Investing In You
Freelance writers often work for themselves and forget about investing in themselves. If you write for yourself full time, it is important to remember to invest in yourself for your own retirement. If you don't know how to do this, we have a few pointers to share with you.
How Much Should I Save?
Every time you get paid by a client you need to set aside some of the money for yourself. A simple guideline to get you started is to save 10-20 percent for yourself to use and to save the rest. This may not be practical, especially if you are just starting out and are making little money. However, once you have established your business, it is time to start thinking of your future.
How Do I Save?
There are several easy ways for you to save money as a freelancer:
- Savings Account and Money Market Accounts
- CDs and Savings Bonds
- Separate Business Account
- Individual 401K Account
Savings Accounts and Money Market Accounts
Savings accounts and money market accounts are a good place to start, especially if you will need to access the money in the short term. This is a good way to get in the habit of saving some of your money when you're just starting out as a freelancer. However, there are some obvious drawbacks:
Not much of a return on your investment and you may only be allowed to make a certain number of withdrawals per month. In addition, many money market accounts require that a minimum balance remain in the account at all times.
CDs and Savings Bonds
CDs and Savings Bonds are a good way to save money for the long term. There are a few pros and cons for these investment methods as well:
CDs- there is a low return on your investment presently. This may change in the future, but you could get a better return on your investment in other ways. In addition, CDs can't be easily converted into cash without a penalty. Only use this method if you won't be needing your money any time soon. The time period for each CD to mature varies.
Savings Bonds are another great long-term investment tool, but you won't see much of a return on the investment for 20-30 years. Only use this method if you can afford to stash the bonds away in a safety deposit box for a few decades.
Separate Business Account
A separate business account for your own personal payroll may also help you to save money. However, there isn't much of a return on this investment, especially if you keep a low balance. It is much like a personal savings account.
Individual 401K Account
Probably your best bet is to open an individual 401K account. You can easily do this at your local bank, usually with a minimum investment of $50. You will not be able to withdraw this money without a penalty unless you become totally and permanently disabled. It is a very good investment tool, especially if you remember to always pay yourself every month.
Other Investment Ideas
It isn't difficult to invest your money in other ways, such as buying stocks, blue chip stocks, penny stocks and annuities. All of these options can be exercised on an individual basis, but as with all speculative investments you should read up on them before you buy. Investment sites, such as Share Builder, allow you to open an account for a very small investment (usually $25), and allow you to start investing right away.
It is important for anyone handling their own investments to not put all of the eggs in one basket, so to speak. For example, have some savings bonds or CDs, a savings account and a personal 401K. Since the financial market fluctuates wildly, this will help you weather both the bull and bear markets more effectively.