Freelancers, If I had My Hands in Your Pockets, These are the Things I’d Do


by Yolander Prinzel

Sorry to get your hopes up, but this is not a dirty post. Oh that it were. Unless, of course, you consider money dirty. The purpose of this post is to tell you exactly how I would set up your finances if I could.

To some of you, my methods will look extreme. “Oh Yolander,” you’ll cry, “can’t we just use one account for spending, saving and bills?” No, no you can not. Okay, maybe some of you are up for that responsibility, but a lot of you probably aren’t. For many of you, I would even venture a guess that when you see a large balance in your checking account, you feel safer spending money–even though most of that balance is money you need to send to the IRS in 2 weeks. To change your relationship with money, spending and saving, I suggest the following.

Savings Accounts

I believe in multi-tiered savings. I think that you should have:

1. An intermediary savings to bridge the gap between bills that are due and invoices that are late or to help out in slow months.

2. A business savings for taxes and other potential business expenses.

3. A long-term savings account with funds in CD or bond ladders (a ladder means that there are multiple CDs or bonds in your account with different maturities so that you aren’t putting all your money in a 10 year bond. You’ll have some that mature in 1 year, some in 3-5 and some in 10. That reduces your interest rate and penalty risks.)

4.  A brokerage account with a mildly aggressive portfolio for you young uns and a more conservative blend for people in their 40’s and up. The brokerage account can be funded with extra money or some of your long-term savings.


Checking Accounts

I also like different checking accounts for different uses.

1. A bill paying account. This account should be linked to your intermediary savings account and should be used for bill paying only.

2. A spending account. This is where your grocery money, gas money, and entertainment money goes. This is the only account you use for spending and should not be connected with any saving’s accounts.

3. A business checking account for business expenses and to deposit payments.

Now What?

Remember this post about where to put your money? Here I’m going to give you a road map to follow [click for a larger image (I’m aware of the spelling mistake(s) in the chart but it was too hard to put it up–I’m not fixing it)]:

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Yolander Prinzel, ACS is a financial writer as well as a series 7, 66 and 2-15 licensed financial representative. With a decade of financial industry experience, she was the National Director of Marketing and the Director of Operations for The Compass Agency USA and has also been a trader for Raymond James Financial Services and a life insurance underwriter. No matter what you may think, none of her posts are advisory, they are simply informational. Only an advisor with close, personal knowledge of your financial situation can offer advice.

5 thoughts on “Freelancers, If I had My Hands in Your Pockets, These are the Things I’d Do”

  1. Excellent points, across the board (and as usual!).

    I’m not obsessive about many things in this world, but saving is one of them. (Ask my wife. Actually, please don’t!)

    For me, a valuable incentive to get your financial house in order is the freedom it gives you to make smart business decisions. When you’re confident that you’re in good financial shape, you won’t make choices out of desperation–such as taking low-paying jobs and retaining vampire clients just to pay the bills.

    Looking to the future, as a Generation Xer, I know that there is also no way in heck that I’ll ever see all that money I’ve dumped into Social Security.

  2. Yolander,
    This a great breakdown of what you need to do to be financially responsible. I try to explain this to my freelance writing class and they role their eyes at me. Something this well spelled out might get through to them—might.

  3. Let them know it’s either this or the baptism-by-fire method which includes the dreaded, “Pawn all the shit that matters to you” strategy of survival 🙂

  4. Well Jake, I look at social security a little differently. It was never intended to be a savings account, which is why the next generation will always pay for the currently retired generation. I think there will be some sketchiness ahead–but the generations that are younger than us will still pay in which will ensure our payments.

    The real problem lies in the fact that social security is meant to provide emergency income, not life-sustaining income. This is where a lot of freelancers (and other working folks) mess up. They don’t save because social security is there–but social security really is no where near enough.

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