As a freelance writer, you’re responsible for your total financial picture… everything from day-to-day expenses through retirement and taxes. Don’t be surprised if you hardly know how to think about all of this.
Freelance writers are creative and creatives aren’t necessarily good at keeping track of money and planning. If you’re like most of us, it will take time, maybe even several years to get your financial house truly in order. But you’ll never get it done if you don’t start.
The category, Dealing With Money may help.
One of the most critical part of dealing well with money is savings. It’s savings and residual income that will allow you to move through the ups and downs of freelance writing income with grace and ease.
Three or Four Kinds Of Savings
You really need several kinds of savings.
- The first is what I call a Prudent Reserve. This is the account I use to smooth my freelance writing income out. The goal is at least 6 months of expenses, and sometimes I now actually have almost that amount. I pay myself a salary out of my income, but if I hit a dry spell, can pay myself out of that reserve f until the next check or contract comes in. I started this account with 2% of my income and now put in 12%.
- The next account is for taxes – both quarterly and annual, and in my case, that state and federal and self-employment. The exact percentage you need to save of each freelance writing dollar you earn is a number you need to work out based on your tax situation. Earning a bit of interest on this money before I send it out always tickles me.
- Retirement funds. Unless you’ve inherited a bundle or you’ve got a spouse with a generous pension, or sold a true best seller or two, you need to save for your retirement. Sure, your self-employment taxes contribute to social security, but it was never meant to pay for all of your retirement, just act as a skinny safety net. It will help, but you’ll need more. I’ve got a savings account called Retirement. I put a minimum of $3 a day in this one, and often will put in 10% or more of each check. Once there is several thousand in this account you can begin to think about investing it, preferably in something that produces income.
- Miscellaneous Savings. I now do my savings at IngDirect.com. They link to my checking account and it’s easy to move money in either direction online. They allow a seemingly unlimited number of savings accounts. For example, my cat has $500 in her savings account in case she needs to go to the vet; I’ve got savings to replace my computer every two or three years, etc. etc. etc.
Savings isn’t very popular in the United States – it used to be, but we lost it to consumerism. It took my over a year to manage to save $100! Then it became easier and easier. I like having money in the bank when I negotiate writing contracts because I”m not coming from lack or fear. It’s worth saving and I urge each of you do find a way to start and continue backing yourself up this way.
How much are you saving?
Image from http://www.sxc.hu