Emergency savings represent a special stash of cash that helps you out in times of need. You can fall back on this cushion in case of unemployment, illness, or a costly unexpected expense.
As a freelancer, you need more of these savings than most other workers. Find out why that is below. But first, let’s figure out how much the average freelancer needs to squirrel away for a rainy day.
How Much Do You Need?
Let’s start with the savings target for the average worker. People who work for a company should aim to save three to six months’ worth of living expenses in an emergency savings account.
As a freelancer, you have a bigger goal in mind. Some experts recommend saving as much as a year’s worth of your living expenses.
This enormous stockpile can help you weather big changes to your workflow, like if you lose 80% of your clients for an extended period. But it’s equally ready to handle smaller emergencies, like if your pipes burst or your car breaks down.
What if You Fall Short of What You Need?
A full year of expenses is a daunting goal that will take time to save. What happens if you blow a tire on the way to a client meeting before you get anywhere close to this goal?
If you can’t put off an emergency repair, you may use a cash advance as a backup to savings.
Let’s get this big question out the way: what is a cash advance loan? A cash advance is a small-dollar, short-term loan that acts as a safety net in an emergency.
The average cash advance comes with a simple online loan application that you can fill out in a matter of minutes.
And, if approved, you’ll receive a fast loans direct deposit by the next business day or so. The speed depends on your location and bank’s policies but generally, applying for an online cash advance means you won’t have to wait long to deal with your emergency.
Why Do You Need Such a Big Cushion?
Finally, let’s get to the real meat of the issue. Why do you need to save more than everyone else? Here are three reasons.
Reason #1: Workflow Fluctuates
Depending on your area of expertise, your work might not be steady. You’ll have a season when you’re overworked and raking in a lot of money followed by slow periods where you’re barely earning anything at all. Extra savings strike a balance between these two extremes.
Reason #2: Clients Can Be Unreliable
While salaried or hourly workers know the exact date of their paydays, it’s harder to anticipate when you’ll get paid as a freelancer. According to one study, 29% of freelancers get paid late. If a troublesome client doesn’t pay you on time, you’re on the hook until they send the money.
Reason #3: You Have Fewer Safety Nets
You have to shoulder any issues on your own if a client is late, work dries up, or you face a tech breakdown. Salaried workers get paid no matter what because their employers absorb these costs. Since you’re the boss, these costs are your responsibility to handle.
The Takeaway:
An emergency fund offers security during times of austerity. You’ll still be able to make essential repairs or cover unexpected medical expenses even if you’ve hit a dry spell, a client pays late, or they walk away entirely. So pad out your fund — these savings make it easier to freelance.
