Have a buffer
A buffer could be an extra amount of money that you have to prevent you from overdrafting (if you have a checking account). However, you can use buffer differently as an extra wiggle room for when you have miscellaneous or unexpected expenses. How I see buffer, as a freelancer, is having extra money to cover you for a month’s (or less) necessary expenses in case the check didn’t come through yet. The problem with freelancing is that you’re not quite sure if you’ll have the same earnings every month. Every client is different. I never had a buffer and I just discovered what a buffer is this year after reading an article from The Simple Dollar. As a freelancer, this would be something great to have as a the-client’s-pay-didn’t-come-through-yet money.
Have an emergency fund
This I’ve known for years. Many financial bloggers advise having at least three to six months of living expenses as an emergency fund. The bigger your emergency fund, the better. This emergency fund should cover events, like hospitalization or when you’re suddenly out of job. The key here: emergency. It shouldn’t be touched to buy that new iPhone or that nice dress from Zara.
When I resigned, I only had a little over a month of emergency fund sitting in my bank. Though it did help a lot during my first month out of corporate, it would have been better to have more. I got lucky and found a project just a week before my last day at the office which was amazing. I also found another paying gig two weeks after that. So a few weeks in, I already had enough money for my monthly expenses. It was a miracle. Unfortunately, I exhausted all my funds at that time. Now, I’m slowly rebuilding my emergency fund (along with other savings).
Pay off all debts
I had a big sum of (credit card) debt even before I quit my job. This was the result of bad financial management in my youth, despite knowing better. My parents berated me for months when they knew of my financial sins. My mom asked me to close my accounts and I had to pay them all. Quitting my job made it worse. Without a stable monthly paycheck, it was more challenging to pay my bills. Truth be told, it was tough. On the flip side, I already paid one credit card account in full (while I was freelancing). It was an achievement on my part. Now, I’m on my way to pay off the last one.
Have a few freelancing projects before resigning
Get your toes wet first, if possible. This is probably the most important test to see if you could handle the freelance life. Make sure that you have bankable skills that you could use as a freelancer. If you know designing and graphics, you could easily find projects online for designers. VA jobs are also in demand right now and are relatively easy to get. Utilize the skills that you have and find a job that you enjoy. By trying out freelancing jobs, you can maneuver how the online industry works. It’s definitely a skill to learn as well.
Start your retirement savings
This is something that’s good to start as soon as you get your first paycheck. I just started mine, so there’s no judgment if you don’t have this bit figured out yet. Once you have your emergency fund set up, work on your retirement savings. Don’t rely on social security to get you through your senior life. No, your future kids aren’t your escape plan. Have your retirement figured out as early as possible and you’ll thank yourself when you reach that age. It’s nice to think that you have yourself covered when you’re old and gray. Some people even save up super fast in order to retire earlier than 65.
Figure out a way to get insurance
Health insurance is one of the perks of working in a company. When you’re working for yourself, you only I have yourself to rely on. Find ways to get some sort of healthcare coverage when emergencies arise. I personally opted to pay voluntarily for my PhilHealth and join a cooperative that comes with basic health insurance. This is still not enough for someone who has health problems, like me. I’m still looking into getting prepaid healthcare insurance to beef up whatever coverage that I currently have. I cannot imagine burning a hole in my savings just because I didn’t prepare for health emergencies. This also includes preparing for death, so I just started a memorial plan just in case.
Although I am currently doing all these points right now, I wish I could’ve done them sooner to prevent certain challenges in my freelancing life. I just hope some people, who have been contemplating about being their own bosses, will find this helpful. It can be tempting to jump off the cliff too soon, especially when you’re already dragging yourself to work. However, just making sure you have an extra layer of (financial) security will help you sleep soundly at night.