Sarah Jessica Parker, the actress from “Sex and the City,” told podcast host Alex Cooper on a recent edition of “Call Her Daddy” that she used to make $40 stretch for three days before stardom, fashion, or multi-million dollar deals.
Having only “a little money in the bank” from her work on the 1980s CBS sitcom “Square Pegs,” Parker claimed, she moved out on her own at the age of 18. Therefore, she would withdraw her money “very judiciously,” she claimed, only allowing herself $40 twice a week for her daily necessities, as she went out for auditions, unsure of when the next major job would come.
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Using the CPI inflation calculator from the U.S. Bureau of Labor Statistics, $40 in 1983, when Parker was eighteen, would be around $132 today after accounting for inflation.
Parker recognized that financial stability was important, even though she claimed that her passion to perform drove her early career more than fame or money: “There’s security in financial gain” and “security in being able to pay your bills,” she stated.
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Parker’s stringent budgeting may have served her well in the near term, but according to Christopher Haigh, CEO of the financial advising business Icono Capital, concentrating on daily expenses isn’t the best way to plan and save money as a freelancer, gig worker, or artist nowadays.
“Budgeting for freelancers and gig workers shouldn’t be about rationing pennies or envelope systems, it should be about building a system that absorbs volatility,” Haigh asserts. “If you’re relying on extreme budgeting methods to stay afloat, that’s a sign your financial foundation is cracked.”
According to Haigh, you can still create effective budgeting techniques even if your income is erratic. According to a financial expert, here’s how to manage those fluctuations and begin moving past scarcity thinking.
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Knowing what you’re really spending is the first step in creating a budget, according to Haigh. “Look closely at your last three months of expenses to get a sense of that amount,” he advises.
You can stop speculating and begin preparing with actual numbers if you have a solid understanding of where your money is going on a regular basis, according to Haigh. At that point, you can begin applying his “bucketing strategy,” which involves dividing up your earnings into various “buckets” each time you receive a paycheck.
A bucket technique divides your expenses by a proportion of your income, as opposed to tiered budgeting, which allocates fixed cash amounts to spending categories each month. According to Haigh, it can offer flexibility for the economic swings that artists, gig workers, and freelancers frequently have to deal with.
“Every time you make a dollar, it should be allocated to particular buckets no matter what,” he states.
According to him, the buckets for a gig worker or freelancer with little money should begin quite simply:
-
Essentials,
like rent, food and transportation:
50% to 60%
-
Short-term savings to cover emergencies and irregular expenses, such as car repairs and quarterly bills:
10% to 15%
-
Wants and discretionary purchases,
such as dining out or paying for a streaming service:
10% to 15%
-
Long-term savings and investing, like contributing to a Roth IRA:
5% to 10%
(This can be optional at first when cash is extremely tight, Haigh says.) -
Taxes, if you’re responsible for withholding your own taxes:
10% to 20%
According to Haigh, forming sound habits early on might help you achieve your goals later, even if the amount you’re saving doesn’t seem like much. He adds that you may automate those routines and relieve some of the burden by using a budgeting program like Tiller, Monarch Money, or Copilot.
Moreover, keeping an emergency fund is crucial if you anticipate going weeks or months without a job, even if it might be challenging to save money when your income is irregular, according to Haigh. He advises gig workers and freelancers to save at least six months’ worth of basic living expenses, if at all possible. This is more than the three months he usually suggests for W-2 employees, he says.
“The next step should be to open up options for growing your income if you are unable to save enough money for several months, which is often the case for people with unstable income,” advises Haigh. You can’t budget your way out of shortage, he argues.
Haigh frequently counsels his customers to take up part-time work or diversify their gigs in order to lessen financial stress, he says.
According to Haigh, while it’s crucial to develop muscle memory when it comes to allocating revenue to your “savings bucket,” your first priority might need to be determining how to increase that income first.
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