In lean times, having an emergency fund can provide peace of mind. However, building one on varying income can feel impossible. Here are three ways you can make it happen. File your freelance taxes with confidence using TaxAct’s easy-to-use tax software.
Become best friends with the “zero-sum budget”
Living off last month’s income alone
- Spending every dollar doesn’t mean going on a shopping spree, it simply means assigning every dollar to a particular monthly expense
- Make a list of bills and assign dollar amounts to each of those expense buckets
- You’ll quickly see how much you need to cover the bare essentials
- Trim unnecessary items during months where you don’t have a large cash flow
45% of every paycheck goes into savings
30% for taxes and 5% for reinvesting in your business
- Set aside 10% for an emergency savings fund
- It takes time, but being diligent about stashing away money will help you reach at least three months of savings quicker than you think
Set a specific and realistic goal to build an emergency savings fund
Have a specific metric you’re trying to reach based on what you reasonably need during a dry month
- Start by trying to set aside one month of living expenses
- It can be helpful to have a checking account that’s solely dedicated to paying bills so you can better manage your money for those needs
