The importance of a buffer fund when you’re freelance

Posted on: December 14th, 2010

As a freelancer, you know you need to put money aside for your tax bill. But do you also put regular sums into a ‘buffer fund’?

This is a fund you can draw on when:

  1. you can’t work because you’re ill, or you need to take time off to care for a sick relative
  2. you have temporary cashflow issues because a client is late in paying you
  3. work is thin on the ground
  4. you want to take some time out from work to study or learn new skills
  5. your partner has lost his/her job and you’re now the sole income provider
  6. you have large unexpected bills or items of expenditure to pay for

This time last year I had to draw on my buffer fund because of points 3 and 5. Without those reserves, we would have found it hard to pay our monthly outgoings.

One year on, and my husband is earning again and I’ve had loads of work over the past few months. It’s very tempting to think: “We’ve got enough money to go on holiday now” or “I can splash out and buy some new clothes”.

Well, OK, I did buy some new winter boots but my focus at the moment is to build my buffer fund back up, so it’s there to fall back on the next time I need it.

When was the last time you needed to call on your buffer fund?

3 Responses to “The importance of a buffer fund when you’re freelance”

  1. [...] The importance of a buffer fund when you’re freelance – the importance of having some savings and when it’s a good idea to use it. [...]

  2. Betty
    December 20th, 2010

    I put a percentage of every payment aside. A few months ago, my main computer was in the shop for a week, at a time that I was very busy with work under tight deadlines. In order to get work done I had to buy a new “back up” computer that could run the new software I’m using. Having the money to do so made the situation (and the week) a little less stressful.

  3. Freelance FactFile
    December 20th, 2010

    That’s extremely disciplined of you, Betty, to put a percentage of EVERY payment you get aside. Sounds like a very wise move.

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