Here’s a lesson I’ve been trying to teach my almost-four-year-old: you have to plan for tomorrow today. Of course, I keep it age-appropriate for her, especially since the concept of today and tomorrow are still kind of vague. You know, if you eat all the goldfish today you won’t have any to eat tomorrow. Let’s lay out your clothes tonight so they’ll be ready tomorrow.
For us, planning for tomorrow includes more than the next day or the day after, but the years and decades to come.
Get rid of your past debt.
Most of my debt is student loan debt. Oh, if I knew then what I know now. But many of you may have car loans, mortgage, and credit card debt to deal with also. Debt keeps you from reaching your most important financial goals because you’re often paying for something you’ve already consumed.
The feast and famine aspect of freelancing may make it hard to pay off debt, but put more toward your debt when you can. The sooner you can get rid of debt, the sooner you can start putting more toward your other financial goals.
Build up an emergency fund.
An emergency fund is savings that you can access whenever you have, well, an emergency. For example, my car’s air compressor went out last August and here in Alabama it was still 90+ degrees every day. Thankfully, I had the $750 for the repair stashed away in an emergency fund. It hurt to part with the cash, but what if I hadn’t created an emergency fund. I might have had to use a credit card, dip into my buffer account, or maybe even borrow the money.
The ideal emergency fund is 6-12 months of living expenses, but working toward a short-term goal of $1,000 is better than having nothing at all.
Have sufficient health insurance.
Part of securing your future means you have a health insurance plan that will cover some of the most expensive medical expenses. Without health insurance, you could be one major illness away from bankruptcy.
If you have a health insurance plan with a high deductible, make sure you have that deductible stashed away in an account somewhere. There are tax advantages to placing the money in your health savings account, which is basically a savings account you can use for medical expenses.
Save for retirement.
If you’re like me, you can’t imagine that you won’t be writing forever. But, one day I would like a more leisurely life that’s void of deadlines and invoices.
In a perfect world, I’d spend my retirement living off royalties from all the best sellers I’ve written. Since the aforementioned are still in draft and idea form, it’s probably best that I go with plan B – set some money aside for retirement.
While the days of employer-matched retirement plans may be gone, there are retirement options for freelancers that allow you to save more tax-deferred money than if you still worked for someone else.
Remember that you're not just making money to pay the bills for this month or next month, but you also have to plan for your financial well-being for the rest of your life.