When you work from home, it often means you’re no longer a traditional full-time employee. Full-time employment has its benefits, including access to financial tools such as retirement funds and even human resources programs that support your financial literacy.
Not so for the typical work-a-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 see this as an advantage of freelancing — you can be your own boss, set your own hours, increase your income by doing more work and/or raise your prices, and more. But there are risks you face that traditional workers never think twice about.
Catch: Irregular income
For many people, working from home means irregular income. Whether your work is seasonal in nature, your work relies on someone else’s work to pay you (like when you make customer calls, for example), or you’re simply subject to the ebb and flow that comes with online business, irregular income is truly a financial stability. Can throw the wrench.
In this day and age When debt is high, savings are low, and many Americans can’t even come up with $400 in an emergency, looking after your finances couldn’t be more important. This is even more important when you are doing a job that involves irregular income.
Safety net: Your savings
Many people recommend that you save a good cushion of cash before you strike out on your own – as much as 3 to 6 months of living expenses. While this is certainly a way to offset the risk of low-earning months and a fairly common ramp-up period transitioning to working from home, it’s not necessarily possible for many workers to save that much.
This is a huge mistake we are making as a society. By failing to set aside money to lean on for emergencies — or when something big comes up, incl well Thing – we are taking huge risks with our future. Money in the bank won’t solve every problem, but it sure will prevent something big from becoming something destructive.
As far as income goes, when you’re single, you’re also on your own to set up your own safety net. I always recommend keeping your “safety net” money completely separate from your regular money, so you’re not tempted to draw on it for everyday expenses. I love Chaim Bank for this — it’s all online, easy to use and mobile-friendly But more on them in a minute!
Don’t Let It Be You
If you’re like most of us and you’re not sitting on a pile of cash “just in case,” it’s time for some intentional action. No one else is going to do it for you – it’s your responsibility, and it’s a big one.
First, take stock of your current financial situation. Can you survive a financial disaster? What will happen to your family if you make only 25% of your monthly average next month? Could you meet the end? If you’re like most people, the answer is “no” or simply “maybe” and you need to set up a small buffer to help you move forward.
Many personal finance experts recommend starting with a $1,000 “emergency fund” that you set aside in a separate bank account, to be used only in true emergencies—things like your water heater breaking or a trip to the emergency room. Every time you make a payment, take a percentage off (I’d recommend anywhere from 10 to 50%, depending on how much you need that money elsewhere) and put it in a Separate bank account Scheduled for emergencies.
Once you hit that first $1000, it feels like a huge win…which makes it easier to keep going. Why aren’t you aiming for that 3-6 month benchmark that many people like spouting? The more you can save, the better your buffer against the storms life throws at you. But don’t get ahead of yourself — aim for that $1,000 first and then see where you stand.
Chime makes saving easy for freelancers
One of the great things about the internet age is that it makes working from home easier than ever. Another big thing is the rise of online banking. An online bank that I absolutely love is called Chim. I think starting to save and continuing to save, effortlessly, is a great option to protect 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 started. With automatic savings, Chime will “roll up” each transaction in your checking account to the nearest dollar and move that “extra change” amount into savings.
Here’s why I think it’s 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 those guidelines to save yourself some major headaches. Having an account with Chime makes it easy — you can deposit money directly, you can connect your PayPal account, and you can use a debit card to pay from your account. (There’s also a check-mailing feature for the rare times you need to send a check.)
You can “eyemark” the linked savings account as your emergency fund and then Don’t touch it. Start transferring a portion of every payment you receive to a savings account, as I mentioned earlier. And as each new transaction increases your savings, you’ll reach your savings milestones faster.
Plus, since it’s all online and kept separate from your regular bank account, it will be far less tempting to dip into that money for non-urgent and pseudo-urgent situations.
You can use Chime on your computer or through their mobile app — whichever you prefer. And you can hit many ATMs across the U.S. without paying a fee — just be sure to check a fee-free ATM before you withdraw to make sure it’s fee-free.
No matter what, do something
The most important thing you can do is start taking action. When you are able to take charge of your finances, you are no longer at the mercy of lenders, fees, interest and more. The first step is to build a small buffer against the small things, so you can start moving forward. Chim A great financial institution to use for this, but any bank account will do as long as you’re committed to the process.
You never know when a crisis will strike, but there’s nothing like the sense of security you have when you have enough cash in the bank to cover any emergency-related expenses. Give yourself the gift of security, especially in the face of turbulent times. The future will thank you!
For a limited time, Chime is offering readers of The Work at Home Wife a $5 bonus when they make an opening deposit. Click here to avail this offer.