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When you work from home, many times this means you’re no longer a traditional full-time employee. Full-time employment has its perks, including access to financial tools like retirement funds and even Human Resources programs that help support your financial literacy.
Not so for the typical work-at-homer. Whether you’re a part-time employee, an independent contractor, or a dyed-in-the-wool entrepreneur, you’re on your own financially. Many people see this as a perk of freelancing — you can be your own boss, set your own hours, raise your income by working more and/or raising your prices, and more. But there are risks you face that traditional employees never think twice about.
The Catch: Irregular Income
For many people, working from home means irregular income. Whether your work is seasonal in nature, your job relies on someone else’s action for you to get paid (like when you take customer calls, for example), or you’re simply subject to the ebb and flow that comes with online business, irregular income can really throw a wrench in your financial stability.
In this day and age when debt is high, savings are low, and many Americans couldn’t even come up with $400 in an emergency, the importance of looking out for your finances couldn’t be greater. It’s even more important when you’re working a job that involves irregular income.
The Safety Net: Your Savings
Many people recommend that you save up a good cushion of cash before striking out on your own — as much as 3 to 6 months of living expenses. While that’s certainly a way to offset the risk of low-earning months and the pretty typical ramp-up time that transitioning to working from home, it’s not necessarily feasible for many work-at-homers to save up that much.
This is a huge mistake we’re making as a society. By failing to set aside money to lean on in an emergency — or when anything big comes up, including good things — we’re taking huge risks with our futures. Money in the bank won’t solve every problem, but it sure will prevent something big from becoming something devastating.
When you’re on your own as far as income goes, you’re also on your own for setting up your own safety net. I always recommend keeping your “safety net” money completely separate from your regular finances, so you won’t be tempted to draw on it for everyday expenses. I like Chime Bank for this — it’s all online, easy to use, and mobile-friendly. But more on them in a minute!
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Don’t Let It Be You
If you are like most of us and you aren’t sitting on a pile of cash “just in case,” it’s time for some deliberate action. No one else is going to do this for you — it’s your responsibility, and it’s a big one.
First, take stock of your current financial situation. Could you survive a financial catastrophe? What would happen to your family if you made only 25% of your monthly average next month? Could you make ends meet? If you’re like most people, the answer is “no” or just “maybe” and you need to set up a small buffer to help you get ahead.
Many personal finance experts recommend starting with a $1,000 “emergency fund” that you set aside in a separate bank account, to use only in true emergencies — things like your water heater breaking or a trip to the emergency room. Every time you get paid, siphon off a percentage (I’d recommend anywhere from 10 to 50%, depending on how much you truly need that money elsewhere) and put it in a separate bank account earmarked for emergencies.
Once you hit that first $1000, it feels like a huge win…which makes it easy to keep going. Why don’t you aim for that 3-6 month benchmark that so many people are fond of spouting? The more you’re able to save, the better your buffer will be against the storms life throws you. But don’t get ahead of yourself — aim for that first $1,000 and then see where you stand.
Chime Makes Saving Easier for Freelancers
One great thing about the Internet age is that it makes it substantially easier to work from home than ever before. Another great thing is the rise of online banking. One online bank that I absolutely love is called Chime. I think it’s a great option to start saving and keep saving, effortlessly, to preserve your financial stability no matter what comes your way.
When you set up an account with Chime, you have access to a checking account and a savings account. Once you activate their automatic savings program, you’re really getting started. With automatic savings, Chime will “roll up” every transaction in your checking account to the nearest dollar, and move that “spare change” amount into savings.
Here’s why I think this is a great option for freelancers and independent contractors: You need to keep your freelancing income separate. The IRS expects separate financials, and you really need to follow that guideline to save yourself some major headaches. Having an account with Chime makes this easy to do — you can have money direct-deposited in, you can connect your PayPal account, and you can use the debit card to make payments out of your account. (There’s also a check-mailing feature for the rare times you’ll need to send a check.)
You can “earmark” the connected savings account as your emergency fund, and then don’t touch it. Start moving a portion of every payment you receive into the savings account, as I mentioned earlier. And with each new transaction building up your savings, you’ll reach your savings milestone even more quickly.
Plus, because it’s all online and kept separate from your regular bank accounts, it’ll be much less tempting to dip into that money for non-emergencies and pseudo-emergencies.
You can use Chime on your computer or through their mobile app — whichever you prefer. And you can also hit up many ATMs across the US without having to pay fees — just be sure to check for a fee-free ATM before you make a withdrawal so you can be sure it’s fee-free.
No Matter What, Do Something
The most important thing you can do is start taking action. When you’re able to take charge of your finances, you’ll no longer be at the mercy of creditors, fees, interest, and more. The first step is to build a small buffer against the small things that crop up, so that you can start getting ahead. Chime is a great financial institution to use for that, but really any bank account will do as long as you commit to the process.
You never know when a crisis will strike, but there’s nothing like the feeling of security you have when there’s enough cash in the bank to cover any emergency-related expenses. Give yourself the gift of security, especially in the face of turbulent times. Future-you will thank you!
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