Wednesday, May 23, 2012

Setting Your Finances: What To Prepare Before Going Freelance

There are lots of people who are lured to working as freelancers. However, before you jump on the bandwagon, it is important that you prepare your finances first.  Although you may earn more compared when you work as an employee, working as a freelancer has its own drawbacks. One of the disadvantages of working as a freelancer is that you don’t have a steady stream of income that you can rely on every month. Moreover, you are not given paid vacation leaves and sick leaves so you have to work hard. In fact, the testament of your hard work is the amount of money that you get from working online. Thus said, the more you work, the more income you make. Thus it is important that you set your finances first before you even say goodbye to your day job.  Here are some of the things that you need to prepare when you decide to go as a freelancer:

Emergency Fund

Even machines break down from working non-stop. So when you work all the time, you may end up getting sick. Since your salary as a freelancer depends on how hard you work, you may find it difficult to earn money once you get sick. Before you decide to go  freelance, you need to have an emergency fund. An emergency fund, as the name implies, can be a savings account or time deposit renewable monthly which you can use for emergency purposes. And no, emergency spending does not mean buying  that attractive handbag that you spotted in the mall recently. It is advisable that the amount that you have in your emergency fund is equivalent to three to six months worth of your salary. I have part of my emergency fund stored in my savings account and a portion of it saved in short-term time deposit for higher interest rates.

Retirement Fund

Another thing that you need to save  is your retirement. Unlike working as a corporate slave, you will not get retirement benefits should you decide to retire at the ripe age of 60 or earlier. When it comes to saving for your retirement, it does not mean continuing your SSS and Pag-Ibig remittances alone as the pension given by these institutions are not enough for people to conveniently get by once they age. There are lots of investment vessels where you can put your retirement money and let it grow until you need them. The earlier you start saving for your retirement, the more you get for your future.

Usual Daily Expenses Fund

It is impossible for you not to spend for food as well as pay your bills thus it is important that you set-up a daily expenses fund which will be the source of where you get money to pay for your food, gasoline, energy bills, insurances and other constant expenses. Never use your emergency fund to pay for your usual expenses. Make sure that you have at least two months worth of money in your daily expenses fund.

Tithe Fund

Some people give their tithe only when they have paid all of their bills and other obligations and I am as guilty as the next guy. However, my views about tithing changed when I read an article about tithing from an old copy of Health and Home. Tithing is a portion of our earnings that we give voluntarily to the Lord. As a general rule, we are required to give 10% of our salary to the church but if it cannot be helped, then any amount will do. So what does tithing teaches us? It teaches us to acknowledge our blessings and how to give back. Personally, I found out that the money that I give away always comes back to me in the form of more projects and money-making opportunities and if you are a freelancer, this is very important and that is why I tithe.

To become a freelancer, it is important that you set your finances first. I learned this lesson the hard way and until now, I am still saving a part of my monthly earnings to complete the funds that I have mentioned above. Good luck!

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