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Financial Fitness for Freelancers

budget critical illness coverage disability insurance employment insurance financial planning money management retirement retirement planning May 25, 2024
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Hey there, freelancers and gig economy warriors! 

A topic that hits close to home for many of us these days: managing our finances in the wild world of freelancing and inconsistent income. Below we dive into some strategies for those whose income is as consistent as the Southern Alberta weather (Geez, how old am I? Cracking weather jokes on my blog…I used to be so cool).


Know Your burn

One month you’re rolling in dough, the next you’re counting pennies. Sound familiar?

The key is to get cozy with your spending. Budgeting is about as fun as a root canal, but trust me, it’s going to be your financial BFF. 

Sit down, crunch those numbers, and figure out how much you need to cover your essentials each month – rent / mortgage, regular bills, groceries, entertainment and the occasional emergency coffee run. What number do you need to hit every month to keep the lights on, the kids in gymnastics, and the occasional mid-level vacation a reality? That is your Burn Rate. If you can’t hit your burn rate consistently, you need to either reduce your spending or make more money. Simple concept. Hard to do. 

When I left the bank in 2016, my ‘business’ fell flat on its face out of the gates. My six month old daughter still needed clean diapers and I really enjoyed the whole ‘being married’ thing. Spending less wasn’t an option; I had to make more.

So, I turned to driving for Uber in the early mornings and late weekend nights and I picked up the occasional bartending shift. It kept my business aspirations alive one month at a time. I didn’t want to give up on my dream. I KNEW it had legs, I just needed to get through the initial rough time.

If you’re there now, put your ego aside and get to work. Do NOT let your freelance dreams die! Sidenote: if you need a cheerleader or a strategist, this is a coffee meeting I will always make time for.


Cash on hand always wins

Once you are earning enough to satisfy your Burn Rate, start stockpiling cash. Get obsessive about building the balances in your business account and your personal savings.

Don’t worry about your ‘rate of return;’ worry about collecting enough cash to survive six months of no new gigs.

My wife, Lindsay, has owned her own Interior Design firm for 15 years now. Since I’ve known her, she has been busier than she wants to be and could be (read: SHOULD BE) if she was charging double what she is. But even her business didn’t stand up to COVID; there was a three month period that was uncomfortable for her - she wasn’t sure if she would work again!

Ironically, people eventually started spending MORE on their renovations once they realized they were locked inside, so she got even busier than before - the day was saved 😂.

You won’t regret having cash on hand. I promise.


Protect your family

If your family relies on your income - if it isn’t just the icing on the family’s financial cake - you owe it to your loved ones to act responsibly. You likely need life insurance, critical illness insurance, and disability insurance. 

Your T4 counterparts probably have some insurance at work, but you don’t.  

Even at our poorest, I was paying about $650 a month for critical illness and disability insurance. I realized early on that I am a risk-taker when it comes to my business and my income (I have been accused of having ‘rose coloured lenses’ on things just working out. Yes, I see the irony in a financial planner with this attitude towards life) but my biggest fear was leaving my family with a pile of debt they couldn’t afford or becoming a financial dependent. My appetite for risk is MY appetite, not my family’s. 

I can’t describe to you the peace of mind I felt knowing that no matter what happened to me, my family would thrive.


Will I ever retire?

Entrepreneurship is the number one way to get rich, but the chances of it following a straight line are slim to none. Strap in for the ride, because your ‘retirement planning’ won’t look ANYTHING like an RBC commercial.

As an entrepreneur, you have created a business that you love doing; you choose passion over security every day. Hopefully that means you don’t have to retire “on schedule;” you will be able to wind down your business when you feel like it.

I for one, have no plans to retire at 55, 60 or even 65. My business is fun, engaging, and social without being burdensome to my travel desires or my availability to volunteer at our girls’ school. I LOVE my job - I’m winning at life and don’t see a need to run from that.

DON’T get down on yourself if your buddy at the big oil and gas firm is significantly further down the retirement road than you are; your path is different - not necessarily worse.

DO have a plan. Start thinking about what you want your mid-to-later life to look like, how you can exit your business when you are ready (and make money selling it), and how best to save/invest your money to have it start working for you.

Do you feel like your life is unconventional? I thrive in the unconventional! Let me help.

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