I started out as a freelancer in October 2007, not long before the global financial collapse. When Lehman Brothers folded, there was a ripple effect in many businesses, and many of my clients delayed paying me.
It was pretty scary–my husband is also a freelancer, and we have four young kids and a mortgage–but it taught me an important lesson: When you’re a freelancer, you come last in situations like this. Big companies will pay their employees on time but think nothing of making you wait 60 to 90 days. Hopefully we’ll never see a crisis like that again, but there will undoubtedly be economic events that cause clients to tighten their purse strings.
There’s no point in getting mad about it. What you can do is prepare yourself financially. What I’ve learned in five years of freelancing is that self-employed professionals who earn a particular amount–whether it’s $60,000 or $200,000–cannot live the same way as someone earning the same salary in corporate job. Freelance gigs can dry up overnight, costs like healthcare can skyrocket just as quickly, and invoices can simply get lost in a client’s inbox. You need a much larger cash cushion than your corporate friends.
Of course, building your emergency fund is easier said than done. A good way to start is by setting up an automatic transfer from your checking account to your savings account. Even if you put away $100 a month, that’ll still get you to $1,200 you wouldn’t otherwise have saved by year’s end. In three years, you’ll have $3,600. It’ll keep you from adding unnecessary charges to credit cards if something goes wrong.
Plus, it’s lot more fun to freelance when you never have to lay awake nights worrying if a check will arrive on time–and when you know that you really can buy a latte at Starbucks and still pay your bills.