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Why Every Freelancer Needs an Emergency Fund


    The emergency fund earned its name for a reason. It’s there to help you in financial emergencies when your budget is stretched to its limits, and you still can’t afford something essential in your life. You can tap into these savings to pay this emergency expense and move on with your life. 

    Financial advisors have long hailed the emergency fund as an essential financial safety net because it provides invaluable backup in difficult situations. 


    As a freelancer, you’re no stranger to difficult situations. Waxing and waning workloads, clients paying their invoices late, and your laptop showing the blue screen of death — these are just part of a usual Tuesday when you freelance. 

    Having a well-stocked emergency fund can help you handle these freelancing issues without losing your cool. 

    How Much Should You Save?

    The rule of thumb for emergency funds is to keep around six months of living expenses in a separate savings account. 

    To find out what this number looks like for you, sit down with your bank statements and credit card accounts to track your spending over the past six months. 

    Since your goal is to cover six months of living expenses, you need to cover all your usual spending you do over half a year. Don’t just list your rent, utilities, and groceries; you also need to factor in your usual personal loan payments, toiletries, household items, and commuting costs.

    What if Your Emergency is Already Here

    Emergencies can happen at any time, including when you’re just starting out. In the beginning, you probably don’t have enough savings set aside to handle an unexpected expense on your own. But don’t worry — an online financial institution like MoneyKey can possibly provide financial reinforcements in the form of installment loans and lines of credit.

    If you’re approved, you can use these helpful online loans to cover your emergency expense upfront. You won’t have to worry about repaying everything in one lump sum, as both installment loans and lines of credit let you repay what you owe over time. For more information, check out the lending options through MoneyKey to learn more about how they work. 

    Why Does a Freelancer Need Emergency Savings? 

    Everyone — from salaried workers to freelancers alike — will run into tricky financial situations from time to time. You can’t predict when you’ll get sick and need to pay for an unexpected prescription, nor can you foresee when your tire will go flat and require a replacement. 

    However, the nature of freelancing can make these emergencies harder to handle, as you might face these interruptions in pay:

    • Clients Can Pay Late: One of the biggest frustrations of freelancing is the late payment. One survey shows 45% of all freelancers weren’t being paid on time. Here are some steps you can take when this happens.

    • Projects Can Take Time to Pay Off: Some projects can span months, but you’ll only receive your full pay when it concludes. In the meantime, you won’t be making money to pay your bills. 

    • A Contract Can Fall Through: A project you were counting on to help put food on the table can get cancelled suddenly due to reasons out of your hands. Unfortunately, you still have bills to pay.  

    • You Don’t Have Paid Sick Leave: You can fall ill or get injured seriously enough that you have to decline contracts that you were looking forward to starting. 

    Bottom Line:

    Having an emergency fund can smooth out the many bumps in the road of freelancing. You can dip into these savings in an emergency — whether a client pays late, you take sick leave, or a contract falls through.

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