Flourishing on a fluctuating income

Knowing your experience and expertise and the value it brings to clients has a big impact to your finances as a freelancer.

According to the Australian Institute, casual employment grew by over 400,000 positions between May and November 2020¹ and it’s believed casual, contract and freelance roles make up 30 percent of the Australian market.² Whether you’re in these roles, self-employed or considering the switch, knowing how to effectively manage your finances when your income changes from week to week can be a steep learning curve.

Amanda Kelly, co-founder of Freelancing Gems, Juliet Redding from Redding Fry Financial Advice, and teacher’s aide Vicki Dorizac, understand the challenges and have shared their advice on how to budget, save and flourish on a fluctuating income.

Know your worth

Amanda Kelly said knowing your experience and expertise and the value it brings to clients has a big impact to your finances as a freelancer.

“In the freelance industry, where income fluctuates, it’s important to know the value you bring and to charge clients accordingly, so you can factor in your financial obligations and goals,” Ms Kelly said.

Ms Kelly recommends that freelancers and contractors add 20% to 30% on top of their hourly rate to cover tax and superannuation obligations, as well as factoring in annual leave or sick leave to their rate, since this is not paid for by an employer.

“It’s also important to plan for those periods when you’ve maybe lost a client, and you need to cover your costs while you find another client or another job.”

Plan for the future

Juliet Redding, financial advisor and director of Redding Fry Financial Advice, said people on fluctuating and varying incomes need to plan for the day-to-day as well as retirement.

“From a budgeting perspective, it’s about planning for the future. This includes knowing what your expenses are, what your outgoings are and putting aside money for your tax, as well as trying to reduce your spending. Have some money set aside for a rainy day and remember to keep contributing to your super,” Ms Redding said.

“It’s really important for those who have a fluctuating income to have a strong understanding of your financial position including what their baseline is, which is the bare minimum expenses that need to be covered on a monthly basis. And making sure they have strategies in place to achieve the retirement they want,” Ms Redding said.

Prioritise what’s important

For teacher’s aide Vicki Dorizac, managing her household and family expenses on a fluctuating income means being wise about her spending and prioritising what’s important.

The single mother-of-three only receives a salary during school terms, so ensuring she can cover expenses during unpaid holiday periods by sticking to her budget is essential.

“I look at my expenses at the beginning of the year to understand my expected salary, what I need to factor in for essentials like petrol and electricity and how to best delegate the rest for spending,” Ms Dorizac said.

Looking for alternative income streams during periods of fluctuation can be a viable way to supplement your lifestyle. Ms Dorizac hosts international students each year during the school holidays to supplement her income.

Her smart spending and saving habits have meant that she has been able to send her three daughters to a private school. She recommends that parents on lower incomes ask their school about any possible concessions.

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Personal view disclaimer
The opinions expressed and those providing comments are theirs alone, and do not necessarily reflect the opinions of the QSuper Board. No responsibility is taken for the accuracy of any of the information supplied and you should seek advice for your circumstances.

1. australiainstitute.org.au/wp-content/uploads/2020/12/Labour-Force-2020-Briefing-Note.pdf
2. seek.com.au/employer/hiring-advice/rise-contingent-workforce-attracting-managing-engaging-transient-staff