The Importance of a Financial Reserve to a Freelancer

Looking back at my earnings over the past year on a monthly basis I noticed that there is a difference of 700% between my highest and lowest earning months. How does this happen? Two reasons; some months I simply earned more than other months and some clients pay slower than others.
While my earnings may differ wildly my expenses are pretty consistent and inflexible. My daughter isn’t interested in hearing that she can’t go to dance class this month because daddy is in one of his low months and the cashier at the supermarket could care less about the fluctuations in my monthly income.
How do I deal with this situation? Strict financial self-control. I calculated what my monthly income has to be to meet my monthly expenses. In months when I earn more, I put this “excess” money away in an account that can be easily accessed. When my earnings are down I draw on this money. The idea is to not go into a state of euphoria in a good month and go out and buy a solid gold dog polisher, and on the other hand not to hesitate to draw on your short-term savings in a down month
Let’s not forget the unanticipated major expenses and retirement money. For longer term saving I have a certain amount automatically taken from my account each month and include this money as part of my fixed monthly expenses.
A note to people starting out as a freelancer–In the beginning you won’t have many good months. This means that before you try your hand at full time freelancing you will have to build yourself a war-chest.


Freelancing=Dating, Salaried=Married

This entry is continuation of an earlier post about the similarities between personal relationships and freelance writing.
In Israel, at least, many freelance technical writers work through outsourcing companies who find them projects, pay them at the end of the project and support them to a greater or lesser extent during the project. I currently work part-time as a Project Manager for one of these companies and it occurred to me that working as a freelancer through one of these companies is like dating while being a salaried worker is like being married.
Why do I propose this? Say that as a Project Manager I worked with a freelance writer on a previous project and liked the work that he did. However, for some reason he did not like working with me. The next time I call him for a project he doesn’t have to scream at me that I’m a jerk and he never wants to work with me again. All he has to say is that he is all booked up or taking some time off. After I get this response two or three times I’ll get the message. He doesn’t want to work with me. The situation could, of course be reversed, and I may not want to work with him. In that case, if he calls me looking for a project I simply tell him that none are available (This may also be true). In other words for the relationship to work both sides must give their best all the time. This is similar to dating. If I’m going out with someone (Don’t tell my wife) and she decides that I’m not the one, the next time that I call her all she has to do is tell me that she’s busy or has to wash her hair. After getting this response a few times I’ll get the message.
Being a salaried worker however is more like being married. As a worker you have to do something pretty serious to get fired and after working at a company for a while you’ll think twice before resigning and looking for another job. This is very similar to being married. Small things that may cause you to think twice before going out with someone for a second date are generally not grounds for divorce. How many of us have thought: ” So what if I haven’t showered for a week? She’s not going to divorce me over that”.