Dr. Martin Luther King Jr. is believed to be the first to introduce the phrase, “a budget is a moral document.” As a 9-to-5er who took the leap to full-time freelancer, I’ve come to understand these words to be true. If you look at my budget today, it would tell a very different story than it did five years ago. To effectively manage my business and live a life that brings me joy, it’s been critical that the biggest line item on my budget shift from shopping to saving. The most important lesson I’ve learned along the way? Pay yourself first.
My path to becoming a full-time freelancer and paying myself first has been a long and winding road. After college, I moved to Los Angeles to pursue my then dream of working in fashion. I landed my first job right out of design school, only to be let go a year later due to budget cuts.
This was my first real financial lesson on my path to entrepreneurship—companies that survive, grow, and thrive are ruthless in cutting expenses and saving money. In this case, it was me. I was the expense that was cut and it stung.
Not long after, an opportunity fell in my lap to do graphic design work for another company, but the position wasn’t permanent. So I started freelancing before I ever knew what the term “freelancer” meant. However, I did know that this new company wanted to pay me for a service, and my rent was looming.
I wish I could say that was it, and the moment where the importance of saving clicked for me, but it wasn’t. It took a few more years, unfulfilling full-time jobs, being passed over for two promotions, and countless freelance writing and consulting gigs for me to realize that it was more logical to work for myself than anyone else.
It was through this process that I began to develop healthy savings habits to support my decision. Here’s what I’ve learned about saving on my ever-evolving self-employment journey.
Why creating a savings plan?
As a Business-of-One—or someone looking to venture into self-employment—there are countless reasons why you should be saving.
A rainy day
Starting a business isn’t for the faint of heart, it’s a huge risk. In reality, every single day that you work for yourself, you’re taking a risk.
Although we don’t plan for bad things to happen, life shows us that they can—and often do—depending on what season we find ourselves in. Who would have thought we’d live through a global pandemic, the most devastating since the Spanish Flu of 1918? I’ve found the best way to prepare for the unthinkable is to set yourself up for financial success should the unthinkable actually happen. A healthy saving habit is a great place to start.
Starting, growing, and scaling a business
This is a big one. The dream of entrepreneurship is one that many of us share. However, if you’re a woman, a woman of color, or specifically, a Black woman, the lack of access to capital when it comes to starting or growing a new business has been well documented.
By developing a healthy saving habit, in some cases, you have the opportunity to bootstrap your business growth before needing to raise capital. We have come a long way as a society, but even in 2021, Black women are still not invited to the table often enough. By saving the seed money to fund your business, you have the opportunity to build your own table.
Tip: The Power of Broke by Daymond John a great book about bootstrapping and it shifted my perspective on raising capital to start a business.
Working for yourself is a magical adventure. You meet new and interesting people, and hopefully, do work that you love.
However, sometimes it’s time to make a change. Maybe you need to fire a client. Maybe you decide to shut down your business and take some time off to plot your next move. Or maybe you’re going to move to the other side of the world to become a professional surfer. Whatever the reason, it’s important to have a slush fund so that you don’t have to choose between making money to support yourself and self-care.
Of these three scenarios, the worst-case is that you’re in a position where you need to live off your savings. The best case is that you actually have savings to support you when you need it.
A four-step saving framework for freelancers
So what does it look like to save when you’re self-employed? Through my own self-employment journey, I’ve learned that it’s important to be strategic, honest (with yourself), and consistent. Here is a simple, four-step framework that I’ve used over the years. It’s taken me from no saving at all to having a year’s worth of expenses in the bank.
1. Set a goal
If you want to save money, identify why you’re saving. Just like laying the foundation for a new business, you have to be able to answer the question, what’s your why? Saving is no different. Make a business plan for your money! What’s your vision statement for your savings account? What’s are your three, six, and 12-month goals? What solution are you solving in your life by saving? Write it down!
2. Create a budget
Creating a budget is the next step to saving for your future. This is the place where you should identify your gross and net monthly salary. How much are your combined expenses? And what’s leftover?
Call me old-school, but along with the online money management tools that I use, I also have an Excel spreadsheet that I check every month to make adjustments as necessary. As a freelancer, my monthly salary isn’t always consistent, so I’ve found it helpful to keep a copy close by whenever I need to make a quick update.
3. Decide on a percentage to save each month, and actually do it
This is where the magic happens. As a self-employed person, there’s a good chance your monthly salary fluctuates. Although the numbers may change, committing to saving a certain percentage gives you the opportunity to be consistent. Consistency not only grows your bank account but also helps to grow your confidence along the way.
Tip: I moved my savings account from a popular retail bank with ATMs on every corner to an online-only, high-yield savings account. If I can’t see the money from day to day or have easy access to it, I’m less tempted to move it around.
4. Sit back and watch your money grow
If you start saving a percentage of each dollar you make and let it grow for a year, you might be surprised by how much you can accumulate. Once you start to see your accounts grow, saving more money almost becomes a game. For example, one of my side hustles is selling cute accessories on Poshmark. Every time I sell something, I send the money straight to my savings account. It’s not much, but over time, it adds up!
Having a substantial savings account is only one of the many paths to financial freedom. Saving is foundational to taking control of your finances and can give you a leg up when starting and running a business.
I’ve been freelancing for over ten years now, full-time for two years. I’m proud to report that I’m currently saving 45% of my monthly salary. The biggest lesson I’ve learned on my savings journey is that money is a mindset; I had to tear down my not-so-great spending habits to build healthy saving habits.
To be clear, I do realize that times have been hard for many business owners as we continue to work through the ongoing disruption of the pandemic. However, starting a savings plan in this economic downturn—no matter how big or small the amount you can commit to putting away—could prepare you to be in a very different position during the next economic downturn. Happy saving!
Laura K. Wise is the founder and lead consultant at Content Wise Communications, a boutique communications agency building brand stories and assets around social impact initiatives for a digital world. Laura is also the founder of The Black Female Freelance Network (@bffntwrk), a community of Black women freelancers sharing tips, tools, resources, stories—and most importantly, creating a hiring pipeline. You can find her across most social platforms @laurakwise.