strain on your finances.

If you want to buy a home, you may qualify for an FHA loan, which means you’ll only have to put down 3.5% of the total purchasing price. But add in private mortgage insurance (PMI), property taxes, and the mortgage payment, and you’re in for a pretty penny.

Therefore, your long-term financial goals as a freelancer will require an adjustment to the 50/30/20 principle. Take away from your entertainment expenses and wants and try to see the end goal. A prize exists at the end of the road, and you’ll take satisfaction from knowing you may have had to limit the conveniences in order to reach what you want out of life.

Think About Retirement

If you haven’t started planning for retirement already, you aren’t alone. According to a Bankrate.com survey, a shocking 41% of Americans have zero to 5% of their income socked away for retirement. Freelancing doesn’t make it any easier to save for your elderly years. But it doesn’t prohibit it either.

Fortunately, you have numerous resources to help you create a nest egg for the future. Take full advantage of Individual Retirement Accounts (IRA) or solo 401(k) plans. A Roth IRA is another financial tool that lets your money grow tax-free. It isn’t tax-deductible, but you can withdraw the funds after you’re 59 ½ without paying any income tax. Conversely, a traditional IRA gives you the tax breaks now, but you’ll have to pay taxes when you withdraw the money in the future. Either way, you’ll reap the benefits and watch your savings grow.

Secure Your Future with Smart Financial Goals

Setting financial goals is crucial for freelancers. It’s the foundation for building wealth and ensuring a stable future. Melding your short-term and long-term financial goals isn’t easy for anyone, but being a freelancer doesn’t make the situation any simpler. But if you analyze your goals, put together an actionable plan, and execute that plan, you just may find the stress melt right off your shoulders. Creating and sticking to financial goals can help you thrive. It’s the key to long-term success and financial security. Start today, stay committed, and watch your wealth grow.

Take the Next Step: Join Virtual Vocations Today

Ready to put your financial goals into action? Become a member of Virtual Vocations and find your next freelance gig. With a wide range of job listings and resources tailored for freelancers, you’ll have everything you need to succeed. Don’t wait — take control of your financial future today. Sign up for Virtual Vocations and start building the career and wealth you deserve!

What are your financial goals as a freelancer? Connect with Virtual Vocations on Facebook, X (formerly known as Twitter), LinkedIn, Instagram, and YouTube to share your thoughts and tips. We’d love to hear from you!