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florydev
Community Member

How important is savings to a freelancer?

I want to hear other's opinions so I will let the subject stand for itself.

18 REPLIES 18
petra_r
Community Member


Mark F wrote:

How important is savings to a freelancer?


very.


Do I have any? I try to have enough set aside to get by for a couple of months if absolutely need be. But I dip into that frequently and occasionaly deplete it.

 

I am not good at saving though, too many bright shiny things I like ๐Ÿ˜„

 

IMO savings is extremely important to freelancers as well as nonfreelancers. "Rainy days" most definitely do happen; sometimes more frequently than others.

Very important for me. 

 

I have had otherwise reliable clients disappear on me out of the blue in the past, leaving me with a void to fill in my income. There's also no telling how long it will take for me to fill such voids. I might find myself in trouble if I didn't have something to help pull me through. 

I try to have a couple of months' worth of income set aside at all times, but how much savings you should have will obviously depend on individual circumstances. Somebody who lives in the U.S. with no access to free healthcare, and/or has dependants, and/or has mortgage/loan repayments to make, would need a much bigger cushion than someone who's footloose and fancy-free like I am. ๐Ÿ™‚

 

tlsanders
Community Member

I have mixed feelings about this. The obvious answer is "critical," and I do agree with that. Even the most successful freelancer will hit dry patches, or times when he/she is unable to work for some reason. But, there are many different issues in play.

 

First, I do think it's critical to have what I think of as a buffer...operating reserves (including funds to pay myself) if there's a gap in revenues.

 

But, the issue is larger than that, because there are a lot of risks for a freelancer that don't apply to traditional workers. 

 

I'd always heard that a person should have enough cash on hand to pay three months of living expenses without income. When I got sick in 2012, I had that. I even stretched it to last 5 months instead of three. Unfortunately, I was unable to work for more than 7 months. 

 

Though that situation can be devastating for anyone, traditional employees often have some safety net built in--leave, access to short-term disability, even just paid sick days that fill a small part of the gap. When an employee gets laid off and can't find work again right away, there's unemployment.

 

Of course, as freelancers, we CAN buy disability insurance. But, even as a single parent (no child support) with freelancing as my sole source of income, it had never occurred to me to seek that out. I had my three months of living expenses tucked aside, and I'm a WRITER. I always assumed that even if I got injured or sick, I could do at least enough work to keep the rent paid and food on the table from my laptop in bed. 

 

Of course, having that savings was better than not. But, it wasn't enough. And, I don't think there's any way to be sure it's enough just by having a larger amount of savings (unless, perhaps, that amount is several hundred thousand dollars). Savings should be one piece of a safety net freelancers build.


Tiffany S wrote:

I have mixed feelings about this. The obvious answer is "critical," and I do agree with that. Even the most successful freelancer will hit dry patches, or times when he/she is unable to work for some reason. But, there are many different issues in play.

 

First, I do think it's critical to have what I think of as a buffer...operating reserves (including funds to pay myself) if there's a gap in revenues.

 

But, the issue is larger than that, because there are a lot of risks for a freelancer that don't apply to traditional workers. 

 

I'd always heard that a person should have enough cash on hand to pay three months of living expenses without income. When I got sick in 2012, I had that. I even stretched it to last 5 months instead of three. Unfortunately, I was unable to work for more than 7 months. 

 

Though that situation can be devastating for anyone, traditional employees often have some safety net built in--leave, access to short-term disability, even just paid sick days that fill a small part of the gap. When an employee gets laid off and can't find work again right away, there's unemployment.

 

Of course, as freelancers, we CAN buy disability insurance. But, even as a single parent (no child support) with freelancing as my sole source of income, it had never occurred to me to seek that out. I had my three months of living expenses tucked aside, and I'm a WRITER. I always assumed that even if I got injured or sick, I could do at least enough work to keep the rent paid and food on the table from my laptop in bed. 

 

Of course, having that savings was better than not. But, it wasn't enough. And, I don't think there's any way to be sure it's enough just by having a larger amount of savings (unless, perhaps, that amount is several hundred thousand dollars). Savings should be one piece of a safety net freelancers build.


I think insurance would also be an interesting discussion.

jr-translation
Community Member


Mark F wrote:

I want to hear other's opinions so I will let the subject stand for itself.


When I started 2 years ago I had enough savings in the bank to last at least a year. After two years I still haven't touched any of my new fortune.
The downside: The bank keeps ringing me telling me to spend my money on thing I do not need because the interest rates are so low.

lysis10
Community Member

yuuuuuge

 

I was doing so well but it's that time of year I want to buy things so I've killed some of mine off again. boohoo

 

 

hoyle_editing
Community Member

Massive - really, really really important. 

 

Have i got any? NO

 

I have made the move into freelancing with no safety net whatsoever - (not entirely by choice) but i'm just about scraping by, literally 'just'.

 

Hopefully as time progresses the saftey net will increase and things will be a little less stressful. However, I do consider it a very important aspect of working for oneself. The 'lack of a saftey net' can be very stressful (as can many aspects of working for yourself im sure)  

 

Something else i need to 'learn' to do on this steep, fun, scary, rewarding learning curve i have found myself on Smiley Happy

It's more important than anything else. I'm not sure if you include retirement as a part of this, but I do. Cash on hand plus investments; it's the only reason I work. Maybe I'm older than many of y'all but I want to semi-retire sooner rather than later.

 

I was VERY fortunate to have a good job for more than 20 years though, so that really let me build my nest egg. I also have a husband who works and rental property. And no kids. And I buy my clothes at Goodwill. And don't eat at restaurants for the most part. My dad and my inlaws found themselves in dire straits in their twilight years and I do not want to find myself in that position.

I'm sure you're older than some, Kelly, but you're younger than me...and quite a few of the other regular posters here.


Tiffany S wrote:

I'm sure you're older than some, Kelly, but you're younger than me...and quite a few of the other regular posters here.


You're my brother's age so I consider you my age, plus you LOOK younger than me. ๐Ÿ™‚

 

But I read that study that says retire at 55 and live to be 90, or retire at 65 and live to be 67 (I'm paraphrasing) so I'm looking to not work full time for too many more years. ๐Ÿ™‚

My cushion is losing its stuffing. However, if I have to, I will sell my assets (the one that I live in!). 


Kelly B wrote:

Tiffany S wrote:

I'm sure you're older than some, Kelly, but you're younger than me...and quite a few of the other regular posters here.


You're my brother's age so I consider you my age, plus you LOOK younger than me. ๐Ÿ™‚

 

But I read that study that says retire at 55 and live to be 90, or retire at 65 and live to be 67 (I'm paraphrasing) so I'm looking to not work full time for too many more years. ๐Ÿ™‚


It's a little picture and my eyes are old, but you look about 26 to me.

 

I kind of feel like I'm already retired. I haven't had a job I had to show up to in about a decade. I still work--sometimes a lot--but I pick and choose what I do and when I do it. I can count on my fingers the number of times I've had to set an alarm in the past couple of years. If the weather is bad, I don't go out. If the weather is good, I go work by the lake...or take the afternoon off to get outside and then work in the evening. It's not quite like having no responsibilities, but I feel like I'm already getting most of the health and psychological benefits of being retired.

I think it would be difficult for anyone to argue that savings isn't important. Of course that doesn't mean that people actually do it even if they have the means to do so. A more difficult follow-on to this question is how important are investments. Obviously if one cannot afford to save then this question is very easy to answer. However, if we assume an "appropriate" amount is put away in a safe savings instrument, the question is then what? Do you keep just putting it in savings beyond what might be needed in a crunch? Savings is really dead money. The safety, security and liquidity of it guarantee that it won't grow at a pace that keeps up with the cost of living. So what the notion that you might actually want to retire some day or actually make money more passively particularly in slow freelance times or when otherwise dealing with or enjoying the other things in life. Given the seemingly infinite instruments of investing with the vast differences in risk, this is often a topic that scares people. That or it's assumed that investing is only for the rich. There are options for people at all levels of income and with all levels of risk tolerance. It pays to spend a little bit of time investigating some of the possibilities available. Once you get beyond protecting for sudden dips, you are leaving a ton of money on the table with pitiful interest rates and an attitude that screams "I am going to have to work until I am dead" or "the government will take care of me". [shudder]


Jonathan H wrote:

Massive - really, really really important. 

 

Have i got any? NO

 

I have made the move into freelancing with no safety net whatsoever - (not entirely by choice) but i'm just about scraping by, literally 'just'.

 

Hopefully as time progresses the saftey net will increase and things will be a little less stressful. However, I do consider it a very important aspect of working for oneself. The 'lack of a saftey net' can be very stressful (as can many aspects of working for yourself im sure)  

 

Something else i need to 'learn' to do on this steep, fun, scary, rewarding learning curve i have found myself on Smiley Happy


Very honest Jonathan and exactly why I asked.

Well, I'm older than everybody.  I have absolutely no savings because of some family issues that arose over the years.  I do get Social Security, as does my son who lives with me (SSI in his case).  That's enough income to pay our bills as we live very inexpensively.  So, I do try to save, but I do have a tiny little cushion.  I understand how important it is to have a cushion but ...

My slow but fun way to save: the "Happy Friday Treat"

 

I transfer money from Upwork Wednesdays, it arrives Fridays sometime in the morning, no time to spend it because I either work (timer) or work on bids. Friday afternoons, after "closing business" I send to a savings app 10% of the money I earned the previous week. Not a big amount, so I usually don't miss it, but that little purse helped a couple of times already, when projects slowed down or dried up.

 

There are microsavings options out there, also offering IRA retirement savings that are suitable for US freelancers

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