See also my review of The Financial Peace Planner, a finance how-to guide for low-income folks. Yeah yeah yeah, “we vow to live in poverty just to spite what they’re selling” and all that. Regardless, as long as we live under capitalism, understanding how to handle money so we can meet all of our material needs is an important part of self-care and sellout prevention. <3
The Money Book for Freelancers, Part-Timers, and the Self-Employed: The only personal finance system for people with not-so-regular jobs by Joseph D’Agnese
My rating: 3 of 5 stars
Totally useful, though quite longwinded to get across a simple message. It’s a how-to guide for managing your finances (especially how to save money longterm) if your income is variable and unpredictable, like freelancers and people employed part-time or who work for tips.
The book had a few things that differentiate it from a traditional, holistic personal finance book. These included organizational tips and how to handle stuff specific to the self- or under-employed: you have to pay your own taxes (no withholding), health insurance, vacation & sick days, and retirement.
The book’s main purpose is its savings system for people who can’t make regular payments into a savings account. Instead the authors recommend:
(1) Save in percentages of all income you receive, instead of fixed dollar amounts. So instead of saving $50 every month, you would save 10% of every check, which might mean $15 one week and $35 another week. This way you still save even when you’re not really earning much money, but it never bankrupts you, and when you’re flush, you save more.
(2) Actually open many different savings account so you keep your money separated by purpose, instead of all in one lump. The authors figure that when you have no good feel for how much money you will have in the future, you tend to go through crazy spend and thrift cycles, getting super frugal between checks and then making extra purchases as soon as one comes in. Because of that, they feel that keeping all your money lumped together in one savings account makes it too hard for most people to sort out what they can spend now and what they should save for later. This is purely psychological– you could easily just keep track of things on paper. But the authors feel that since it’s easy to make many free online savings accounts nowadays, it’s more effective to actually create separate accounts for each thing you are saving for.
They suggest you keep your checking account at your regular bank, with a debit card and all that. Then you create several savings accounts at an online high-interest savings bank. These do not come with debit cards, so to access the money you have to wait 2-4 days for it to transfer to your checking account, making them still liquid but not available for impulse purchases. These also get slightly more interest than regular banks, but are equally secure (they’re FDIC insured).
They suggest 3 separate savings accounts to start:
- emergency fund (5-10%): 3-6 months worth of expenses saved up so that if you lose your job or something really expensive breaks (like a car), you can pull from this instead of a credit card. You set a limit to how big this will be and save a % of your income until you hit that limit. Once it’s full, you don’t need to add more money here, until you withdraw from it for an emergency. Then you save a % again until it’s back to its full size. It’s crucial to decide ahead of time what counts as an emergency: the authors recommend only pulling from this account to pay your fixed expenses like rent.
- retirement/long-term fund (10-15%): Choose a low enough % for this that it won’t be a burden, but actually go ahead and start saving for longterm stuff like a house or retirement now since even small amounts become a lot of money over time. They recommend you have an online savings account for this, but regularly transfer that money into a higher interest investment like an IRA retirement account (which they explain in detail). They don’t get into this, but I think a cool option might be to invest this in “socially responsible investments.” That term has definitely been co-opted, so I’m not suggesting you throw money at any random organization that uses that term. But with research, it’s possible to find things like revolving loan funds or other financial institutions that support good causes; your investment gives them some more capital to give out bigger loans, and you earn slightly more interest than you would in a savings account. For example, the Cooperative Fund of New England gives low-interest loans to housing and worker’s co-ops, and they accept really small investments. I tried to do some research on mutual funds that have really strict guidelines in what companies they invest, but I didn’t find anything worth recommending.
- taxes fund (20-30%): If you earn enough to pay taxes, and they don’t get taken out of your paychecks, it’s important to prepare yourself for that enormous bill by actually putting like 20-30% of you income in a separate account that you don’t touch.
After these three big ones, the book suggests creating more accounts based on your needs and goals. For example:
- [savings goal] accounts (5-15%) – accounts named by the thing you are saving for. Use the money that would have gone to the emergency fund, once that account is full. They suggest having separate accounts for small or regular stuff and large dreams, so you don’t end up never reaching the big dream cuz you constantly empty your savings for smaller ones.
- health fund – to pay for things that aren’t covered by insurance, if you have it, and to pay for everything if you don’t.
- donations (5-15%) – Separate out some money to give to good causes, campaigns, and charities; actually choosing a % to spend on this leads to donating more money overall in a way that doesn’t make you feel hard up.
I’m gonna repeat that a lot of this system is mental, and could be just as easily accomplished if you are meticulous about your financial records, keeping track of how much money you can allot to any specific part of your budget. That said, I’m probably going to try some of their recommendations: namely, separating out an emergency fund into a high-interest online savings account (I think I’ll use this for dream&goal savings as well, just keeping careful track that the bottom X number of dollars don’t count for fun stuff) and starting a retirement/long-term savings account; by starting a retirement account really early, I’m hoping to give myself less pressure later on to either get an amoral-ish high-paying job in my 30s and 40s, and/or struggle with needing to work forever. I also started a running Donations Budget, with a starting balance that I will continuously add to as a % of my income, and subtract from as I make donations; I’m hoping this will allow me the ability to send money out to emergency legal funds and stuff while having the peace of mind that it’s actually money that’s budgeted towards donations and not, you know, rent.