Back Button

How to start an emergency fund as a freelancer

Arno Yeramyan
October 12, 2022

Yes, being a freelancer is amazing! With all its perks and advantages, it was, and still is, one of the most popular options that independent talents can go for. But the thing is, sometimes, there are weeks or months where it’s a bit harder to make ends meet. Those times are the ones that we might miss the security of a steady income or a regular pay-day. Not to worry! With a bit of planning and budgeting, we as solo professionals can set up our own emergency savings in order to avoid being overwhelmed with financial challenges. An emergency fund also greatly helps subdue the effects of financial anxiety.

What is an emergency fund?

An emergency fund, or emergency savings is simply the source of cash that you save for tough times. While the amount of an emergency fund varies from person to person, it is important to keep your emergency savings in a seperate account from your regularly used checking account.

How much should you have in emergency savings?

Establishing an emergency savings fund is rather easy. What is harder to decide is the amount of money that you want to transfer to your emergency fund on a regular basis as well as the overall amount of money that you wish to keep there. Although there is no universally-agreed amount of emergency savings, there are certain points that you need to keep in mind while determining the ultimate volume of your emergency fund. Here are some points that you can consider while deciding how much you should have in your emergency fund.

  • Your location
  • Taxes you’re responsible for
  • Your rent
  • Any household members you’re taking care of
  • Insurance
  • Your retirement plan
  • Essential monthly expenses (utility bills, etc.)
  • Other expenses such as entertainment, traveling, education etc.

It is of utmost importance to keep in mind that these vary greatly from one solo talent to another. Although asking for the opinion of others who have already started such a fund is surely helpful, keep in mind that only you can assess how much to save and spare for your emergency fund. What you can do to find the right balance is to spare a certain percentage of your regular income consistently for over an amount of time that you see fit.

Building an emergency fund

Regardless of how large you want your emergency reserve to be, there are certain steps that you need to follow in order to lay the foundations of a fund that will provide you with financial security in case of unexpected occasions. While the first and foremost thing to keep in mind is to be consistent with your savings plan, you can start by considering;

  • Getting familiar with zero-sum budgeting
  • Setting target-specific and realistic goals
  • Budgeting monthly savings
  • Using a separate account for your emergency fund

Get familiar with zero-sum budgeting

The term may sound too technical but trust me, it isn’t! Originally devised as a part of the vocabulary of economics, a zero-sum budget refers to the idea that every bit of money that you make needs to be channeled to a certain place. The equation is simple: your income - your spendings = 0. This means that after deducting your essential expenses from your income (monthly, bi-weekly, or weekly) you will need to handle the remainder with a set plan at hand. Writing down every regular expense for the month could be a great start, allowing you to see how much of your paycheck will need to be set aside no matter what. Then, you can start planning for where the remaining amount will go. This amount can be divided into personal shopping, travel savings, or most importantly, your emergency savings. Needless to say, this method makes planning ahead so much easier.

Determine a realistic, specific goal

One of the key aspects of establishing a well-functioning emergency fund is to be consistent, and being consistent over extended periods of time is best achieved by setting realistic goals that are target-specific. Your ultimate goal amount for your emergency fund is recommended to be an amount that can at least cover your essential expenses for 3 months. Again, this amount will change according to many variables, which we listed above. Being consistent with regularly putting money into this fund, however, is a bit trickier for freelancers–although still doable!Keep in mind the fluctuations you experience with your income throughout the year. Remember that the point is not to have some arbitrary amount of money in your account that you didn’t quite understand how it got there. The point is to have a reliable, realistic plan to reach your goal, which you can follow every month.

Put a set amount to your savings every month

Remember that we talked about consistency? This is one of the crucial points where the idea of having consistency in your savings is put into practice. There are two possible ways of putting a set amount of cash to your emergency savings fund every month. The first way is deciding to deposit a certain percentage of your monthly income to your fund. The second is to decide on depositing a certain amount nominally. Is it going to be 10%, 20% or 30% of your monthly income that goes into your emergency savings or is it going to be 10$, 100$ or 1000$ that go into your savings? The answer is: it’s totally up to you! The important thing to keep in mind is to choose a single method and stick to it. Although some people have more concrete suggestions such as trying to save around 45% of your monthly income, it may, for various reasons, not be possible for every freelancer and solo professional to achieve. Try taking your personal retirement plan into account as well.

Use separate accounts

Using at least two separate accounts, one for your emergency fund and the other for your regular financial transactions, is always a good idea. This way, you can know the exact amount of your up to date emergency savings. Using separate accounts is also good for preventing you from going over your monthly budget for other expenses. It would be easier to impulsively spend money if you don’t exactly know how much money you should have in your savings fund for that month.

Towards your own personal emergency fund

The single most important message to take home here is consistency and planning. By getting familiar with the ins and outs of personal accounting such as zero-sum budgeting, you can get to plan your finances at the beginning of each month. Be in charge of your personal spendings and their nature, as well as the annual pattern of your income. This way not only you’ll be able to build a fund that is more reliable but also sustain it for longer periods of time. Don’t lose the forest for trees while setting your goals and micromanage your accounts by dividing them. Things may seem a little too complicated or frustrating for novice freelancers, but don’t forget that for everything related to the world of freelancing, Ruul is here to help!


Join the 70.000+ talents using Ruul.
Have doubts? Read 270+ reviews here.

  • Invoice clients without a company
  • Get paid in 24 hours
  • Connect bank accounts or wallets
  • No client sign up required