April 7, 2020 Working from Home

Taking the bumps out of the road.

For the foreseeable future, the population of people working from home will continue to increase. It’s becoming more of the norm. While the freelance world has many perks, it’s not without risks and financial instability.

Shortfalls

One of the biggest challenges that people who leave their 9 to 5 jobs face is the financial ups and downs that come with self-employment. You can have several months of lucrative income and then have a difficult time finding work for a month or two. During these slow periods, it’s important to have cash in reserves to cover monthly bills and day-to-day expenses.

Making Ends Meet

Everyone, regardless of whether they work for an employer or are a freelancer, should have a sizable savings account that contains at least the sum equal to three months of their bills. This is more critical for anyone self-employed. If you don’t have a nest egg, when the shortfalls come along, and they will, you will have to scramble to keep up with your expenses.

Securing a Loan

When you work independently of an employer you have no guaranteed salary. Without money set aside for these slow periods, you will need to borrow money to stay afloat. Traditional banks have very strict guidelines. Because of this, many freelancers have a difficult time securing a loan. The good news is there are other types of loans such as payday loans. While the interest rate is much higher than a conventional bank, they provide a way to acquire the necessary funds to remain solvent.

Creating a Budget

As a freelancer, the only way to survive financially is to create a solid budget and stick to it. You may feel that you can afford to treat yourself during a productive month. However, you will need surplus cash in the future. Budgeting will allow you to keep your bills current and your credit good. It will also let you see where you spend your money and areas that need work.

Saving for Retirement

Freelancers have no retirement funds such as a pension or a 401K. They also don’t have sick time or paid vacations. This means that any time off you take without pay. Your budget will help you create savings for your vacation, your emergencies, and your retirement. Thankfully, you don’t need to work for an employer in order to start a retirement plan. A traditional Roth IRA and a solo 401K are a couple of available options. Investment companies like Betterment can help you best manage your money and steer you in the right direction for retirement.

Pay Cash

It’s very easy to use debit cards, especially when you rarely see the cash. When you work from home as a freelancer you will probably use PayPal for payments or have a direct deposit to your bank. In order to track your expenses and tighten your belt, you should withdraw a set amount of money weekly. Once you spend the cash, you have to wait until the next paycheck.

The Art of Saving Money

Some people seem to have the natural ability to put money away. Others can’t seem to hold onto a quarter. Learning how to save money will make it easier to afford big-ticket items. For instance, you want a new living room set and the price tag is a couple of thousand dollars. Once you find the furniture that you want, put away money each week from your allotted monies towards the purchase. Once you have the cash saved you can purchase the set. This benefits you in several ways. First, you learn how to save money. Secondly, you own the furniture outright, with no interest and no monthly payments.

Working from home does have advantages. However, when it comes to making money, you will have months of financial wealth and those without. Learning to budget, pay cash and save money will all help you eliminate the bumps in the road.

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