Life is unpredictable, and your financial stability often hinges on how well you prepare for the unexpected. An emergency fund serves as a safety net that can help you cover unforeseen expenses like medical bills, car repairs, or a temporary loss of income. The COVID-19 pandemic taught the hospitality industry and other industries that it is crucial to build an emergency fund. Beyond just alleviating financial strain, having such a fund can also provide peace of mind and give you the confidence that you’re ready for whatever challenges come your way.
If you are a freelancer or just starting your first job, the path to building an emergency fund can feel like a particularly difficult one. Entry-level salaries, student loan repayments, or the ebb and flow of freelance work might leave you wondering how to start saving. But while the road may seem steep, the goal is far from unreachable. With the right strategies and a commitment to financial discipline, you can steadily build a buffer that will protect your financial future throughout different stages of your career.
This article outlines practical, actionable tips tailored specifically for freelancers and first jobbers. Whether your income is fixed or fluctuates from month to month, try these strategies which are designed to help you take control of your finances and work toward a more secure tomorrow:
1) Open a Separate Account for Savings
Saving is easier when you remove temptation from the equation. Keep your emergency fund in a dedicated account so that you can separate it from your day-to-day spending money. Not only does this reduce the likelihood of dipping into it for non-emergencies; it also allows your savings to grow over time through accrued interest. Choose an account with low fees and easy access in case of emergencies, but avoid linking it directly to your debit card to make it less tempting to use the money for non-essential spending.
For examples, if you are a freelancer or a jobber in Philippines, a digital bank in the Philippines, such as the multi-awarded Maya, is one of your best options for storing your savings if you’d also like to earn some additional value on your emergency fund. A digital bank like Maya shoulders significantly lower overhead costs than its traditional banking counterparts in the absence of physical branches. For example, Maya promises free cash-ins with select over-the-counter partners, and it’s just a matter of finding the one nearest to you.
As a result, Maya Bank is in a position to pass these savings on to its customers in the form of fewer fees, more competitive interest rates, and other perks that can ultimately help you grow your money further. When it comes to interest alone, you can expect up to 15% p.a., which means that your emergency fund can gain significant value while being parked.
2) Set a Realistic Savings Goal for Yourself
The idea of saving several months’ worth of expenses will likely be an overwhelming one, especially if you’re just starting out. Instead of aiming for perfection right away, focus on incremental goals. For instance, taking the example of Philippines again, you might start with a buffer of PHP 50,000 to cover small emergencies. Once you achieve that, you can scale up to cover three months’ worth of rent, utilities, and other essentials.
There’s no shame in breaking the process into manageable steps; doing so makes it less intimidating and keeps your progress on track.
3) Budget Strategically
You will have an easier time building your emergency fund if you understand exactly where your money goes. Start by tracking your expenses for a month or two to identify patterns in your spending. Pinpoint what’s most essential, like rent, utilities, and groceries, and what you can cut back if you need to.
Armed with these insights, create a budget that allocates a portion of your income to savings. Consider automating this process, such as by setting up a direct transfer to your emergency account after each paycheck, so that you can prioritize saving without having to think about it. You can also create sub-accounts, quickly transferring money from your main account into sub-accounts that correspond to different budgeting categories.
4) Adapt to Irregular Incomes
Consistent saving can feel like a juggling act if you work freelance or just have an unpredictable paycheck. Instead of saving a fixed amount, consider saving a percentage of each payment you receive.
For instance, putting away 10-20% of every freelance invoice ensures your savings grow in proportion to your earnings. On high-income months, increase your contributions to offset leaner periods. Open a buffer account for business-related expenses to keep from dipping into your emergency fund prematurely.
5) Reduce Expenses Proactively
Building an emergency fund isn’t just about saving more; it’s also about spending less. Regularly evaluate your expenses to identify areas where you can cut back without compromising your quality of life.
Cancel unused subscriptions, negotiate bills like cable or insurance, or switch to more cost-effective alternatives for services you use. Small changes, such as cooking meals at home instead of eating out or choosing generic brands over name brands, can also free up funds to accelerate your savings. Over time, these adjustments can make a noticeable difference in the speed at which your emergency fund grows.
6) Practice Financial Discipline
Your emergency fund will only be useful to you if you can keep it intact for the long haul. Treat this fund as untouchable except in genuine emergencies, like unforeseen medical expenses or critical home repairs.
To avoid temptation, define what qualifies as an “emergency” ahead of time. Reward yourself for reaching milestones—like saving your first PHP 50,000—but ensure those rewards don’t come from the fund itself. Discipline is what transforms saving from a chore into a sustainable habit.
7) Review and Reassess Your Savings Regularly
Your emergency fund requires periodic attention, so don’t treat it like a set-it-and-forget-it solution. As your expenses change—due to circumstances like moving to a new city, taking on new responsibilities, or experiencing inflation—revisit your target savings amount. Make it a habit to review your fund every six months to make sure it’s still aligned with your needs.
An emergency fund is a necessary financial safety net, but more than that, it’s also a foundation for peace of mind and resilience in the face of uncertainty. It will go a long way to just start small, stay disciplined, and adjust as your circumstances evolve; with this seemingly simple strategy, you can create a buffer that empowers you to face life’s challenges with confidence. Even as a freelancer or first jobber, the best time to start is now—your future self will thank you.
