Freelancers know instability. But the impact of CORVID-19 has thrown a lot of us for a loop.
It’s one thing to navigate fluctuating income. It’s another to have whole industries shut down, even if it’s only for a few weeks. The risk of sickness or the responsibility to care for someone else adds another layer. As hard as it might be, now is the time to start thinking of how we handle blows to our income and interruptions in our work.
All that is a long way of saying that freelancers need PTO just like anybody else — maybe more. Setting that up is easier said than done, but honestly, PTO isn’t all that complicated.
All it is, is money that’s paid out when you aren’t actively working. Employers (American especially) have all kinds of weird and convoluted ways of putting it together. But you can do the same thing, or something similar in a way that suits you.
First off though, let’s just be honest about something. Funding your own PTO takes money. If you aren’t making at least $75/hr or your regional equivalent, it’s going be hard and maybe impossible, so tackle that goal first. (The advice there will also help you pivot if the pandemic has impacted you negatively.)
Alright. Ready to go? Let’s talk about a few different ways to approach PTO, so the next upset won’t hit quite the same.
This is probably the simplest way — the rainy-day fund.
The idea is to keep savings so that if things get dicey, you can still pay your bills and stay afloat for a while. It can be as simple as a separate (untouched) savings account that you keep at a minimum balance.
How much will you need? Well, that depends. People say to fund 6 months of expenses, but that’s a lot to figure out, especially if you’re just getting started. You can start with a smaller goal, like one week’s worth of income and built from there as you can.
Keep That Paycheck Flowing
Now that I FINALLY got the whole S-corp thing figured out, this is the option I’m using.
The way it works is that I’m issuing myself a paycheck twice a month, just like I got when I was employed. That check keeps coming in the same amount whether I’m down 2 weeks with viral pinkeye, running to Japan to visit family, or working a few extra hours because a new project’s getting ramped up.
On the admin side, it’s basically just running simple payroll for one person, but does mean that your freelance business needs to bring in enough excess money (depending on what you want to pay yourself) so you can regulate your income.
The S-corp decision has a few moving parts, and doesn’t work for everyone in every state (the general advice is it doesn’t start to make sense until you’re crossing into or above the $75K-$100K U.S. range…here’s a good podcast on it), but if you want to talk it out, come over to the community and hit me up.
Check Out Emergency Options
This isn’t an endorsement and doesn’t cover all emergency situations that can come up, but AFLAC is an option that you’ll regularly see freelancers bring up. It covers situations like hospitalizations, short-term disability, and accidents.
I have policies myself (similar to ones I had when employed by a small business), but thankfully haven’t had to use them…if you have, I’d love to hear about your experiences in the comments.
The thing about benefits as someone who’s living independent of an employer is that you have almost all the same options to build your benefits package that employers have. It’s might take some restructuring and a little bit of research, but we’re living in a great time for freelancers where putting things together is easier than ever.
If you’ve got any questions, drop a comment and I’ll see what info I can find.