How to save as a freelancer

1. A Freelancer’s
Guide to Saving
and Investing

2. 2 | A Freelancer’s Guide to Saving and Investing
Life as a freelancer can be pretty
great. You can often set your
own schedule, decide which jobs
to take, skip, and work from
almost anywhere in the world.
However, there’s one thing that
those with a side gig don’t have
that many people who work for
larger companies or corporations
do have: employer-sponsored
retirement plans. The perks of
these sponsored plans can include
401(k) matching and certain tax
benefits. When you’re a freelancer,
you need to decide for yourself
how much to set aside. There is
always the unpredictable nature
of freelancing which makes it
difficult to put money away in a
savings account for emergencies,
or for the day you buy a home or
new car.
Any freelancer can become a
smart saver by having both long-
and short-term plans for their
finances. Here are a few things
every freelancer should keep in
mind when saving and investing.
A Freelancer’s Guide to
Saving and Investing

3. 3 | A Freelancer’s Guide to Saving and Investing
In 2015, almost every working individual has a checking
account. In fact, a recent study shows that only 7.7 percent
of Americans do not have bank account, which places them
squarely in the minority. Twenty-six percent of adults do not
have money saved for emergencies. That means they’ll have
to pay for an unforeseen expensive car repair with a credit
card, by borrowing money, or with money they would use for
daily expenses like rent and groceries.
As a freelancer, your savings account is just as important, if not
more important, than your checking account. So many people
think it’s hard to save, but the fact of the matter is, you need to
save a little bit out of every dollar you earn. Even if you’re only
earning $100 a week, setting aside $10 gives you $10 more in
your savings account than you would’ve had otherwise.
Choose the Right
Savings Account

4. 4 | A Freelancer’s Guide to Saving and Investing
Your first step in building a solid
savings foundation will be choosing
the right bank account. Most banks
will offer you an interest rate on your
savings account. While rates aren’t
particularly high right now, you will
want to shop for the highest rate you
can find. Generally, online banks will
offer the best interest rates because
they are able to cut overhead costs
by not having any physical branches
to maintain. The money they save
goes back to benefitting their
customers. Don’t be scared by the
thought of having an online bank
without any physical branches; many
of these banks have great online and
telephone customer services, and
you can carry out most transactions
via their website or mobile app. And
then, of course, getting money is as
easy as hitting up the nearest ATM.
There are two types of savings
accounts that are good for
emergency funds, or places to park
money while you save for a big
purchase like a house, car, or dream
vacation - money market accounts
and onliutne savings accounts.
Because they both offer slightly
higher interest rates than what
you’d get with a checking account,
the federal government only allows
you to take out money a certain
number of times each month (you
can deposit money as often as
you’d like). Money market accounts
Choose the Right Savings Account

5. 5 | A Freelancer’s Guide to Saving and Investing
can often be accessed with an ATM
card, while savings accounts generally
require you to transfer money back and
forth from another account, usually a
checking account.
You can take some of the pain out of
saving by automating your savings.
If possible, have a certain amount of
money automatically transferred to
your savings account once or twice a
month. This is easier to do if you have
a regular paycheck (for instance, if you
get paid every two weeks, or on the
15th
and the last day of the month).
If your freelance income is a bit less
predictable, automated savings may
not work for you, which means you have
to be disciplined about setting aside
part of your paycheck every time you
get paid.
In terms of how much you should
save, it should be your goal to have 6
months worth of income in your savings
account in case you can’t find work or
are unable to work. On top of that, you’ll
want to save for any big purchases you
think you’ll make down the road. Even
if you don’t see yourself buying a house
or car in the next few years, it’s not a
bad idea to pretend like it’s a possible
and go ahead and set aside that money.
If you don’t make the purchase, the
money is there for you to eventually
spend on a major purchase like a new
computer or furniture. Or you can, of
course, let it continue to earn interest.
Choose the Right Savings Account

6. 6 | A Freelancer’s Guide to Saving and Investing
Saving for retirement is different than putting away
money in your emergency fund. You may never be unable
to work for 6 months, or you may get around town on your
bike or the bus and have no need to purchase car, reduce
the need (at least in theory) for a savings cushion. The
same cannot be said for retirement. All of us will someday
reach an age where we are no longer able to work. And
not only will we be unable to work, we’ll also have medical
expenses that we don’t have when were are in our 20s,
30s, or 40s.
Experts say that people in their 20s should aim to put 10 to
15 percent of their income away for retirement. This number
is significant, but not unreasonable. While some companies
match 401(k) contributions, making it so employees have
to set aside 8 or 9 percent to surpass that 15 percent mark,
freelancers are preparing for retirement all on their own.
Retirement

7. 7 | A Freelancer’s Guide to Saving and Investing
There are a few different options for saving for
retirement. One that you can probably find at an
online bank or the one down the block from you is an
IRA. An IRA is an individual retirement account that
has benefits and restrictions design with retirement
in mind.
There are two types of IRAs: Roth IRA and traditional
IRAs. A Roth IRA contributions are made after taxes
are taken out and you do not have to pay any taxes
on your distributions; traditional IRAs are funded
with pre-tax money, and you pay taxes on the money
when you take it out. One way to choose the IRA
that’s right for you is deciding whether or not you’ll
be in a higher tax bracket when you retire, or if you’re
current tax bracket will be higher. That way you can
decide whether you want to pay taxes on that money
now, or years down the road when you retire.
Retirement

8. 8 | A Freelancer’s Guide to Saving and Investing
Unlike money market accounts and savings accounts,
IRAs have strict rules on when you can access the money
you put into them. These are meant to be vehicles for
saving for retirement and usually earn slightly more
interest than other types of accounts. The federal
government has penalties that discourage people from
pulling money out before they enter retirement.
The penalties for each are similar but also slightly
different. For instance, you will generally get hit with a
10 percent tax for taking money out of either kind of
IRA. The only exception is with a Roth IRA; if your Roth
is at least 5 years old and you are accessing the money
because you have become disabled, your beneficiary
is receiving the money because you have died, you’ve
reached age 59 ½, or you are using at least $10,000 of the
funds to purchase your first home, these are considered
qualified distributions and are tax and penalty free.
Retirement

9. 9 | A Freelancer’s Guide to Saving and Investing
Saving and investing your money for the future is a
personal-finance must. But you shouldn’t neglect
the day-to-day financial needs that can help you save
money and have a better retirement down the road.
Many Americans struggle with some form of debt,
whether it’s credit card debt or student loan debt.
Depending on your interest rates and the amount
of debt you have, it may be smart for you to adjust
your savings plan so you can pay off those debts.
While you should always be putting something toward
your retirement and emergency fund, if you have
major debts that you’re trying to pay down, you may
want to take a year to focus on that before you start
putting money (Julie: there’s is a part of this sentence
missing)
Paying of Debt and
Being a Smart Spender

10. 10 | A Freelancer’s Guide to Saving and Investing
Saving is what you do when
you decide to make your own
lunch instead of going out
to eat, or buying a car that’s
less flashy but gets better gas
mileage is and is more reliable.
Your checking account can be
a savings tool as well. Look
around for a checking account
that has minimal fees and
maybe even gives you a bit of
interest on your money. It may
take some time, but after look
around for a while, you’re sure
to find one or two financial
institutions that make good
financial sense.
Paying of Debt and Being a Smart Spender

11. 11 | A Freelancer’s Guide to Saving and Investing
Talk to a Financial
Professional
Personal finance can be a tricky realm to
navigate. That’s why it’s almost always
worth your while to meet with a financial
planner who can help you make the most of
your money. You may think that you don’t
make enough money to warrant seeing a
professional, but that is almost never the
case. In fact, those of us who aren’t making
millions of dollars a year are often the ones
who need the most financial advice and
assistance. A financial professional can you
help you decide which kind of product to use
for your retirement, how much you should
be spending each month, and help you built
a plan for getting out of debt.
All images are subject to copyright.
Sources: https://www.creditdonkey.com/average-american-savings-statistics.html
http://time.com/money/2791164/how-much-income-to-save-for-retirement/
http://www.cnbc.com/2015/04/28/the-freelancers-guide-to-saving-for-retirement.html