If there’s one positive thing that came out of the Covid-19 pandemic, it’s this:
The way we think about working has changed. Forever.
During lockdown, employees and employers alike started to rethink pretty much everything we thought we knew about traditional work.
Employers realized that they didn’t necessarily need to pay for expensive office space if their employees were just as productive working remotely.
And a number of office workers got a taste of the wonderful freedoms that come with a life unchained from the 9-5. For many, the appeal of setting their own schedule and working wherever meant they would never return to an office—even if that meant quitting their job altogether.
But here’s the other side of the coin: When you leave a steady job to work independently, you also might be saying goodbye to a steady paycheck. In fact, you may be headed for the financial rollercoaster with an ominous name:
Feast or famine.
This term describes a life where you’re rolling in dough one month, and a few weeks later you’re hunting through the couch for coins to pay your bills.
I know about the feast or famine lifestyle first-hand. I started my first freelance business a decade ago and had almost no clue what I was doing. But over time, I picked up a few methods that made the feasting a lot more common and the famine periods fewer and farther between.
I’m going to share those methods with you in this article.
What does feast or famine mean?
Here’s a basic definition of feast or famine:
Feast or famine occurs when a freelancer or other independent worker experiences extreme fluctuations in their income.
There are no hard rules around what amount of income you need to be considered feasting or famished. But if you’re experiencing whiplash when trying to make ends meet month to month, then chances are you’re going through the feast and famine cycle yourself.
Note that “feast or famine” can also be used to describe an abundance/lack of things other than income. You could win a bunch of games of Scrabble against your friend, then lose a bunch in a row and say, “Game night has been feast or famine for me.”
You will also hear people use the term “variable income” to mean something similar. Though this phrase doesn’t carry the same gravitas as “feast or famine,” it’s more likely to crop up during tax time (more on that later).
For the purposes of this article, we’ll be talking about feast or famine situations as they apply to your wages as an independent (or partially independent) worker. Here are some examples of when people might experience feast or famine:
A part-time remote worker is living flush thanks to their side hustle selling jewelry online (feast). Then they lose that part-time role and find their digital business doesn’t bring in enough revenue on its own (famine).
A small catering business has a massive boom in the summer season, when there are lots of weddings (feast), but their bookings during the winter months are few and far between (famine).
A newbie freelancer goes months doing small projects for a few hundred dollars at time (famine), only to land an enormous contract that triples their income in a week (feast).
These scenarios might seem impossible to avoid, but there are ways to prevent the feast or famine lifestyle, even if you’ve only just begun working for yourself.
Below, I’ve outlined the process you can follow to spend a lot more time feasting and very little time fasting.
How to combat feast or famine
Seriously, start budgeting (even if it gives you anxiety)
For a long time, I cringed any time someone uttered the word “budget.” Thinking about money gave me anxiety, and the idea of sitting down and taking a hard look at my spending habits was enough to make me sick.
But eventually, I learned that there would be absolutely no way to avoid feast or famine if I didn’t have a grasp on where my money was going. When I bit the bullet and put together a budget, I found my anxiety around money went away pretty quickly.
A budget is not meant to make you feel ashamed about how much you spend on restaurants. The intent of a budget is to help you answer this question:
How much do I need to earn in order to live the lifestyle I want?
To get started, you need to get a grasp on how much you spend every month just living your life. Apps like YNAB, Mint, or PocketGuard can make this a lot easier, or you can make your own calculations as you look through your bank account for the last few months. Just be sure to take an average, and for costs that are variable (like entertainment), be generous so you don’t shortchange yourself out of fun in the future.
It’s a good idea to categorize your expenses, so you can have a clear picture of where your money goes every month. Here are some categories to consider:
Rent or mortgage payments
Utility bills (like gas, electricity, etc.)
Phone and internet bills
Subscriptions to apps (like Spotify, Netflix, etc.)
Entertainment costs (restaurants, bars, concert tickets, etc.)
Transportation costs (car expenses or public transportation fees)
Shopping expenses (like clothing, home goods, etc.)
Now you know how much you need at a bare minimum to get by each month, but you want to do more than just get by—you want to thrive! So now let’s talk about big-picture goals. Think about your long-term and short-term goals, and how much they might cost. Here are some questions to ponder:
Do you want to move to a different house or apartment?
Do you want to pay off your loans or debts faster?
Do you want to go on a vacation this year?
Do you plan on purchasing something big, like a car or a new computer?
Do you want to make a donation to a charity you care about?
For each of these goals, do some research to figure out how much they might cost, and set a rough timeline for when you want to achieve your goals. You can then use some calculations to figure out how much you need to earn each month on top of your daily expenses to achieve those goals.
For example, let’s say I wanted to go on a trip to a tropical island in the winter months. I know I’ll need about $6,000 to take that trip comfortably, and I want to leave within 6 months. Since 6,000/6 is $1,000, I know I’ll need an additional $1,000 per month to achieve this goal.
Step 3: Figure out how much you’ll need to pay in taxes
If you’ve followed the steps above, you’ll now have a figure that you need to have in the bank every month to live your daily life and achieve your goals. Multiply that figure by 12, and you know exactly how much you need to bring in over the coming year to live the life you want.
But you’re not done yet, because unfortunately, you still have to pay taxes! The number we have so far is what we want to have after we pay taxes.
If you are working for an employer either remotely or part-time, you will still file and pay taxes on that income as you normally would working a full-time, in-office job.
But if you’re starting your own business as a freelancer, contractor, or otherwise, things can get a little more complicated.
When you’re just starting out working for yourself, you should absolutely speak with a tax professional who can give you advice. They will be a massive help figuring out your unique tax situation.
For now, let’s get a general estimate of how much you’ll need to pay additionally in taxes if you want to make the figure we’ve identified above (daily living expenses + monthly savings for goals).
TaxAct has a simple calculator you can use to get a rough figure. Or if you want to get into the nitty-gritty of it all, you can use the tax brackets for 2020-21 here:
Once you have a good idea of how much you’ll need to pay in taxes, add that to the annual financial goal you set using the steps above. And now you have one big figure that tells you exactly how much you need to make this year to live comfortably.
What are 1099 forms?
When you’re a freelancer or contractor, you’ll likely need to fill out what’s known as a 1099 form from the IRS. Your 1099s should be sent to you by any business that pays you $600 or more in a single tax year. (If you’re freelancing for several different companies, you’ll definitely get used to filling these out!) These can be helpful when figuring out how much you need to set aside in taxes: A 1099 form often gives you a summary of how much you’ve earned from a single business.
Step 4: Bring it all together to set your goals
Now we know:
A) How much money we need to earn to afford our lifestyle
B) How much money we need to save to achieve our bigger goals
C) How much additional money we need to make to pay our taxes
Using these figures, you can now figure out how much you need to earn this year in total to live comfortably. And when you divide that number by 12, you have a monthly goal.
Write down this monthly goal somewhere in big, bold letters. It’s going to become your number-one tool for avoiding the feast or famine lifestyle.
Feast mode: save when you can
Take it from me: It’s very easy to forget about that whole famine thing when you’re feasting. If you have extra money in the bank, it’s natural to want to splurge on something or be generous with your friends and family.
The key here is to practice discipline. If you leave the extra money sitting in your spending account, you might end up dipping into it by accident.
Instead, it’s a good idea to open up a few other bank accounts to help you sort your money:
A business bank account
If you are an independent contractor or freelancer, you should absolutely open a business bank account (which you can usually do at no extra cost). This bank account should be reserved for transactions involving your business, including payments you receive and any business expenses. You should also hold your estimated quarterly tax payments in this account until it’s time to pay, so you don’t accidentally spend it and find yourself short when it’s time to submit payments to the IRS.
Each month, transfer only the amount you need (based on your budgeting estimates above) into your checking account. In this way, you are essentially paying yourself the salary you need and want.
The rest of the money you should transfer to the other account I suggest you get:
A high-interest savings account
If you’re still using the free savings account that came with the checking account you set up a long time ago, then you’re missing out on making extra money off interest. Since you’ll be saving money during feast mode, you want an account where you can put away your money and let it grow while it sits there.
A word of warning: Make sure you can still access this money as needed—this isn’t money going toward retirement; it’s a safety net you can use to bridge the gaps during any famine periods you’re going through. Once you have a safety net in place, you can distribute the money elsewhere as you see fit.
You may want to check out a site like Betterment, which allows you to set up different digital accounts (including a savings account) and designate the money for different goals (like an emergency fund, saving for travel, and even putting money away for retirement). Otherwise, speak to your bank or a financial advisor to find a savings account that will help you keep your money safe while also earning interest.
Methods for reducing the famine periods
Saving money to cover the famine periods is a good first step, but the real goal for any independent worker should be to eliminate famine periods altogether. Then, any money you make on top of your monthly budget can be spent however you like—reinvest it in your business, put it toward retirement, save it for a rainy day, or buy a round of drinks for everyone at the bar.
So how do you go about reducing famine? Here are a few tips to help you along:
Focus on retainers, not projects
If your independent job involves providing a service (like web design, copywriting, illustration, etc.), then you can reduce the risk of a famine period by hunting for retainer work—long-term contracts that guarantee you steady income month to month.
Finding clients who are willing to sign a long-term contract will take time—you’ll need to develop a good pitching strategy; build trust with a solid portfolio, case studies, and testimonials; and determine a good pricing structure to make it worth your time.
Even if you’re only able to land one or two retainer clients, having that reliable income each month will mean a lot less scrambling to find work during the famine periods.
Link up with agencies or other freelancers
One of the best ways to guarantee a steady flow of work is to partner with someone else. Depending on what field you’re in, it may be worthwhile to partner with an agency or other freelancers to grow your client base.
For example, let’s say you’re making a living as an independent graphic designer. Look online for marketing agencies that offer branding or visual content, and send them a friendly introduction and a link to your portfolio. Or perhaps you’re a wedding photographer—look around for local wedding planners, caterers, or event spaces who might be able to refer you for more work.
The more people who know about you and what you do, the easier it will be to find leads and keep consistent income coming through the door.
Build up your passive income streams
Passive income refers to money that regularly comes into your bank account without you having to do much work—after a while. Setting up passive income streams requires a time investment up front. But once you have some additional income coming in, it can be a helpful cushion when you have a gap in your regular income.
To get started, check out some of these articles about building passive income streams:
Consider part-time or remote work
If you have tried everything I’ve recommended in this article and still find you are struggling with feast or famine, it may be time to consider looking for work that provides more regular income but still gives you plenty of flexibility.
In the wake of the Covid pandemic, more businesses are offering remote opportunities. These jobs still give you the freedom to work from home (or wherever), but can bring you that regular paycheck and other benefits that come with a traditional job.
You could also take on a part-time job to keep yourself from going through feast or famine. You can look for part-time remote opportunities, or look for part-time jobs in your area that will give you some supplemental income but still allow you to work for yourself some of the time.
Working for yourself brings lots of benefits, but a feast or famine lifestyle is no way to live. By getting a better grasp on your budget and looking for ways to eliminate those famine periods, you can take full advantage of the freelancer lifestyle.