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Conventional wisdom says the average worker should have three to six months of living expenses saved in an emergency fund.
Despite how pervasive this tip might be, it doesn’t apply to every worker universally.
Gig workers like you face greater uncertainty moving from contract to contract, so you might need a bigger stash of emergency savings. Some experts recommend saving as much as one year of living expenses.
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How to Save More for Emergencies
A year is daunting. The good news is that you don’t have to save it all at once. Consider it a long-term goal you achieve after years of consistent saving.
You’ll find it easier to meet this target faster by saving with every check you deposit, setting aside at least 10% of your earnings. This is, of course, above and beyond what you need to save for taxes.
Automate these contributions so you don’t forget to transfer cash one month. You should also consider dropping any windfall into this fund to expedite how quickly you reach your goal.
In these beginning stages of saving, cautious freelancers also take out an emergency credit card or line of credit. These accounts act as a cushion in case your emergency arrives before you manage to squirrel away your first $500. You may also apply for a cash loan to cover an unexpected expense.
Before applying for a line of credit or cash loan, make sure you’re borrowing from a legit source that you trust. Legitimate online loans come from licensed lenders that provide all the information you need to decide whether their products are affordable. This information includes the full cost of borrowing as represented by APR, as well as expected monthly payments, finance charges, and scheduling.
4 Reasons to Boost Your Savings Rate
Now let’s get to the question of the hour. Why should gig workers consider doubling the standard savings goal? It comes down to these four reasons:
1. You Don’t Have a Corporate Lifer’s Perks
Once you go freelance, you give up certain safety nets that give you time to get back on your feet after an illness. You also don’t have the benefit of coworkers who can pick up your slack while you’re away; instead, you might have to drop clients or decline projects when you’re sick.
2. You Can Experience Lean Months
A salaried worker puts in their 9 to 5 every Monday to Friday, regardless of their workload. Gig workers, on the other hand, can only work when they have a project lined up. Depending on your industry, the economy, and your success at landing gigs, you might have a slow period when you earn less than usual.
3. You May Not Be Paid on Time
Nearly one-third of all freelancers get paid late, so there’s a good chance you may have to chase after a payment. Clients can honestly forget about their due date, but some may not be able to pay you on time because of their own financing issues.
4. You Pay for All Your Equipment
While a corporate worker arrives at the office with a computer, phone, and copier supplied by their employer, freelancers cover this cost on their own. You also have to cover their upkeep.
An Emergency Fund is a Gig Worker’s Best Friend
If a client pays late, your computer breaks down, or you can’t land a job right away, you can rely on your emergency fund. Make sure it’s up for these big tasks by prioritizing savings every month.
