How to Build the Ultimate Freelancer Benefit Package
You love the flexibility and freedom of freelancing, but there were some things your employer made easier. With traditional jobs, things like taxes, time off, insurance, and a host of other benefits are coordinated with your salary to make life easier and more secure.
Now that you’re on your own, acting like your own HR department should be simple. It’s just a matter of moving money around, right? With all the other details you have to keep up with, it can be easy to let these things fall through the cracks. Let’s make sure that doesn’t happen.
How to Build Your Freelancer Benefits Package
Deciding what you need to be secure can be a little overwhelming. Traditional benefits are designed to work with your monetary compensation to make your life more secure. Even in the freelancing world, this is true. You’ll need to consider these three areas as you begin building your package.
Your Four Pillars of Financial Stability
These four pillars are the foundation of your financial security. You’ll ideally have access to each leg for different types of emergencies, expenditures, and other financial needs both short and long term.
- Savings: This is liquid value. It provides coverage for short term emergencies, planned time off, and major expenses.
- Investments: This pillar provides value but focuses on the future - think retirement. Money growing for you increases your overall worth and helps ensure you’ll be secure in the future.
- Insurance: Insurance provides protection in the case of emergencies so big you can’t cover them with simple savings. It also provides stability by providing coverage more quickly than investment money and with fewer (if any at all) penalties.
- Credit: When you can bring capital into your portfolio in the medium term, you’re able to strategically pay for things that potential build bigger wealth - think mortgage or student loans.
Used together and strategically, these pillars provide you with both short-term and long term stability. With each emergency or life change, your financial picture is stable. Without access to each pillar, your financial future remains volatile.
Your job as a freelancer is to build your benefits package with smart choices for the first three pillars. Once those are in place, you have easier access to the fourth, credit.
What Belongs in Your Benefits Package
Let’s look at these four pillars to help get you into a stable financial situation despite your somewhat unstable compensation. Freelancers are particularly vulnerable to financial volatility because planned income doesn’t typically exist.
Within your savings portion, you’ll have to consider a few different things. Think about your life in the short term and the long term and then divide your savings into several different categories.
Emergency savings should always be a priority. Emergencies like car repairs or unexpected medical bills can immediately set you on a path to financial volatility. A study from the Federal Reserve shows that up to 40% of Americans don’t have a way to handle a $400 emergency without borrowing money or selling something. Increase that emergency to $1000, and that number goes up to 70%.
You can hit those savings targets in a few different ways. You could move money to your savings account or multiple accounts each time you get paid and risk forgetting. You could set up automatic withdrawals and risk overdrafts if you don’t have regular payments coming in.
Catch gives you the best of both worlds through smart automation. You can set up multiple savings goals, customize the percentage of each check, and Catch automatically withdraws your savings for you (with prompting) only when you’ve gotten paid. Whether you’re saving 5% or 50%, the amount pulled from your account is dependent on receiving money and the amount of money you get.
Non-emergency savings can help you take time off and sick days. How many days can you recover from sickness without having to tap those credit cards? If it’s zero, a non-emergency savings strategy can change that. If you want to take a vacation at all during the year, non-emergency savings can cover that for you too.
Freelancers have reputations for workaholic tendencies and high risk for burnout. With non-emergency savings, you provide your own safety net for illness, time off, and vacation time. Remembering each time to withdraw savings or trying to handle automated payments could be the answer.
Again, you can set up separate savings pools with Catch for things like sick time and vacation time. Catch’s algorithms help you decide what percentage of your check to based on your desired sick and vacation time to get you to your goals as efficiently as possible.
Investments and Retirement
Your long term investments can also get a lot simpler if you have the right framework. That same Federal Reserve study showed that less than half a percent of people had the recommended retirement amounts - talk about a precarious position.
If your current plan is to work until you die, you may want to reconsider. Long term retirement savings ensure that you can care for yourself during years when you’re likely to have more complex care needs. Figuring out investing can be hard on its own, and without employer matches or pension plans, it could seem insurmountable.
There are lots of apps that can help you begin your retirement journey. Acorns is one that withdraws automated amounts for a targeted retirement account. Still, if you have irregular income, that can be disconcerting, leaving you to underfund your retirement accounts out of fear of overdrafting. You might also set up automatic withdrawals from a savings account instead, but if you have to use those savings, it’s more complicated.
Catch uses the same percentage method to ensure you’re funding your account in a way that mirrors your compensation. And those same algorithms can help you set a percentage in the first place if you don’t know what you’re doing. It’s an investment in your future.
Insurance covers more than just your health. Unexpected illnesses, disability, family leave, and liability are all concerns that insurance can handle for you. An insurance plan prevents you from financial disaster.
If you’ve got an emergency room bill with a multi-day stay in the hospital, that could cost as much as a car or potentially a house.
Health insurance is on freelancers' mind (reminder: November open enrollment for 2020!), but disability insurance, life insurance, and liability insurance ensure that major catastrophes are covered at just a comparatively small monthly payment.
Currently, you have a variety of ways to sign up for health insurance, and Catch has a newly-integrated health insurance portal designed to make that decision easier. Down the line, Catch will also have other types of insurance located in the same portal to help you keep track of your health, life, and liability.
Building Your Benefits Strategically
The key here is that you can certainly cobble together a variety of programs to handle these four pillars of financial stability, but having them all in the same place is a better choice. You can keep track, watch your stability grow stronger, and get targeted advice on how to improve your benefits package.
Catch currently has the capability to handle your various emergency and non-emergency savings, retirement, and health insurance with other standard benefits options coming down the line. It’s everything you need to ensure your freelancing career is wealth-building and not just a hamster wheel. Check us out here and get confident that you’re building wealth that lasts.