How wise budgeting will see you through those scary times. Continuing our ‘Future of Work’ series, I wanted to explore one of the more frightening sides of freelancing. Many people want to take the plunge and move to a self-employed status, but are reluctant to leave behind the safety and security of a full-time, salaried position.
As a freelancer, you are not entitled to paid sick leave or any other healthcare benefits associated with a permanent role. Indeed, that is the attraction for many organisations – they are quite prepared to pay a more substantial day rate because they don’t have to invest in things like national insurance and paid sick leave.
The fact that over 15% of us now freelance didn’t spring to the minds of our policy makers when our taxation and healthcare laws were being written. In those days, people worked full-time for one company for life. Not so much anymore – freelance numbers are rising daily and yet, our lawmakers are still not moving with the times.
Freelancers signing up for The Work Crowd often ask me for advice on how to budget to see them through times of illness. Sadly – and unlike some other EU countries – there is no real support during times of sick leave for freelancers.
One way to protect yourself is to purchase a reasonably priced critical illness insurance policy. However, it is important to read the terms and conditions and small print very closely. You want to make sure you actually do get some money in the event that you are taken ill.
Another option available might be to join IPSE. IPSE is a British association for the self-employed, which offers a premium membership package for around £240 per annum. Part of this package includes an insurance policy that pays out up to £2,000 if a member is sick for more than three weeks.
However, careful budgeting is another way of protecting yourself during times of illness. First of all, you need to make a comprehensive list of all your outgoings on a monthly basis. Try and be very precise – even down to the last penny. That way you know exactly how much you have to earn as a minimum to survive. Look at what you earn every month and put a percentage of your earnings into a savings account – preferably one that pays a decent rate of interest. I try and work on the premise of accumulating enough of a ‘rainy day’ fund to see you through three months.
Of course it will take time to build up, but if you have a particularly fruitful month, stash away a bit more. You don’t need that new dress or that funky new shirt as much as you think you do and certainly not as much as you may need the cash if you come down with the flu in a few weeks time.
That said, I am not expecting freelancers to live like monks in order to build up an emergency amount, but a little bit of regular prudence will afford you peace of mind.