Although freelancing offers a lot of flexibility, the work can be inconsistent.
This affects the stability of your income.
Using credit cards and loans to stay afloat is all too common in this scenario.
Whether it’s debt you racked up when freelancing work was slow or debt from a big purchase, paying it off is critical.
This is because debt can alter your quality of life and have a horrible impact on your well-being.
Prevent it from casting a dark cloud over everything in your life.
Adopt the tips we offer in this article to pay off debt efficiently and carve out a path toward financial freedom.
What’s the Impact of Debt on Freelancers?
Debt can affect your mental and physical health.
For instance, stressing over debt can cause you to lose hundreds of hours of sleep per year, affecting your body’s ability to reset and function properly.
You can slip into a life of debt avoidance that keeps you fearful, worried, and hopeless.
You also put off your dreams because you just can’t afford to pursue them, making you feel even worse.
The financial ruin debt can cause is apparent.
But the impact it can have on your mental, physical, and emotional stability might be even more noteworthy.
How Can You Pay Off Debt Efficiently and Eventually Achieve Financial Freedom?
Like any business, there are ups and downs in freelancing.
Whether you’re making a lot of money or down to one client right now, actively paying off your debt is a must to keep your holistic health strong and build a solid financial foundation.
1. Change Your Mindset
Debt can make you feel down all of the time. You’re worried about debt collectors.
You’re anxious about paying bills. You’re unsure if you’ll ever pay off your debt and become financially comfortable.
A negative mindset and sad spirit aren’t conducive to climbing out of debt efficiently.
You must change your mindset so that it’s inherently positive and solution-seeking. Also, stop putting limitations on yourself.
Believe that you’re capable of achieving financial freedom and paying off your debt entirely.
Challenge every negative thought you have about yourself and your financial situation and replace them with positive ones.
Explore many solutions for paying off debt to remind yourself there are various avenues to becoming debt free.
It’s also a good idea to come up with a mantra to repeat whenever you start to feel overwhelmed by your debt.
Something as simple as “I will pay off my debt by (year) no matter how difficult things seem right now,” will do the trick.
2. Add Up Your Debt
Many freelancers don’t have a clue how much debt they have.
The thought of debt can give people so much anxiety that they just avoid the subject altogether.
This is especially true for those who don’t have the means to pay it down.
But what most people don’t realize is that knowing how much you owe can give you a lot of relief.
You know exactly where you are and can begin constructing a viable plan for paying things off.
Write down how much you owe and to whom.
Once you’ve compiled a list of your debts, add up the total. Then, move on to developing a plan for paying everything off.
3. Determine How You’ll Approach Paying it Off
Now that you know how much you owe, how do you want to approach paying it off?
Some people start with their smallest debt and work their way up.
Some start with the biggest debt, putting double or more than the minimum payment on it while maintaining minimum payments on the rest.
Consider how much money you bring in each month and what’s left over after you cover your bills.
Allocate a significant amount of what’s left over to your debt.
We know that freelance work can be inconsistent at times.
But you’re still bringing in something.
Shape your debt payment amounts around a number that you know you’ll bring in, even during your slow months.
4. Consolidate if Appropriate and Possible
It might be a lot easier to manage and pay off your debt if you can consolidate it into one payment.
Note that consolidation isn’t always the best option.
If you can’t get an interest rate lower than what you’re already paying on existing debts, consolidating may not be a good idea.
On the other hand, if you can wrap multiple high-interest loans into one with a lower interest rate, consolidation is worth pursuing.
Sit down with a banker to see if you’d qualify for a consolidation loan.
They can give you details on qualifications before you apply so that your credit score isn’t negatively impacted by a denial.
You should also explore consolidation loan options from online banks.
Many of them have less rigid qualifications for approval. However, interest rates can be high. So, make sure you’re paying attention to all the details before moving forward.
5. Live Below Your Means
Living below your means can help you pay off debt faster.
It also sets you up to achieve financial freedom because you’re able to save and put your money toward things that make you more money.
The first step to living frugally is finding ways to cut down expenses.
For example, cut out expensive leisure activities, like eating out and shopping.
Save on home internet by bundling it with other services like phone and TV.
Thrift for clothing, appliances, and home goods.
Grocery shop with a strict budget. Use public transportation.
Living below your means will free up funds to pay off your debts and save money on a low income.
6. Start a passive income stream
One of the best things you can do to fast-track paying off debt and establish a solid financial foundation is to start a passive income stream.
Unlike an active income stream, you make money without having to be actively involved.
You can continue to freelance while your passive income stream makes you extra money in the background.
Renting your car out is a great way to make passive income.
You can list your car on a car-sharing platform.
People will book your car at your established rate for however long you permit.
The most you have to do is exchange keys with renters and keep up with maintenance procedures.
Or, you could do affiliate marketing in blog posts you’re already going to write for your own blog.
Keep in mind that establishing a passive income stream requires a good amount of work upfront.
But once it gets going, maintaining it is a breeze.
You can use what you earn to double up on debt payments. You can also use some to grow an emergency fund and eventually invest.
Pay Off Debt and Thrive Financially
It’s so hard to believe there’s a light at the end of a really long debt tunnel.
Especially when you’re a freelancer struggling to make ends meet. But the truth is, becoming debt-free is achievable even on the tightest budget.
Attack your debt with the tips above and you’ll be well on your way to financial freedom.