By Adrian Galley
The notion of Financial Planning has many of us freelancers burying our heads in the sand. And for good reason; our income is erratic at best and our job security is nonexistent. As independent contractors we enjoy none of those safety-nets afforded the regular nine-to-fivers: pension fund; paid leave, including sick-leave; unemployment insurance; medical aid and access to workman’s compensation and, for those fortunate enough in these tough economic times, an annual bonus. No, we’re independent contractors, we’re free agents.
Freedom! Wouldn’t that be nice? In truth, many of us freelancers feel shackled by our financial obligations and our unpredictable flow of income. We live hand-to-mouth with the ever present feeling that we’re failing, we’re being exploited, that we should be earning more. How much more? Well … enough. And how much is that? How much is “enough”? That is a difficult question to answer, unless one embraces the full implications of the term “free agent”. Let’s face it; freedom is meaningless without agency, without the capacity for us, as individuals, to make choices.
As independent contractors, we’re free to accept or decline any offer of work; we can choose whether or not to sign any contract that’s put in front of us. Unless, of course, we’ve given away that choice to our personal financial circumstances. An uninformed choice is not a free choice; “take it or leave it” is not a choice, it is an ultimatum demanding a “yes” or “no” answer. There should be room for a “yes, but …” or a “no, because …” which is where negotiation begins. Ignorance robs us of our agency, our ability to make informed decisions. Dare I say it? Our own ignorance creates an environment of exploitation. There will always be someone out there to take advantage of our ignorance, to pounce, and to rob us of our freedom.
The antidote to ignorance is knowledge, gained through access to information and education. To reclaim our agency over financial matters we need to gather as much information as we can about our income and our expenditure, in other words, how much we earn and how much we spend. The best way to find out how much you need to earn, is to figure out how much you absolutely must spend to get by, beginning with necessities like food and shelter, provision for medical care, unexpected events and an unknown future where we are no longer able to work or whether we choose to retire.
Because our income is not fixed, we must first ensure that whatever necessities we pay for each month are covered. Unless we have some kind of emergency fund, it is very difficult to maintain any kind of savings plan or to manage our finances well. For example, during a month where we earn no money, we may be unable to pay for any of your living needs, let alone our savings. The following month we may have to pay double: for the month that we missed and the current month. As we all know, this is not a good feeling; none of us operates at our best with nagging financial worries clouding our reasoning, our judgment and our ability to make informed choices. There goes our freedom.
In the following weeks, I hope to post a series of blogs that will help us regain our sense of Financial Freedom: to understand how much we currently earn and how much we actually need to earn; to gain insight into our capacity for generating our income, and to gain real knowledge about our financial position that empowers us to stand up to those who expect us to work for peanuts at best, or that familiar currency often tendered in our world: exposure.