The Importance of Having an Emergency Fund as a Freelancer

Understanding the Importance of Having an Emergency Fund as a Freelancer

While freelancers have the benefit of unlimited earning potential and the flexibility to work with multiple clients at one time, this does not negate the importance of having an emergency fund as a freelancer. Due to fluctuating income levels and potential late payments, self-employed individuals should plan for financial instability by having a significant amount of savings.

In this article, we will discuss the importance of having an emergency fund as a freelancer, as well as some tips for creating one.

What is the Purpose of Having an Emergency Fund?

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Emergency funds are often separate from regular savings accounts, and their purpose is to cover any unexpected or ‘emergency’ expenses. Some examples of circumstances that emergency funds can be used for include:

  • Sudden accidents or disability (in lieu of insurance)
  • Long periods without clients
  • Late payments
  • A natural disaster
  • Urgent home or vehicle repairs
  • The death or sudden unemployment of a financial contributor
  • Long-term illness
  • Another pandemic

The Importance of Having an Emergency Fund as a Freelancer

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A survey by Bankrate found that 51% of US adults have less than three months’ worth of expenses covered in their emergency fund, and a startling 25% do not even have such a fund. Emergency funds are crucial to cover any financial emergencies for freelancers and traditional employees alike. 

Protecting Against Income Volatility

Freelancers have a more volatile income than their salaried counterparts. Because of fluctuating amounts of clients from month to month, freelancers cannot expect to have a stable income throughout the year, and should therefore be prepared for situations where they cannot find enough clients to cover their expenses. Furthermore, freelance professionals are more subject to late payments from their clients; Bill.com found that 45% of independent workers had experienced situations where clients had paid much later than expected. 

Freelance professionals are also responsible for covering all of their medical expenses themselves, as they do not have the benefit of health insurance coverage from their employers. They must also account for periods where they cannot work due to illness, injury, or burnout, as sick leave is not covered.

Addressing Unexpected Expenses and Emergencies

If an emergency were to arise, freelancers would be responsible for covering all of the expenses incurred. Situations such as a car accident or breakdown, a medical emergency, a house fire, or essential equipment needing to be replaced cannot be predicted, and must be dealt with as they occur. 

This is where an emergency fund comes into play – instead of going into sudden debt or using their regular savings, freelancers can withdraw from their emergency fund to cover the losses. Having a fund for these situations can help self-employed individuals to feel more at ease and reduce their stress levels significantly. 

Maintaining Peace of Mind and Reducing Stress

As highlighted above, freelancers can greatly reduce stress levels and achieve peace of mind knowing that if an emergency occurs, they will be able to deal with it quickly and easily without the added worry of finding the funds to cover expenses. They can benefit from having a sense of security, knowing there is a safety net in place for unforeseen circumstances.

High stress levels can lead to burnout, which is characterized by a lack of motivation and joy in one’s career. If left untreated, burnout may cause symptoms of depression.

Building and Growing the Emergency Fund

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Building an adequate emergency fund can prove difficult, and may take some time. When making the transition from employment to full-time freelancing, try to use this period to build up a decent amount of funds in case of emergency or prolonged periods without an income. Below are some steps that you can take to build an emergency fund as a freelancer.

✅ Calculate Your Monthly Expenses

Sit down and go through your financial statements, and calculate your average monthly outgoings. Things like rent, utilities, insurance contributions, and groceries can be included in your list of essential expenses, as well as other things that you cannot go without. Luxuries, such as expensive clothing or restaurants, can be excluded from this amount. Once you have the total, you should aim to save at least six months’ worth of expenses ready in case of an emergency.

✅ Come Up With a Savings Plan

Based on your income and your essential expenses, calculate the minimum amount that you can contribute to your freelancer emergency fund every month. Determine how long it will take you to reach this goal, and if you’re not still employed full-time, try to find another income stream to support you during this period. 

✅ Reduce Unnecessary Expenses

Luxuries, such as dining out and entertainment, should be reduced until you have reached your emergency savings goal. Any unnecessary expenses, such as an unused gym membership or expensive groceries, should be avoided completely. This can greatly reduce the amount of time that it will take you to build up an adequate emergency fund.

✅ Automate Your Savings

Set up automatic transfers from your checking account to a separate savings account designated for your emergency fund. This method ensures consistent savings without relying on willpower alone. Consider using a high-yield savings account that offers competitive interest rates to grow your emergency fund over time.


Having an emergency fund for freelancers is crucial due to the volatile nature of their income and the potential for unexpected expenses. It helps protect against income volatility, addresses unforeseen emergencies, and provides peace of mind and reduced stress. 

Building an emergency fund as a freelancer requires calculating your monthly expenses, creating a savings plan, reducing unnecessary expenses, and automating your savings. By taking these steps, freelancers can establish a safety net that provides financial security and stability in times of need.

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The Importance of Having an Emergency Fund as a Freelancer

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