Congratulations, you're on your way to becoming a wealthy freelancer! You've successfully created your own company, saved for emergencies, paid off your debts, and made your clients happy. You're running payroll and investing in low-cost, diversified investments that line your pockets and not your greedy advisor's. You're taking full advantage of the tax-advantaged investment accounts available to you and are contributing to them regularly.

Now that you're seeing progress, it's time to get a bit philosophical. Personal finance is the art of balancing between current wants and future needs. It's personal finance because everyone's perspective is different.

Earlier we touched on budgeting and how it's the cornerstone of wealth building. Periodically examining your past expenditures and planning your future ones keeps you abreast of your progress and can help you modify your behavior to meet your goals.

Because your budget is zero-based and accounts for every dollar of income, we can actually imagine it has having two main parts:

• Expenses: The income you're going to spend this month.
• Savings: The income you're going to save, invest, or use to pay down debts.

By simplifying our budget down to these two components, we can divide our monthly income by our amount saved in order to come up with our savings rate, the percentage of our total income we retain versus spend. Let's say our simplified budget looks like this:

• Monthly Income: $3,000
• Expenses: $2,000
• Savings: $1,000

If we're bringing in $3,000/mo, spending $2,000/mo on our household expenses, and we're retaining $1,000 toward our investments, that means our savings rate is:

$1,000 / $3,000 = 33.3%

Savings Rate

Safe Withdrawal Rate

Giving

Case Study: A Little Planning Goes A Long Way

The neighbors are always asking my parents how they did it. Last year, my mom and dad stopped working, packed their things, sold my childhood house, and moved to Florida. They often joke about how they're the youngest people in their retirement community. At 55, they're retiring a decade before the generally accepted age of 65.

When I was growing up, I never quite understood why my parents thought everything was so expensive and why they were so hesitant to spend money. It was because I hadn't had the epiphany they had: Saving more and spending less will mean being able to retire sooner. An enhanced savings rate combined with moving to an area of the country renowned for its low cost of living means they're now able to enjoy a longer retirement and a shorter working lifetime.

My parents and I talk about it regularly. I think it took me the better part of my twenties to grasp what is actually a simple concept. They reassure me I'm ahead of the curve. The best time to start investing is 20 years ago. The second best time is right now.

Conclusion

I may have written this book, but it's only because I was once confused, ignorant, and broke working as a freelancer. It took me years to finally recognize how important my finances are to my overall well-being.

I hope this book provides you with a plan to help turn your freelancing career into a wealth-building machine.

It's much easier to read books about business than it is to apply the principles as practice. That's why I want you to read to the end of this chapter and then close this book. Make a list of everything you need to do to get your business producing wealth for you and then start doing it. Refer to the book when you're lost, but don't make reading the book a substitute for action.

I want to know when you start seeing results. Email me (tj@guilded.co) your story and I'll include it in future editions of the book.