How Online Banking Can Help Freelancers Become Debt Free

Getting out of debt is more than a dream for me - it's a mission. I want to have the option of retirement at 50, be free of all debts except for my mortgage within the next 12-18 months, and pay off my mortgage -- in full -- within 10 years.

Aggressive, yes. Impossible, no. IF you take control of your finances. And, online banking has been a big part of helping me to control my finances and reach my financial goals - and on a freelance salary, no less. Here's how:

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1. Organization: I know it sounds old and redundant, but before you can accomplish anything, you must get organized.

Paying bills online keeps me organized because I can see, at a glance, what's going out and coming in. This eliminates missed payments, guesstimates as to what's due when, and how much money is left over at the end of the month, which leads me to my next point -- free money.

2. Free Money: As in, money that's left over after all the bills are paid. I use the "bill pay" feature of my online bank account to schedule bills for payment. For example, when I receive my electric bill, I immediately log into my account and schedule it for payment.

This way, week in and week out I know exactly what's coming due; hence, what's going to be paid. As I deposit a certain amount* each week, I know exactly what's going to be left over after everything is paid.

*If you are a freelancer, your deposits may be irregular. To combat this, put yourself on a "paycheck schedule." What do I mean? Pay yourself the same amount every week/month -- no matter what your income is. This will achieve two things: i) force you to budget your money; and ii) get you in the habit of treating your freelance career as a business.

You will also be more ambitious in reaching income goals because if you know that "pay day" is coming, but you don't have enough money to pay yourself, you will start to look for ways to make more money.

"Paycheck" Tip: To find out how much you can/should pay yourself each week/month, go back over last year's income and see how much you brought in, on average, each week/month. Pay yourself a percentage of this (75%-80%). Why only a percentage?

Until you get used to paying yourself this way, you may be short of funds, and/or have a hard time allotting yourself money this way. So, for the first 3-6 months, pay yourself less than what you actually average each week.

This does not mean you should spend/blow the extra, though. Let it sit there. Then, once you are used to getting a "paycheck" every week/month, you can up what you pay yourself. Right now, you just want to make paying yourself like this a habit.

3. Track Income & Expenditures: Piggybacking on the above point, online banking forces me to keep track of my money. How?

With online banking, you have payment history at your fingertips. Want to know how much you've paid Visa the last six months? How much, on average, you spend on electricity? Ho w much you deposited last month?

Instead of digging through paper statements and receipts, you can pull up account history information going back months - in most cases, up to a year's worth of information. This has helped me tremendously.

For example, I recently switched to a level payment plan* for my electric. I did this because it allows me to create a more effective budget. So, for example, instead of paying $100 one month for electricity and $168 the next, my payments are the same every month - this is huge if you're trying to effectively track expenditures.

*A level payment plan is one where you pay the same amount each month for 12 months. It's re-evaluated every 12 months and your payments are adjusted up or down based on the amount of electricity used over the previous 12-month period.

Getting out of debt is like any other goal - you have to take control of it, instead of letting it control you. Online banking puts my finances under my control - with one simple click of the mouse.

Whatever your financial goals - online banking can help you achieve them - quicker than you ever imagined.
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How to Get Out of Debt on a Freelance Salary

The number one problem most freelancers have is that their income is inconsistent. This makes it hard to plan. As a freelancer with some financial savvy, I've noticed some things that have helped me keep the debt monster at bay.

NOTE: Notice I wrote "at bay"; I haven't completed escaped him, but he's not an all-consuming threat either.

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1. Get a job you hate: Why? A little story:

Jerry Seinfeld said that he sold light bulbs before he became rich and famous. He said he hated it, but he did it because it made him work that much harder on his comedy. His thinking was, "The sooner I succeed, the sooner I could give up selling light bulbs.

I thought this a brilliant concept.

Moral of this story: Complacency kills and this is kinda like reverse psychology. Imagine if you hated what you were doing. You'd work much harder to not have to do it and put every penny you earned towards the debt you owe so you could quit - as soon as possible.

2. Save ONLY $1,000: One of the things I learned from Dave Ramsey's book, The Total Money Makeover, is to have an emergency fund.

Hold on, don't tune out. This is not having 3-8 months of expenses in the bank, like most financial gurus will tell you. Dave says to start with $1,000. Why this amount, and why is it so radical?

When you hear, save 3-8 months of expenses, most of us turn a deaf ear. If you're struggling just to keep up with the bills as they come in, putting $5,000, $10,000 or more away seems impossible.

But, most of us can imagine socking away a grand.

Mr. Ramsey's theory is that it's the little emergencies that cause us to constantly whip out the plastic and before we know it, we're a few thousand in debt. He says, if you have an emergency fund of $1,000 and the transmission goes on your car, you won't have to finance it with plastic.

You pay cash for it and therefore you haven't created more debt at a time when you can least afford it - when things are going bad.

I'm a big believer in the universe talking to you. Some may call this presence God, Buddha, Allah; whatever you call it, I'm a big believer in a higher power. Around the time I read this, three things happened that added up to almost exactly a thousand dollars.

My car needed new rotors (I still don't know what they are, but apparently my jeep was in bad need of them); my fiance's car needed new tires and the thermostat in our house went kaput - in the dead of winter.

Now, we were lucky enough to be able to pay for all of this without charging any of it, but it didn't come out of an emergency fund; it came right out of earned money, which really put a crimp in the holiday budget.

Moral of this story: Put away funds for Murphy's law because when you least need something bad to happen, it will. Do this BEFORE you start paying off debt. Mr. Ramsey says it kind of inoculates you against ole man Murphy.

NOTE: There is a point where you do build up the 3-8 months of living expenses, but it comes later in his plan.

3. Chunk pay: What I mean by this is, when you get a chunk of money from a project, close your eyes, write out the check and just pay a darn bill.

I know from my own personal experience that when most of us get a chunk of money at one time, we want to treat ourselves a little, pay only what's due (maybe a little more), and "save" a little.

The reason save is in quotation marks is because eventually that gets eaten up by those expenses that we can never seem to account for.

Another of Mr. Ramsey's philosophies is that money you don't have a plan for will find a way to leave you. So, if you know you're getting a check in two weeks for $1,748.32 for a project you just completed, look over your bills and assign a debt to it. While it may bug you to do it, you'll feel so much better once the check is in the mail.

Moral of this story: You can track where your money went; you can see the progress. This is important because when you remember that client who drove you bonkers and the project took you 8 more hours than you billed, at least you can say it was worth it because Visa is finally paid in full.

And you know what, I've taken on projects this year that in the past I would have passed on because I have a goal. Getting out of debt takes laser focus - and it gets addictive. But, since I've been on Dave Ramsey's plan, I've made more progress in three months than I made all of last year - and I'm not THAT bad with money.

I've found that it's those little things that get it in the way of success. By chunk paying, getting an emergency fund in place and doing jobs I don't necessarily like, my debt-free goal is within reach - and yours can be too!

Tomorrow's Post
Debt-Free Living: A Freelancer's Personal Tale of Getting -- & Staying -- There
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Copyright Notice: May be reprinted with the following, in full: Yuwanda Black is the publisher of InkwellEditorial.com: THE business portal for and about the editorial and creative industries. First-hand freelance success stories, e-courses, job postings, resume tips, advice on the business of freelancing, and more! Launch a Profitable Freelance Writing Career in 30 Days or Less -- Guaranteed! Log on to InkwellEditorial.com to learn how.
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