This transcript was generated from the episode audio and may contain minor errors.
How can a freelancer pay herself a stable salary? Feast or famine income doesn't have to mean feast or famine life. We're going to talk today about a simple system that turns lumpy freelance revenue into a more predictable paycheck. And this is a big issue for new freelancers in particular. You get into freelancing because it offers freedom. And that sounds great. You're set in your own schedule.
You're going out and attracting the clients you want. And all that is fine and well until the calendar turns into cliffhanger months, nail biter invoices, and a plot twist called quarterly taxes. So today we've got a listener who is, I believe she is a designer. Her income swings quite a bit. She makes $8,000 some months. Other months she makes a bit more than $1,000. So, you know,
quite a range here. She doesn't want a complicated corporate payroll. She just wants rent money that shows up on time every month. So let's talk about that system, that three bucket system that can help you have more predictable income when you are freelancing or otherwise working a side hustle that has variable income. Thanks for tuning in today. Detailed question in my answer coming right up.
Hey, Chris. Mariana here. Longtime reader of your books. I also discovered side hustle school when I was Googling how to survive feast or famine freelancing. My design business can pull in $8,000 one month and then limp along at $1,200 the next. I'm tired of living off whatever is in
the checking account at the bill pay time. Is there a smart way for a solo freelancer to give herself an actual salary? Something consistent without having to set up a full S Corp payroll. I'd love a framework for smoothing out cash flow so rent, groceries, and taxes feel predictable instead of stressful roulette. All right, we have another question similar to this coming up in a few days. So I'll make sure I give you some detailed strategies that vary a bit. Hopefully
it'll be helpful. One approach for someone, another approach for someone else. Here I want to suggest you think of your freelance income as going into three different accounts. All right, and you can physically set up three different accounts to do this. We've talked about this a couple of times before as well. Mike Michalowicz and his profit first system, very helpful. So a modified version
of that here is you have an operating account. You have a tax account where you're basically saving money to pay those quarterly taxes and your personal pay account. This is your owner pay account, your future salary pool. And so the trick is to direct this on a fixed schedule instead of letting it just kind of be totally unpredictable. So you've got these three accounts, operating, tax holding, owner pay account. Operating account is where all client payments land. Money comes in,
it goes in this account. Tax holding account, 25 to 30% of gross, you just transfer immediately on deposit, just goes there. You kind of hang on to it. That way when taxes come, you've got that money. And then your owner pay account, as I said, your future salary pool. So next, decide on a
baseline owner pay. Look at the last six to 12 months, try to find the lowest consistent monthly revenue, one that you hit at least 70% of the time. In this case, let's say it's $3,000 for your side hustle income, $3,000 a month. Pick a conservative pay figure just under that, maybe $2,500. In this example, that becomes your monthly paycheck. Okay, next, automate the pipeline so
that these transfers happen, well, automatically, the tax transfers automatically going out. And then, you know, once a month, or you could do it twice a month, like on the first and 15th, you're going to transfer your monthly paycheck, and then only spend from owner pay for personal expenses. This way you have a consistent paycheck coming in. Now, what about when you make more money? Okay, of course, you want to make more than that. This is why it's a baseline. Okay,
build up a buffer, build up your operating account to a two month buffer, two month baseline expenses. And then once the buffer exists, well, if you make extra money, if you have like a feast month in this famine or feast model, move a percentage of that into your profit account. It's guilt free fun or investment money. And that's great. Like that's what it's all about. So you want to try
to get to those points as soon as possible. But in the meantime, you have that baseline payment coming in to help cover some basic expenses. Now, once you do this, the reason why it works so well is you have separated earning from spending and the business observes volatility. Like your personal life gets this regular paycheck, no extra paperwork, just buckets and scheduled transfers. This works for a lot of people. I think it can be helpful in
this situation. So try it out. Let us know how it goes. Listeners, let me know what's up with you as well, sidehustleschool.com. Lots of updates, notes, pages, their newsletter list that I send out every Sunday. And of course, we'll continue to feature content from listeners as they launch
and grow their projects. Hey, thanks so much for being out there. You're awesome. My name is Chris Guillebeau. This is a side hustle school.
from The Onward Project.
