Experts say everyone should have an emergency fund, but in a year of freelancing I found it's non-negotiable when you're self-employed

0 0 Thursday, February 6, 2020 Edit this post

freelancing working from home

As a freelancer, you can be much more vulnerable to big financial changes, like sudden loss of income.
Experts suggest keeping three to six months worth of expenses in a savings account you won't touch.
Having an emergency fund can help you get through common things like a sudden loss of a client or late payments.
See Business Insider's picks for the best high-yield savings accounts »

I freelanced for about a year before joining the staff at Business Insider. In that year, I learned how to manage my ever-changing income quickly. But, I credit having an emergency fund with my success.

The idea of an emergency fund is to keep at least six months worth of all of your expenses in case of an emergency — enough to cover not just your rent or mortgage, but also any car payments, food costs, debt payments and anything else you might need to cover in a month. It's something that couldn't be more important to have, whether you're in the gig economy or not. But in the volatile world of freelancing, I'd say it's not negotiable.

Freelancers can't count on a steady income, no matter how hard they work

A Bill.com survey showed that 45% of freelancers weren't being paid on time. And the risk that you might have a client walk away from a contract or not pay you at all is all too real.

Having a cushion has always been a priority for me. So, when I got a job, I started creating a little emergency fund. And when I left that job to become a full-time freelancer, I decided to make that account a priority. Even if it was modest, it was good to know it was there.

At one point, I had a client drop me in the middle of the month, leaving me without a significant portion of my income that month. I also had a contract I was counting on to pay my bills fall through at the last minute. I've had projects that took three months to pay out. But each time one of those big disappointments would happen, the fact that I had about three months of expenses saved to fall back on would at least soften the blow.

Build your fund when times are good, and rely on it when things aren't so good

And, if you don't ever need to use it or even think about it, an emergency fund can still benefit you. A high-yield savings account is a great place to stash it away — if you don't use it, you can at least grow the balance.

I saved lots during the good months and what I could during the not-so-good ones. And I'm so thankful I did. I truly think these unique financial challenges would've landed me in big trouble if I didn't have that emergency fund to fall back on.

For me, building up an emergency fund took discipline and budgeting, which was all the more complicated when I had no idea how much I'd make in a month until it was over. But, it really helped when I needed it, and I couldn't be more glad I had it.