How Remote Workers Can Establish a Financial Safety Net
Having an established financial safety net is important for everyone, but it’s especially important for remote workers, freelancers, and other professionals with similar working setups.
If you’re considering transitioning into a remote worker lifestyle there are plenty of financial considerations to think about before you make the transition. For starters, you’ll be responsible for your own health insurance, retirement account contributions, and everything else that typically comes from an employer’s benefits package.
Thankfully, with some careful planning you can make sure your new remote work lifestyle has every chance of succeeding. Here’s how to do it.
Assess the current state of your finances first
Before you dive into anything else, get a handle on how your finances look right now. You need to ask yourself questions like:
Do I have a savings account?
How much do I spend each month?
How long would it take for me to deplete that account based on my current monthly spending?
What does my debt situation look like, including minimum monthly payments?
Ideally, you’ll have a savings account with money for at least 6 months worth of expenses in it before you transition to remote work. This will help you ride out months with less work, and you won’t feel as though you have to accept every low-ball gig that comes your way.
As you set your rates and seek out work, keep this Financial Big Picture in mind. And remember, the Big Picture also includes your retirement savings.
Automate your retirement savings
It’s easy for remote workers to neglect their retirement savings, especially if a company isn’t matching 401k contributions. As an independent worker saving for retirement is wholly your responsibility now, and you should account for this in your monthly budgeting. You don’t have to contribute hundreds of dollars each month, either — something is better than nothing.
As with the rest of your finances, you’ll want to create a system that makes saving for retirement easy on your end. Companies like Betterment make it easy to automate your retirement savings, though their service is hardly the only option available.
Health insurance for remote workers
If you aren’t on a spouse’s or partner’s health insurance plan, you’ll want to do some research to scope out your options. Health insurance can be a big expense, but there are higher deductible plans available with lower monthly costs.
Shop around, ask questions, and make a note of your health insurance costs (you’ll need them for the next step).
Determine a monthly budget
Now it’s time to add up all of your monthly expenses, including your retirement account contributions and health insurance payments, to figure out how much money you typically spend each month. Tools like Mint.com make it easy to track what you’re spending and where, and they can take some of the headache out of the budgeting process.
Once you have a clear picture of the current state of your finances and your projected spending, you can determine how much money you need to have in your remote worker financial safety net. It might take some time to get yourself set up, but the amount of money-based stress that you’ll avoid is priceless.