I’ve always liked pop star Pink. Her songs are catchy but not in the manufactured way. She seems to do whatever she wants to do (the fact that she vacations in Stone Harbor is a nice bonus).
In a recent interview with Entertainment Weekly, she talked her “F— You” account, into which she puts more than half of her money. “That’s the account that, one day when people ask you to do something you don’t want to do, you say ‘F— You.’ I make sure that my F— You account is okay, so that you never have to make decisions based on money. I feel like that’s where people kill their careers.”
An emergency fund is important thing for everyone to have, but especially so for the self employed (which Pink technically is). Mine is called the “Holy Shit” fund. A few years ago, I started out putting 5% of every check into this fund, whether it was a $75 speaking fee or big fat check for a corporate writing project. Over time, I gradually raised that percentage number, and now it’s up to 20% of every check, plus another 20% into a separate account for taxes and another 20% into a separate account for retirement. The experts really are right: it becomes a habit, and I don’t miss the money because I never really see it.
Having that cushion gives me breathing room. I’m not kept up at night trying to figure out when the next payment will come in, and if it will be in time to pay the mortgage. In two years, I haven’t been in debt beyond that mortgage because if I put something like a car repair on my credit card, I have the money to pay off that balance. I do worry about my sometimes-expensive medical bills, but not as much as if I didn’t have a cushion from which I knew I could pay them.
All of this means that I don’t feel pressured to take every assignment that comes my way. Like Pink said, I don’t want to make decisions based only on needing money.
I implemented this system after reading The Money Book for Freelancers, Part-Timers, and the Self-Employed, which I recommend to anyone who asks me how to become a freelancer. The authors don’t scold you if your finances are a mess, which mine were, because they’ve been there themselves. The book is easy to understand and addresses almost every aspect of living off a non-regular paycheck, including paying off credit cards, retirement options for the self-employed, taxes, and building that emergency fund. The book starts you off easy, too, with first figuring out where you are financially, then putting 1% away. That might not seem like a lot, but it snowballs. I never thought I’d get to 20% for my emergency savings, let alone putting away more than half of every check that comes in. When I hit my goal for the Holy Shit fund, I’ll start a new one so I can buy a new-to-me car whenever my trusty Civic goes to Honda heaven so that I’ll have no car loan or a very low one.
That’s the other thing about this system. It makes you allergic to debt, and helps you budget. As soon as a check clears, 60% of it is on its way somewhere else, so I never really feel that the money is mine. It forces me to keep my cost of living low, and I’m never going to go on a big spending spree when a large check comes in.
I don’t write this to brag. I know too many good freelancers who admit that they can’t figure out how to even out the feast or famine of freelancing, and either end up living under a big cloud of debt, or getting a “regular” job they don’t want, or whine about how “the man” has stacked the decks against them.
It doesn’t need to be this way. Building a F—k You account is the first step out.