Freelancing in any field carries risks. How can you possibly feel safe when you’re not getting a steady, guaranteed paycheck? However, experienced freelancers know the truth. With a traditional job, you could be fired or laid off at any time—meaning you have less control over your income than you do when you’re self-employed.
That said, freelancers often have cash flow issues. Some stem from “dry spells” where the clients vanish and the bills loom large. Others come from unexpected expenses like a tax audit, equipment failure, or non-work-related bills—such as a medical emergency or home repair. Preparing for these unforeseen expenses is part of your job as a freelancer. Here are some helpful tips about what to do before, during, and after a cash flow hiccup.
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Preparation Is the Antidote to Worry
The best way to manage a cash flow emergency is to prevent it from happening in the first place. You do that by setting systems in place early and then using those systems to build up extra resources. Here are some examples:
Earn 150% of Your Needs
If you earn 150% of what you need to pay your bills, you’ll be able to save enough money toward slower periods while simultaneously affording some luxuries to reward your hard work. You should do this via a three-pronged approach to your profits and losses:
- Find more gigs, so there’s more work available for you to write
- Reduce your expenses
- Give yourself a raise by charging new clients more than your previous rates
If you combine these factors, you should be able to hit that 150% mark almost every month.
Kill Debt, Then Save Money
Because debt costs money in the form of interest and increases your monthly expenses through minimum payments, it’s a good idea to use your extra earnings to eliminate debt aggressively. Pay off at least one credit card first. Doing so will free up space on that card to deal with emergencies until you save a large enough contingency fund.
Once you pay off everything but your student loans, car payment, and mortgage, start saving toward a contingency fund. Ideally, this will top out at six months of your basic expenses. If you can’t get your earnings back on track in six months, it might be time to consider a different career.
Keep a Content Mill in Your Back Pocket
Sign up and maintain at least one set of credentials at a content mill like SteadyContent, Wonder, or Contently. Working for content mills is low-paying and less fun than most other assignments, however, their demand is bottomless. If you experience a month where the jobs simply aren’t coming in, log in at the mill and get to work. This will keep your cash flow where it needs to be and motivate you to expand your client base for the next month.
Keep a 90-Day Earnings Calendar
Know what you’ve got assigned and where you have leads. Then, develop a marketing plan for the next three months. Use that information to inform how hard you look for work. If the current month looks good, but the next two months look slim, then it’s time to start reaching out to editors for more work. Doing so might mean having the occasional rough week, but it should keep you from experiencing a crushing month.
Responding in the Moment
Even the best preparation won’t prevent the occasional unforeseen hiccup. For example, either you didn’t earn enough to cover your expenses or had a sudden need pop up where you don’t have the cash to cover it. Whenever this happens, follow this emergency response plan:
Step One: Immediately find out how much operating cash you can put toward the problem. This includes money you’ve earmarked for nonessentials, cash in smaller savings accounts, and even quick sources of extra money like selling that 8-track collection you haven’t played in years. This step is the freelancer’s equivalent of going through your pockets for pizza money—and you’ll be surprised how much you find when you look.
Step Two: Access your contingency fund. After all, that’s why it’s there.
Step Three: Use your credit card or a line of credit you’ve set aside for emergencies to cover the balance. Credit is not the best way to get that extra money (which is why it’s step three), but using it beats going under or without.
Consider these steps like you would first aid. They won’t solve the problems that caused the bleeding, but they will stabilize the situation. If you find yourself in a cash flow situation more than once or twice each year, look hard at how you’re handling your freelance writing business. You might find there’s an issue with your plan or your execution that’s causing these frequent financial emergencies.
Recovery and Recuperation
After you’ve stopped the bleeding, it’s time to recover from your emergency and set up systems to prevent it from happening again in the future. While you’re doing this, keep the following tips in mind.
Get Back on Track
Whatever your contingency fund level and credit card balances were before the emergency, cut costs and work extra hours until they have returned to their previous levels. If you don’t do this, the impact of a second cash flow emergency can be disastrous. Do whatever it takes to get back on track as quickly as possible.
Identify the Problem
As soon as you have the mental and emotional resources to do so, find out why you had an earnings shortfall or unanticipated expense. Some circumstances will be unavoidable, while others may point to habits or decisions that are contributing to or causing the problem. Once you find the cause, look to your freelancing business systems for changes you can make to avoid it in the future.
Develop New Habits
Once you’ve identified the source of your cash flow event, you’ll need to make changes that become a permanent part of your writing routine. That means developing new habits, ending old ones, and setting up situations where you hold yourself accountable for these new goals. If you don’t change how you do business, you’ll be “surprised” again and again by the same cash flow emergencies.
Final Thought
The best thing about being a freelancer is you’re in control of every aspect of your financial and professional destiny. The scariest part of being a freelancer is that that you’re responsible for every aspect of your financial and professional destiny. The advice you just read about how to handle cash flow emergencies directly applies to each part of your freelancing career.
If you plan and prepare well, are diligent in your work, and learn from your mistakes—your career will blossom. If you simply react as things come to you, you’ll constantly find yourself in some kind of emotional, circumstantial, or financial stress.
Mike Fisher is a writer and seasoned freelancer with over 10 years of experience working for dozens of publications around the world. When not writing, he’s likely traveling or perusing a bookstore.
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