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How Much Of Your Freelance Writing Income Do You Save?

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.

  1. 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%.
  2. 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.

  3. 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.
  4. 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?


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{ 10 comments… add one }
  • Thank you for the suggestions about savings. I have no savings … my husband and I have never had savings, actually. I hope to change that soon. Good advice!

    • Anne

      When I first started savings I’d put $10 in and often when I’d get to $20 I’d have to take $19 out — it seemed to take forever to get even $100 to stick. Now I’m into the low thousands… working to get even more in savings… it’s such a nice feeling and when I’ve got savings negotiations are easier.

  • I recommend all writers buy “The Richest Man In Babylon” by George S. Clason.

    This book will change the way you think about money (and your skills as well).

    Link to review attached.
    .-= Karl Rohde´s last blog ..Review: The Richest Man In Babylon =-.

    • Anne

      Karl, I remember that book, vaguely… thanks for the reminder… I’ll re-read it.

  • Excellent advice, Ann. And what a great topic to blog about. I’ve always been cautious about what I spend, but haven’t had a “savings” plan per se. I like the methodical approaches you and Celene have suggested. It’s inspiring me to think about doing something similar.

  • Lauri

    Great post Anne. Saving is key as a freelancer. In fact, when I was an in-house employee I was a financial mess; it wasn’t until I was truly hanging out here on my own that I had to get my act together. It is also true that having a financial safety net keeps me from negotiating out of fear.

    Another thing I find really helpful for savings is to continually be seeking out new clients that provide new or different work from the clients I already have. In addition to ensuring that I am not relying too much on any one client, and keeping me interested in a variety of tasks, this “mixed portfolio” approach helps with savings. I have some clients that pay me weekly; some monthly; and some that take the traditional 4 – 8 weeks to send their check. This mixture keeps me from ever going too “dry” and helps me maintain a regular savings habit.

  • admin

    outstanding celene, I wish I’d learned how to do this at your age… congratulations!

  • I have 3 types of savings:

    1. An emergency fund (I currently have 6 months of expenses in it, but I want to increase it up to a year’s worth of expenses). Like you said, this is useful during dry spells. I also use it for unexpected medical/emergency expenses.

    2. Retirement. I’m only 25, but this is a good thing. Compound interest is my friend. I think I have more stashed away in retirement than my mother does. Not that I don’t live well and save everything for tomorrow, it’s just that I find there’s so little I need in life right now. The extra stuff, I stash for thefuture – especially if I can’t work as hard then.

    3. ‘Spendables’. Some savings, I intend to spend in a few months or a year. Right now I’m saving up for home repairs. A few months ago, I was saving up for a laptop. (I already bought it, paid for itself in 30 working hours).

    Despite my initial aversion to saving, I had to be good at it because I was the breadwinner for my family at an early age. Now that my mom has a job and my younger sister lives with her, I get to save more.

  • admin

    John, I sort of agree… I’d actually suggest that some always go into savings – my own experience tell;s me if I sacrifice everything to pay off a debt I’m likely to debt again, but if I can see/feel that I’m building for the future and not just digging out of a hole I do better.

  • It’s worth remembering that if you do have particular types of debt (a bank overdraft or a credit card balance), it can make more financial sense to put your ‘savings’ towards those rather than in a separate account.

    There’s no point making, say, 5% interest by putting $100 in a savings account when you have an overdraft that’s costing you 15%.

    Once you are back in the black, of course, everything you say about savings is perfectly valid. And even if you don’t have a savings account, you need to mentally earmark part of the money you have ‘available’ through your overdraft for things like taxes.

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