I've been self-employed for a little over two years now. Some months are great, some are scary. I have about three months of bare-bones expenses saved, but I still feel anxious when a big invoice is late. For those of you who've been at this longer, how many months of savings actually made a difference in how risky this felt day to day? I know everyone's situation is different, but I'd like to hear what felt like a turning point.
Freelance Finance
How much emergency savings makes self-employment feel less risky?
Six months of essentials was when I stopped checking my account balance multiple times a day. Three months helped, but it still felt like one bad month away from trouble.
I think the number matters less than knowing what counts as a bare-bones month. Once I actually wrote out rent, insurance, utilities, food, and minimum debt payments, I realized I needed more than I thought. A lot of my anxiety was just not having a real number.
Different angle: are you keeping this in a separate account? For me, splitting tax money and emergency money out of the main business account made a bigger difference than the total amount. Seeing the real available cushion helped.
Twelve months is what finally did it for me,but that took years and I have two kids. Not saying that's realistic for everyone. The first four months were the hardest to build.
Honestly I don't think any amount removes the risk entirely. There's always a slow quarter or a client who disappears. What helped me was having six months saved AND a clear plan for what I'd cut first. The plan made the savings feel usable instead of just sitting there ngl.
I've been solo for nine years. I keep about four months in cash and another four in a taxable brokerage that I could access quickly if needed. That two-layer setup feels less risky to me than keeping a huge amount in a savings account earning vety little. But I know market drops make some people nervous, so it depends on your comfort.
Three months is more than a lot of people have. Give yourself some credit. I'm still building toward three and would be relieved to be where you are.
Agreed with the separate account point. I also set a rule: I don't touch the emergency fund unless I've gone two months with no new work. Having a rule stopped me from dipping into it during normal slow weeks.