As a freelancer in Lagos, my journey to financial stability has been anything but conventional. Unlike salaried workers, I don’t have the luxury of a fixed income or employer-provided benefits. Instead, I’ve had to craft my own financial strategy, one that adapts to the unpredictability of freelance work. My name is Ada, and I’ve been freelancing for over five years, working primarily in digital marketing and content creation. Today, I want to share my story and the financial planning strategies that have helped me thrive as a self-employed individual in Nigeria. This isn’t just my journey; it’s a guide for anyone looking to gain control over their freelance finances.

Starting the Freelance Journey: Building a Financial Foundation

When I first started freelancing, I was ecstatic about the freedom it offered—no more 9-to-5, no boss breathing down my neck. But with freedom came the realization that I had to be my own financial planner. There was no steady paycheck, no health insurance, and certainly no pension plan. I knew that if I didn’t get my finances in order, I would quickly find myself in trouble.

1. Establishing an Emergency Fund

One of the first things I did was to create an emergency fund. Freelance income can be unpredictable, with some months being more profitable than others. To ensure that I could weather the lean times, I started setting aside a portion of my earnings each month.

Step-by-Step Solution:

• Set a Goal: I aimed to save enough to cover at least three to six months of living expenses. This amount would cover rent, utilities, food, and other essentials.
• Automate Savings: I used digital banking platforms like PiggyVest to automate my savings. Each time I got paid, a percentage of the money was automatically transferred to my emergency fund.
• Discipline is Key: I treated my emergency fund as untouchable. It was only for genuine emergencies, not for splurging on a new gadget or a spontaneous trip.

In Nigeria, where economic instability can be a constant concern, having an emergency fund provides peace of mind and financial security.

2. Creating a Budget that Reflects Irregular Income

Budgeting as a freelancer can be tricky because income fluctuates. Some months, I earn significantly more than others, so I had to develop a flexible budgeting system that could handle these variations.

Step-by-Step Solution:

• Calculate Average Monthly Income: I tracked my income for six months to determine an average. This figure became the baseline for my budget.
• Categorize Expenses: I divided my expenses into fixed (rent, utilities) and variable (entertainment, dining out). Fixed expenses were prioritized.
• Budget on the Lower End: I based my budget on the lowest monthly income I had received during the six months. This ensured that I could manage even in lean months.
• Use Budgeting Apps: Tools like Money Manager and Expensify helped me track expenses and adjust my budget as needed.

This approach allowed me to stay in control, even when income was unpredictable. In months when I earned more, I saved or invested the surplus.

3. Managing Taxes and Legal Obligations

As a freelancer, I’m responsible for handling my own taxes. This can be daunting, especially since Nigeria’s tax system can be complex. To avoid running into trouble with the tax authorities, I made sure to stay on top of my obligations.

Step-by-Step Solution:

• Register Your Business: I registered my freelance work as a sole proprietorship with the Corporate Affairs Commission (CAC). This not only legitimized my business but also made it easier to handle taxes.
• Set Aside Money for Taxes: I set aside a percentage of every payment I received for taxes. I opened a separate account where I deposited this money to avoid the temptation of spending it.
• Hire a Tax Professional: I consulted with a tax professional to ensure I was filing correctly. This might seem like an extra expense, but it saved me from costly mistakes.
• Leverage Tax Deductions: I learned about tax deductions available to freelancers, such as expenses for internet, office supplies, and business travel. Keeping detailed records of these expenses was crucial.

Paying taxes is a legal obligation, but managing it efficiently can save a lot of stress and potential penalties down the line.

4. Diversifying Income Streams

Relying on one source of income can be risky, especially in freelancing. To mitigate this risk, I diversified my income streams. This not only provided financial stability but also opened up new opportunities.

Step-by-Step Solution:

• Identify Your Skills: I made a list of all my marketable skills—digital marketing, content creation, graphic design—and thought about how I could monetize them in different ways.
• Explore Multiple Platforms: I signed up on multiple freelance platforms like Upwork, Fiverr, and LinkedIn ProFinder. This increased my chances of getting consistent work.
• Create Passive Income: I started a blog and monetized it through affiliate marketing and ads. This provided a steady stream of income without requiring constant effort.
• Offer Online Courses: I leveraged my expertise to create and sell online courses on platforms like Udemy. This not only generated income but also enhanced my professional reputation.

Diversifying income streams is particularly important in Nigeria, where the economy can be volatile. It ensures that you have a financial cushion even when one source of income dries up.

5. Investing for the Future

Finally, I knew that I needed to plan for the future, including retirement. Freelancers don’t have employer-sponsored retirement plans, so it was up to me to create one.

Step-by-Step Solution:

• Start Small: I began by investing a small portion of my income in low-risk investments, such as government bonds and mutual funds through platforms like Cowrywise.
• Increase Contributions: As my income grew, I increased the amount I invested each month. I treated it like a mandatory expense, similar to paying rent.
• Educate Yourself: I spent time learning about different investment options, such as stocks and real estate. The more I understood, the better decisions I could make.
• Plan for Retirement: I opened a personal retirement savings account (RSA) with a Pension Fund Administrator (PFA). Regular contributions to this account are crucial for long-term financial security.

Investing for the future is vital for freelancers, especially in Nigeria, where social security options are limited. Building wealth through smart investments ensures that you’re prepared for whatever the future holds.