Building a Financially Sustainable Writing Career: The Emergency Fund

Make More Money than You Spend

Let’s face facts. It takes money to get started in almost anything. Whether you are a freelancer, a contractor or a full-time employee, it takes money to make money. Freelancers must maintain their own offices, equipment, and communications. They must also market, heavily. Contract workers have to maintain a fairly constant job search, sometimes pay for relocation, and have enough money to cover periods of unemployment. Full-time employees have fewer expenses, but they often make less money. It can be easy to get lured into thinking that your steady income makes up for the fact that your debt keeps increasing. It does not. No matter what your income situation is, the first priority should be to either increase your revenue or decrease your expenses until your income exceeds your expenses. A ten percent cushion is a good start. Twenty percent is better.

Start an Emergency Fund

The main reason you need your income to exceed your expenses is because you need to have money set aside for emergencies, and there WILL be emergencies. Freelancers and contractors tend to learn this lesson much faster than regular employees, but the rule applies to all. Emergencies happen. You may find yourself facing medical problems, legal trouble, or income issues. If you don’t have money set aside, your only option will be debt, and that is never a comfortable option. Set income aside. People like to give figures such as six month’s pay, but few people get to start out with a fund that is so solid. Pick a percentage of your cushion, perhaps half of it, and put it in the fund. It will grow with time.

Get Protection

One of the key ways to prepare for emergencies is insurance. Insurance is basically an emergency fund. You pay money in, with the hope that you will not need to use it, but knowing it is there if you need it. Medical insurance is clearly the most important. Medical emergencies can be among the most costly. Prepaid legal aid is another good idea. Paying a small monthly fee will give you access to an array of free or cheap legal advice and basic contract assistance. Other insurance areas to consider are dental, vision, short-term disability, long-term disability and credit-card protection. I list credit card protection last because the best protection is not to run up credit card debt in the first place.

Know the Difference Between a Problem and an Emergency

An emergency fund is for emergencies. It isn’t there to deal with minor issues. It is money for times when there is no other choice to be had. You don’t use your emergency fund to replace a working computer (or one that you can live without), look for a new job when your old job isn’t in danger, or take a vacation because you “really need one”. The emergency fund is your fund of last resort. It is not only there to fix serious problems, it is there to give you confidence in your everyday life. Knowing the money is there allows you to feel less fearful of the future. When the fund is strong, you can feel more confident in taking the occasional career risk and setting off on a new course. Every time you use that fund, especially for something that could have been covered otherwise, it reduces your options and makes it harder for you to adapt to future changes. The best emergency fund is one you never have to use.

Related links

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Contact John Hewitt

Writing Content and Web Consulting

Email: hewitt@poewar.com
Phone: (520) 261-6104
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