Freelancing offers tremendous flexibility—you choose clients, set your schedule, and pursue work that inspires you. Yet inconsistent payments can make budgeting tricky. Knowing your burn rate provides a clear picture of how quickly you consume savings when income dips. Instead of guessing whether you can afford a vacation or new equipment, you'll see exactly how each decision affects your runway.
Burn rate is simply monthly expenses minus income:
If the result is positive, you're burning cash. Divide your savings by this figure to find how many months you can maintain the same lifestyle:
This assumes steady expenses, but freelancers often face variable costs. Tracking your spending carefully lets you refine the model. Some months you might invest in advertising or equipment, while others are lean. Adjusting for these fluctuations gives a realistic sense of your financial health.
Imagine you have $8,000 in the bank, earn $2,200 per month, and spend $2,900. Your burn rate is $700 monthly, so your savings would last just over eleven months if nothing changes. Seeing that figure can motivate you to either seek more clients or cut optional expenses like dining out. Conversely, if your income surpasses your costs, you'll know how much you can set aside for slow periods.
One approach is trimming recurring expenses—cancel unused software subscriptions, negotiate a better internet plan, or share office space with another freelancer. Boosting income works too: expand your skill set, raise your rates for long-term clients, or look for higher-paying niches. Building a portfolio that showcases your best work can attract quality leads who are willing to pay more.
Consider revisiting your burn rate monthly. Freelancers often experience feast-or-famine cycles, so capturing these ups and downs is crucial. Keeping a spreadsheet of invoices, deposits, and expenditures helps you see patterns over time. Some people prefer a three-month moving average to smooth out spikes.
Taxes can take a big bite out of your revenue. Many freelancers set aside a percentage of each payment—often around 25%—to cover quarterly tax bills. Include this reserve in your expenses for a more accurate burn calculation. Forgetting to budget for taxes can leave you scrambling when payments come due.
The term "burn rate" originates in the startup scene, where investors monitor how fast companies spend their funding. On a personal level, the same concept applies: your savings represent a finite fuel tank. Knowing how rapidly you use that fuel helps you plan growth and avoid running out unexpectedly.
If you frequently face irregular income, set aside several months of living expenses in a dedicated account. This emergency stash cushions you during lean periods and gives you confidence to turn down projects that don't align with your goals.
Late invoices can skew your burn rate and strain cash flow. Ask new clients for deposits upfront or milestone payments during longer projects. The more predictable your income, the easier it is to keep expenses in check and maintain a stable runway.
Reviewing your burn rate can feel daunting, but it also highlights progress. Celebrate months when you exceed your income goals or successfully trim expenses. Small wins add up and reinforce positive habits that keep your freelance journey sustainable.
Financial stability is one of the trickiest aspects of self-employment. With this calculator, you can measure your burn rate and adjust your approach as needed. Update the numbers whenever your income or expenses change, and you'll always know how far your savings will carry you.
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