Freelance Finance

This morning, Muck and I spent $4.60 exactly (I just found out Muck didn’t tip; as a former waitress, I’m appalled) on a pretty average cafe au lait and a very tasty almond croissant. We’ve recently switched over to the famed “envelope system” as a way of curbing our spending on eating and drinking out, by far our greatest expense. You could feed a family of four enough to keep them all comfortably filling out their plus-size wardrobe on what we spend eating out. This bothers us because, in theory, one of the great advantages of working at home is that you can save money on lots of things that the cubically-confined cannot:

1. Fancy work clothes and the dry-cleaning that goes with them
2. Gas or other commuting transportation costs
3. Neverending contributions for birthday-engagment-going away-newly arrived-promotion-I just farted parties
4. And, coming in at number four…Food and eating out.

What’s true in theory is harder in practice, and while Muck is probably more content than I am to stay indoors all day, I get a little claustrophobic and need a change of scenery. Changes in scenery quickly become excuses to eat out/drink out/go to a movie, and before you can say “tourist traffic has overpriced my microbrew,” $40 flies out of Muck’s wallet faster than Mel Gibson heading down a dark highway in Malibu.

This wouldn’t be so hard if we hadn’t become more hard-core recently and drastically upped our off-the-top savings percentage. One of the funds we have yet to get where it needs to be is what we like to call our “Sunny Day” fund. What it really is, is our emergency fund, but that just sounds like you’re inviting financial crisis and the freelance life invites financial crisis just by nature of it being what it is. I love ING Direct because I can open a different account for every little item I want to save for—from health care back-up funds to the vacation that Muck and I will never take—and give each of them inane, cheesy little nicknames. Sunny Day is one of the least offensive, even if it is a bit too cutesy. I haven’t tried out any juicy expletive account nicknames yet, but I might experiment with renaming the tax fund.

The popular “emergency” money-market account is touted by all as a way to protect yourself if you lose your job or can’t go to work. It’s what you will live on while you look for work or recover from illness. Freelancers don’t really have jobs, so it’s a nice perk to know we can’t lose them. But things can prevent us from working (see paragraph 2 above). The emergency fund—ideally enough to get you through six months of living expenses—takes on great importance for the self-employed as more of a slush fund. Stretch the confines of your mind and try to imagine a world in which a client (in our case, usually a newspaper, magazine or publisher) doesn’t pay on time/forgets to submit payment/forgets to file the contract with accounting or or or…

“Mire, would you mind resending the invoice…?” 
Before I do that, why don’t you get your head out of your ass for five minutes and find the one I sent you two months ago so I don’t have to wait another 45 days for payment? How does that sound?

Enter the emergency fund. Dip into it to cover expenses. BUT—and this is the part that requires discipline—once the village idiot does manage to pay you for the work you did now five months ago, you have to replace the money in the emergency fund. AND, on top of that, you still have to contribute whatever the percentage is from the same check that you would normally send to the emergency fund anyway (if you haven’t reached your six-month cushion goal, which we have not.) So that sucks, because now your paycheck may be reduced by about 50 percent.

If I skipped the so-so au lait 10 times each month, and Muck passed on the almond-paste kwahhhsant, the magic calculator (David Bach’s fabulous Latte Factor calculator, that is) says that if we invested that $50 each month in an account earning just 8% interest, we could make $9,387.29 in 10 years.