Before I quit my day job, I decided I needed a bunch of padding for slow months built up in an emergency fund. I wouldn’t have been comfortable without it. Once I actually got that emergency self employment account past $10,000, I did quit my day job and my husband and I sat down and figured out when I’d actually ever touch that money.
My first order of business was to deal with irregular pay. I could not imagine being comfortable trying to cover the bills without the biweekly paychecks I had been receiving for more than 10 years. I set up a separate checking account for my self-employment income with free business banking. I read that a lot of my fellow self employed bloggers didn’t worry about it and just made sure to live on what they make in slower months.
I decided to set up a separate ING savings account just for my blogging income, having any business savings account can help. That emergency fund has become the self employment account that I mentioned above. I made sure it was built up to at least $10,000 before jumping into working from home and giving up the day job I disliked. Since I pay myself $1650 biweekly, I know I have at least 6 paychecks waiting around for me. If I ever need to be paid and I haven’t made enough in a particular month, then I will eat into my padding. Thankfully, that hasn’t happened yet.
One-Time Business Expenses
I am attending the best blogging conference next month, the Financial Blogger Conference. It will cost me about $800 for the entire 3 day trip, but I think it’s going to be totally worth it! That cost as well as any future conference costs will be taken out of my self employment account. Any other large, one-time expenses like a new laptop if mine crashes would be taken from the emergency fund too. If that means it will dip below my happy mark, so be it. I’ll make sure to work on getting it back over the hump within the next month or two.
I have around $500-$1000 of blogging expenses in any given month since I do outsource my social media, my newsletter, and I am having niche sites built. I’ve also bought another blog already and plan to buy more. Given all of that, I may have a month in the future that I can’t cover all of these expenses with the $5000-$7000 bring in. If that happens, I will have to dip below my magic $10,000 mark and build it back up in the following months.
In short, my self employment emergency fund is great to use for my paychecks, one-time business expenses, and monthly blogging expenses. I would not touch it for anything else. I also would never dip into it below the $7500 mark without a true emergency popping up.
Do you have an emergency fund for your hobby job or business? What would you dip into it for?