Emergency Fund for the Self Employed

by Broke Professional on September 12, 2013 · 8 comments

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.

Blogging Expenses

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?

{ 8 comments… read them below or add one }

1 Financial Success for Young Adults September 12, 2013 at 9:22 am

This is a great way to control the irregular expenses and income from self-employment. I think with the way you work, that safety account should continue to grow.


2 Crystal Stemberger September 12, 2013 at 7:23 pm

Thanks! I cover this from a different angle tomorrow at BFS as well. :-)


3 Jeff @ Sustainable life blog September 12, 2013 at 2:50 pm

I think that’s a good way to control for irregular income and keep your sanity. Glad that you havent had to use it yet. I dont have an efund for my self employment, but I do keep all the accounts separate and pay for all biz expenses out of that.


4 Crystal Stemberger September 12, 2013 at 7:25 pm

That’s smart. I started breaking apart my blogging income from my normal income when I realized I could possibly start living off of it one day. :-)


5 krantcents September 12, 2013 at 3:48 pm

I am not a big fan of emergency funds for expenses. There I said and I didn’t self distruct! In business where income can vary from day to day week to week and even month to month, it is a necessity. If you are dependent on that income, you should have sufficient savings to get through the period until the income is consistent.


6 Crystal Stemberger September 12, 2013 at 7:26 pm

LOL, this is just my self-employment emergency fund. We have another one for any other bad things as well that has $15,000 in it and we don’t touch that one at all. It is for employment or medical emergencies only. :-)


7 Neo September 13, 2013 at 9:52 pm

I am a HUGE fan of emergency cash funds! They are not just for the self-employed, with today’s economy (e.g. Bank of America laying off 30,000 people!). Some people think I am a bit over the top, but I keep well over 6 months living expenses in cash, ready-to-go. Sure, during good times when stock markets are riding high my cash is not providing much of yield and is slowing losing its buying power due to inflation. But I consider this cost a “premium” that I need to pay to maintain flexibility and safety. Plus, I can a handle greater stock market volatility in my investment portfolio because I know I have cash in hand just in case I lose my job or have a medical emergency.


8 Hunain @ HowToSaveMoney.ca September 30, 2013 at 9:49 am

I wish I could use my emergency fund like you but my case is different, I used to keep $5000 in my saving account but right now I’ve only got $500 because of unexpected things keep happening all the time to me. I wanted to save some money for my emergency budget and I’m working really hard to make some extra cash so I can build that amount back up again.


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