As a freelancer, how do you save
for the future when income
does not come in regularly?
There are many kinds of freelancers (those who do freelance work) out there with varying degrees of income, depending on various reasons. Some of the factors that affect freelance work is the availability of work, the availability of the worker, or the kind of skills that a worker has. Some freelancers have regular jobs or businesses and they just do freelance work for extra income or just to indulge their special skills or interests.
For the purpose of this article, we will talk about freelancers whose main source of income is doing freelance jobs every now and then. Like me. Like an electrician, a plumber, a writer, an artist, a designer, or such. I am not employed, I don’t have a business, and income is erratic and always ebbing, like the tides of a woman’s PMS.
About 15 years ago, I left my job as a manager of a spa business. After a total of eight years as a salaried worker, talk about burnout from my highly stressful careers where I eat deadlines for breakfast, lunch, snacks, supper, and midnight nights. It was too much and the pay was not worth it. But it’s okay, I got a lot of training back then.
Anyway, since then, I went freelance. That was 2002. I did not regret my decision nor do I desire to go back to the corporate world. And I am writing this because I know that there are people out there like me who cannot stand the rigors of a nine to five job and are well enjoying the present but have not prepared for their financial future.
So my income, to say the least, is not very stable. And since my work skills are not really a specialty, I cannot demand higher pay. Let’s say my income back then can be as low as P100 or as high as P50,000 at one time, depending on the job. But of course, the higher spectrum pays are few and far between. Sometimes, I have earnings daily. Sometimes, it’s once a month. You can never know.
How Did I Manage
Prayers. I don’t know about you, but I believe in God and I prayed. And every time I have a pressing need, I present it to God. And in just a day or a few days, I land a project or I get paid for an outstanding debt. And oh, I tithe.
Money management. I am not a miser nor am I extravagant. So let’s say, I’m somewhere in between. I enjoy the good life, going out with my family and treating them from time to time. I also do not withhold buying gifts for them occasionally or spare expense in improving our house. But I don’t finish off everything that I receive. I make sure that I pay my bills and also use discounts in buying the things that I need. In most cases, I try to find ways to spend less for the things I need because there’s always a cheaper alternative.
Living with my parents. While a lot of young people would move out as soon as they can afford it, I stayed with my parents. We live in the suburbs and I love our garden. Also, we are a small family and it made sense to stay with them. But I didn’t live there for free exactly. I helped in the family expenses and in sending my younger brother to college because my father no longer had work at that time. While my brother had an educational plan to his name, miscellaneous expenses for a 5-year university course can be pretty steep. And it didn’t help that the pre-need company declared bankruptcy on my brother’s third year. Nevertheless, we managed. Despite helping in the family expenses, I still think that it is a blessing that I can stay at my parents’ house and not have to pay rent. And there are emotional benefits, too.
Preparing for the Future
The Attitude ofSetting Aside. When I was younger, I saved. Actually, I was still a child when I developed the habit of saving. I am not saying that my savings as a child is still there because we also went through so many financial breakdowns as a family that I had to give up my savings for the sake of survival. It’s just that I had made it a habit to set aside some amount whenever I get money on my hands—whether earnings or gifts. But I learned that putting your money in a savings account does not save your money for the future. In fact, you are losing money over inflation.
Most people think of this equation:
However, it should actually be:
And you should have different kinds of savings, too. You can have different savings for a variety of things, such as your emergency funds, retirement, a house, a car, or wants that require you to shell out a big amount – i.e. travel, gadgets, etc. We make it a rule not to buy or spend on one thing that is more than 1/3 of our monthly income in just one straight expense. So we save up for it, like the new TV set we recently purchased. A bigger TV set isn’t really a NEED, but what we needed was a TV set that has a USB input for it to play multimedia files for our kids’ educational videos because our old media player is already showing signs of malfunction. We saved up for it using the gift certificates that were given to us in the past. Then we waited until there was a big sale at the mall in order to get a bigger discount off our purchase. I also sold our old TV for P1,500, so I pretty much spent only P1,000 for this new TV, so all in all, we only paid a P1,o00 for a 32″ TV.
Insurance Policies. Though quite late, I started investing on an insurance plan when I was already 29 years old. I knew by that time that I didn’t want to go back to work and I may spend the rest of my life doing freelance work. I thought about my future because working freelance means no bonuses, 13th month pays, and most of all, no retirement pay from a company. I needed to do something. So on my birth month on my 29th year, I sought out an insurance underwriter and signed up for my first policy. It is a health-life policy with return of premiums after a certain number of years. Annual payment is P6,900 for 20 years. I am now on my 13th year. But I did not stop there. I thought that I could afford more than P6,900 per year so I picked another life policy with a return of premiums. I pay another P11,000 annually for 20 years. When I got married, I added a couple of other policies between my husband and I because now that we have children, that would be part of the legacies that we will leave them.
Mutual Funds. I was first introduced to the concept of investing in mutual funds just about the time I signed up for my first insurance policy. I wanted to advance my payments whenever I had money, because you know, I cannot guarantee that I have cash on hand when the due date comes (freelancer, remember). My agent introduced me to mutual fund investing because she said that depending on market value, my money will earn, as opposed to paying in advance for my policy because it already has a pre-programmed return. The money was invested in bonds because then, fluctuation risks are not that high. But depending on your Risk Tolerance, there are other products to invest in, such as equities (stocks) and balanced funds. Right now, since we have decided that our mutual funds are for long-term investments, all our money is on equities.
Educational Funds. I keep on investing on mutual funds WHENEVER I have extra money. If I don’t, it’s fine–my accounts don’t get dormant or stale even if I don’t put in investments in years. They are easier to maintain because I just give my money to reputable financial institutions and they safe keep and manage it for me. It’s hassle-free. This is what my husband and I did for our children’s future funds or educational funds.
At present, there are still educational fund products from different financial institutions. But they are no longer as high yielding as they used to be when the pre-need companies like my brother’s went bankrupt. Some companies won’t even give you a guaranteed return and the policies can be quite expensive.
We realized that putting our money in mutual funds will give us better yields. The cons of this is the tendency to take it for granted and not add to it since you are not obligated to keep putting in money. The advantage though is that at times of no income, you can skip the top ups and the fund won’t be cancelled. We actually got a VUL as educational fund. With this, whatever happens to us, the insurance can serve as the kids’ future educational fund. However, you want to do it, make sure that you have stash for your kids’ higher education.
Savings accounts. Now, you may ask, so you don’t put money in a savings account? Sure I do, but only a minimal amount. It’s probably smaller than some of your kids’ savings accounts. Our children, though, have a savings account for our travel fund and also another one for some emergency expenses. But it’s not much, as in bare minimum. I know I need to stash some more there, but for now, that’s all we can afford.
Just remember this: A savings account is where you can easily KEEP as well as ACCESS your money. So you put money in there that you want to keep for a short time and that you can easily withdraw if the need arises.
Stocks. You can also invest in stocks. But since I am a panikera, the stock market is not for me. If you are not very knowledgeable and have no guts for daily risks, this may not be for you. But I know of other freelancers who have succeeded in doing this. It’s just not for me. I did not really lose money but the stress of managing accounts on a daily basis is not for me. That’s why my bet is in mutual funds. I put money in there and don’t even bother.
SSS and Philhealth. These are both government institutions. Except for Philhealth, my husband and I contribute some money in SSS, too. It may not be much but I know that someday, we will reap some benefits from our social security accounts. I also got some maternity benefits there, too, when I had my two children and when I was hospitalized once. As for Philhealth, only my husband makes contributions there because the coverage is already for the whole family. It may not be much but in times of medical emergencies that need hospitalization, it can help.
Earn from Different Markets. If you have an entrepreneurial spirit, sell some stuff. Some people have strength in selling. You may want to sell something on the side, anything that can earn you money on your spare time. You may also start an online business. However little extra you make is still additional numbers on your pocket. I do that, too, whenever somebody asks me to sell something for them. What you do with it is up to you.
Diversify. Honestly, we follow the principle, “Don’t put your eggs in one basket.” In mutual funds, we put our money in different portfolios. In terms of financial institutions, we have accounts in leading companies in the country, such as an equity account at Sunlife. We don’t have offshore accounts though, but you might want to do that, too.
Now, you don’t have to follow everything that I do, as things are surely different on your side of the fence. Your income might be much bigger than mine but you may not have savings for your future. I’m sure that you can glean a thing or two from me. If you haven’t thought about your future yet, then NOW is the right time to make a plan and act on it. It doesn’t matter whether you’re in your 20s or 40s. There’s still time. Don’t rush into get-rich quick schemes. Go to reputable financial institutions and ask for advice. Compare offers from different companies, too.
Agents would tell me that my investments for the future are not enough for our future needs. Don’t be discouraged and say that you can never afford it. I say to them, I invest only in what I can afford now. It’s no use NOT LIVING nicely today just because you are preparing for the future. Where’s the fairness in that? So I am not like that. For sure, I put our current needs first. And some wants, too. For big expenses like travel, we save up for them. We do this because part of our educational route for our kids is to show them the world—as much as we can afford it. (I will discuss this again in another post.)
YOU DON’T NEED TO LIVE MISERLY just because you are saving for the future. BALANCE is the key.