Keep your finances in order during and after a dry spell

Mar 10, 2014

Dry spells can wreak havoc in a freelancer’s finances.

How do you maintain as much order as possible while trying to stay on your feet? Establishing some sort of financial stability is key for freelancers who want to get the things financial health (and a good credit rating) can buy, like a home mortgage or a business loan.

Here are a few tips on maintaining good financial habits during dry spells and reestablishing good credit after a bad time.

During a dry spell

If at all possible, find more work. I thought I’d start with the obvious. Use your dry time to attend networking events, reach out to previous clients, and send out queries and resumes. Here are more tips on how to find clients.

If that fails, bite into your savings. Sometimes it hurts to watch your hard-won savings go, especially if they were for some particular purpose (like vacation). But now’s the time they’re most needed. Keep careful tabs on how much you’re taking out, and how long your savings is going to last. It may be useful to set a last-resort plan and date: “If I don’t get a check by this date, I will have to do X.” Planning ahead is often the secret to keeping your finances in order.

If you can’t pay bills, start setting payment priorities. Rank your bills by penalty for late payment and interest rate. If there are vendors you can call and negotiate with, do so. This way, when the funds do come in, you know you’re paying as little as possible in interest and penalties. Also rank by priority for your business: If something was shut off (like your phone), would it negatively impact your business?

Pay what you can. Even if you can’t pay the full amount of your credit card debt or meet the minimum, pay some of it.

Always call. Call your bank to give them a heads-up and see if they can waive any late fees. If you’ve established a good relationship with a banker at a community bank or credit union, this is the time to take advantage of those relationships.

Try negotiating a lower interest rate. If you’ve got some interest charges but have a good overall payment record, try negotiating a better interest rate with your bank.

Cancel monthly subscriptions. HBO and Netflix, we’re looking at you.

Go to cash. Take out your daily or weekly expense allowance in cash. You’ll find it much easier to find out where your money is going.

Try not to live off credit cards. Think through all your available options before you decide to use your credit cards to rack up debt. If you need cash now, your best option may be a personal loan from a bank or credit union. The interest rate is typically lower than a credit card.

Never sign up for a store credit card. Signing up for an “easy-to-get” store credit card may seem tempting, but there’s a reason their customer standards are lower: they often make money off of very high interest rates on customers who can’t pay on time.

After a dry spell

Plan in advance. Don’t wait to get your check from a client to figure out where that money is going. Calculate exactly what amount is going where. This future planning can prevent spending splurges on payday.

Know what you’re up against: credit reports. After a period of financial mishaps, you may decide to order a free credit report in order to figure out where you stand. From this point, you’ll be able to determine how much reconstruction you need to do. You can order one free every twelve months from

Pay new bills or old bills? In order to figure out whether or not you should pay old bills or your latest bills, study the fee structure of each debt and when penalties are incurred. What debts have the highest interest rates? If you’ve already received a late penalty, when does the second late penalty hit? This may require some significant time and calls to your various creditors.

Maintain old accounts. A positive credit history with a bank you’ve had a long-standing relationship with can help your credit score in the long run. You may choose to pay off credit card debt on your oldest card first.

Start paying at least the minimums, on time. If the new checks don’t cover all the debt, come up with a budget and timetable. It may make sense financially to not pay off all debts at once. Work out a timetable with yourself and with your bank or other creditor. Being on time is almost always very valuable in rebuilding credit.

Keep up healthy spending habits. Maintain lower spending even during high periods so that you can protect yourself against future dry spells.

Save! Even if you have some debt that you’re paying off on a regular schedule, set aside a chunk of each client check for savings. Socking away at least 10% of each client check means you will always maintain financial stability and good credit in rough times. Plus, when dry spells come, you won’t have the stress of paying your rent and finding your next gig.

Other articles that may help:

How to cope with freelance dry spells

Swimming in Revenue Streams

6 Budgeting Tips for Freelancers

The best banks for freelancers

Notice: We’re sharing this article for informational purposes only; this does not constitute legal or financial advice.

How do you keep your financial house in order during dry spells?