3 Guaranteed Ways to Pay Off Debt as a Freelancer

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Don't have a regular paycheck but still want to pay off debt? Here are 3 guaranteed ways you can get out of debt as a freelancer, for good!

This post comes from writer Melanie, who recently quit her day job to start her own freelance business. She shares more of her journey on her blog, Dear Debt.

I think most people can agree that it’s not ideal to quit your job and start a business if you have debt. Leaving your job to pursue your own thing is risky and being in debt elevates that risk.

You’re leaving behind a life of steady paychecks and false security for the unknown world of freelancing. But life is full of risks, and sometimes going your own way, even while in debt, makes sense. Initially, I started to see freelancing and side hustling as a great way to complement my income and help me pay off debt.

But as my freelance income grew, I felt like it was time to make a decision on where to spend my energy, and freelancing seemed like the right decision.

As I made the transition, debt felt like the biggest obstacle for me. Quitting your job and being in debt goes against every single piece of financial advice we’ve heard.

After fully grasping the weight of my decision, I realized that while risky, being a solopreneur would ultimately open up immeasurable opportunities for me. And that I had a real shot of earning more money than at a nonprofit, which was my field of work for the past eight years.

While not ideal, there are ways to prioritize your debt, while building a business. Here are the strategies I’m using to pay off debt as a freelancer:

1. Put a portion of income towards debt

The beauty of being freelance is being your own boss and making your own schedule. The downside is the lack of consistency when it comes to getting paid. I have clients that pay monthly, bi-monthly, or even up to eight weeks for some of the brand ambassador work I do.

Long gone are the days of getting paid every two weeks like clockwork. Now, I am carefully budgeting my income so it lasts until the next payment arrives.

At my day job, I knew exactly what I would make and when I would make it. A traditional job does make one thing easy, and that is budgeting. It can be hard to budget when your income fluctuates month to month.

When I had a full-time job, I would make a point to pay at least $1,000 a month to debt. Now as a freelancer, I realize that model doesn’t really work — at least not in the traditional monthly budgeting sense.

Instead, I am now putting a percentage of my freelance income to debt. As I continue my transition and grow my business, I’m keeping my percentage at a base of 30%. That means for every payment I receive, I take 30% off the top and put it to debt, in addition to the 30% I take out for taxes. If I have more left over at the end of the month, I’ll make additional payments.

Budgeting this way frees you up to consistently make payments, regardless of your income. So whether you make $2,000 or $8,000 in a month, you’re still putting a portion of your income towards debt.

So how do you come up with a percentage that works for you?

  • Look at the past few months of income. What is your average income?
  • Create a bare bones budget. A bare bones budget only includes what you need to get by. What amount of money do you need to make to ensure you eat and pay rent? Write that number down.
  • Leverage discretionary spending. Hopefully, there will be a gap between your average income and your bare bones budget. That gap is considered your discretionary income, and should be used for paying off debt as well as celebrating big wins.
  • Carefully look at your budget. How much wiggle room do you have? How much do you want to put towards debt each month? (this is important as it forces me to hustle harder to achieve my goals).
  • Come up with a percentage you are comfortable with, that leaves enough room for paying your necessities and your taxes. Make sure it’s a percentage that is working for you and helps you sleep best at night. Paying off too much or too little can backfire, so make sure you are paying off debt at a pace that works to support your business and well-being.

2. Use tools to track your debt

There are more resources than ever to help you pay off your debt, manage your finances, and keep a budget.

A tool that I just started using to track my debt is the ReadyForZero app. It’s a web-based app that helps you come up with a plan to pay off your debt and includes suggested payments.

One of my favorite things, is playing around with payments and the timeline to see when I can be debt free. I’m a fan of their blog and resource centers as well, which offers helpful advice and inspirational stories about people getting out of debt.

If you have student loans like me, try out Tuition.io, which helps you visualize your loans and see everything in one place. This other web-based resource also shows you how much money you can save by making extra payments. You can also request a gift or give a gift, which goes towards your student loans.

In addition to debt tracking and management tools, it’s key to monitor your budget as well. You can use resources like Mint.com, Personal Capital or do it low-tech with a plain old excel spreadsheet.

Whatever your method is, it’s important to see the numbers right in front of you. Sometimes looking at that number can be overwhelming and nauseating — it can be a hard truth to swallow. But it’s a temporary reality that will shift, if you put in the effort now.

3. Set up targeted savings accounts

As a freelancer in debt, you’re trying to get out of debt, not stay in debt or acquire more, right?

In order to do this, focus on building your emergency fund first. I have made a conscious decision to lower some of my student loan payments, while I build up my emergency fund to a stronger level.

Ideally, having three to six months of expenses should be sufficient, but I tend to agree with Kali that a year’s worth of expenses for a solopreneur is much better. A year of expenses is quite a lot of money — so don’t get overwhelmed with building it up, just take baby steps.

Start with even $10 a week.

In addition to your emergency fund, set up targeted savings accounts so you are actively saving for business expenses and other priorities. Myself, and the team of Careful Cents, uses Capital One 360 and have savings accounts for our emergency funds, taxes and travel.

I put a small amount into each every month. By creating and naming your targeted savings account, you are subtly stating your money goals and letting each dollar work for your priorities.

You can plan ahead and create a targeted, separate savings account now to get started on your goals, big or small. Start a laptop fund, a moving fund, website redesign fund, etc.

The key is to make this money separate from a standard savings account. When all your money is lumped together, it’s too easy to spend it — with a separate account, with its own special name, there will be no doubt what purpose that money serves.

Paying off debt as a freelancer

As I mentioned, paying off debt as a self-employed freelancer isn’t ideal, but there are ways to make it easier. As a freelancer, you are likely hard working, creative and a go-getter — all qualities that will help you passionately fight off debt and run an awesome business.

Just think, by paying off debt, you are actively investing in your own future as well as the future of your business.

Are you in debt and trying to grow a business? Or are you thinking of making the leap but unsure if debt will hold you  back? What’s you best tip for repaying debt quickly?


  1. Great advice, Melanie! I had a hard time figuring out how to budget and set aside on an irregular income. I’m on a cash budget and I worked out a way to do it so I can still operate with a monthly budget, by using a set list of “spending categories” with their dollar amount and using last month’s total income as this month’s budget. (I came up with this myself, but I think it’s what YNAB teaches). I have so many moving pieces and drains on my attention every day (I’m a single mom to a toddler who’s in a half-day preschool but otherwise is home with me) that I couldn’t do the splitting each paycheck thing. I’d lose my marbles 🙂 And if excel sheets are old-school, I’m practically stone age! I keep an actual paper ledger! I’ve always been a paper person, though. And it makes it more real to me. Same reason I do a cash budget — the tangible paper thing makes it real. (Also makes it easy — I don’t have to track anything… when the money’s gone, I just stop buying!)

  2. Megan H says:

    Love this post, Melanie! I’m hoping to “take the plunge” in 5-10 years. I finally got it together again and set up a separate business checking (for a while, I was with a bank that had tons of fees), and I feel so much more secure knowing where my money is going.

    My husband and I are making a conscious effort to put $10,000/year towards consumer debt, and then hopefully tackle my student loans by the same amount (notwithstanding any major expenses, such as home repairs). It’s going to be hard because it may take us about 5 years to finish with the consumer debt, all while putting just a little more towards my student loans, but I’m confident we’ll get there. I’m hoping in that time to continue to build my business and make a cushion of at least 6 months’ worth of income for us to live off of when I do finally become fully self employed. Thanks for the inspiration!

  3. Celise says:

    I’m going to bookmark this post. I haven’t started the whole self-employment thing yet. In fact, I’ll be starting the freelance thing in July (after I take the fiction book editing course), but this will be helpful. I currently owe $68K in student loans and will start making payments on it next month. I guess it’s good to have a fixed amount that I know I need to pay, so that helps.

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