Establishing financial habits as an independent contractor helps you save, invest and allocate the money you make from clients and align it to grow your business. Here are some of the 5 greatest financial habits used by independent contractors and freelancers.
1. Passive Investing and Passive Income
It all comes down to being passive.
Passive investing has become and continues to be a huge phenomenon in recents. Like it’s eponymous name, the passive style of investing is like a glacier — it moves slowly, but it can cut through rock.
The same can be said about passive income. The idea is that automatic, reoccurring income can win the day. If you are spending your energy trying to find new clients to replace the old ones then you’re like a dog running on a trendmill — it’s just keeping you stationary.
Instead the best way to think about investments and passive income is to make a decision once (at the beginning), stick to the same simple strategy and keep doing it automatically.
Make the journey of investing as simple as possible like in a high-quality electrically-traded fund.
2. Think about Capital Allocation
Warren Buffett is probably the one to popularize this term, Capital Allocation.
Capital allocation is the primary role of a CEO and in our case it applies to the independent contractor too. There are only a few ways you can spend your money.
You can save it for later, you can reinvesting it, pay it out as a dividend or income or buy back stocks. For freelancers, the most viable option is to allocate capital to help grow the business and improve business outcomes by investing in it.
3. Investing in Processes
Investing in process saves time and improves business outcomes. There are many software solutions that can help you with this as a freelancer and are free or for a small fee per month (Freshbooks is good for invoicing for example).
The processes created helps for you to focus on things that are higher priority rather than things. You can also virtual assistants with the process too to help you do smaller tasks.