It’s 10:00 pm, Tuesday. You have just submitted a crucial assignment, and you feel on top of the world. Your mind is doing calculations regarding your monthly pay, thinking that this time, the amount would suffice to make that Siargao trip a reality or at least give you a chance to buy a new laptop.
But then, an alert pops up. It’s an e-mail from your largest client. The title of the e-mail is very vague – “Contract update.”
You feel that knot in your stomach tightening, and when you open it, you find the same old polite paragraph regarding their decision to terminate your contract owing to “budget cuts” or “strategic change,” thus eliminating 60% of your monthly pay.
If you are a freelancer who’s been doing this for more than a year now, then I’m sure you’re familiar with this feeling of sheer terror. This is the sinister side of the #freelancelife that you won’t see from any Instagram reels.
In the Philippines, the freelance industry is booming like never before. We have some of the best talents when it comes to virtual assistance, graphic design, copywriting, and even software development. However, we often enter this field head-on without considering the consequences that await us – freelancing is a risky business.
We’re accustomed to the corporate structure where you earn your money on the 15th and 30th of every month. In this environment, losing your job always comes with separation pay and a good exit plan. In freelancing, the client can leave you at any moment and there’s no HR office to complain to.
With such a gig-to-gig existence, a single client could turn everything into a full-blown crisis.
But that is not how it needs to be done. Financial stress does not come attached by default with self-employment. There is a world of difference between a self-employed person that panics at the end of the job contract and a self-employed individual who calmly moves on to look for other opportunities.
Here’s how to deal with both eventualities in practical terms.
The Mindset Shift: You Are Not an Employee
Before discussing saving accounts and budgeting apps, there is something that we must address first to seal the biggest loophole of your financial ship: your mindset.
A lot of Filipino freelancers are still using the “employee mindset.” The funds that you are earning in your PayPal or Wise account is your sweldo. With a ₱80,000 monthly earning, you will think you have ₱80,000 available for expenses.
It is very risky.
Being a freelancer, you are an entrepreneur. Your earnings are income for your business and not for your personal use. An entrepreneur incurs costs, taxes, and more importantly, retained income during lean times.
If you spend all that you make during the feast times, you are only ensuring yourself misery during the famine times. You must come to terms with the fact that your income will fluctuate. It is not a flaw in the system but a fundamental characteristic of the business. Once you have come to terms with income fluctuations, it becomes a normal business cycle.
Practical Step 1: Mastering Irregular Income (The “Buffer” Method)
How can you make a budget if you have no idea whether you will earn ₱40,000 or ₱120,000 next month?
This classic advice of listing your income and subtracting your expenses will not work for us. Our solution is to disassociate your expenditures from your income that month.
The aim of the game is to live one month ahead. This is commonly referred to as the “Buffer Method.”
How it works:
The objective here is to save sufficiently such that all your costs for October would be funded through income generated in September.
On October 1st, your account has the funds available which will cover rent, internet, Meralco, and grocery expenses for the whole month. The entire income generated in October is kept safely in a holding account until it needs to fund November’s expenses.
This way there will never be any pressure on you to wait for a client payment to clear just to make an important payment the next day.
The “Fixed Salary” Alternative:
If it seems unrealistic to be one month ahead at present, try using the “Fixed Salary” strategy. Set an absolute minimum that you will need in order to survive comfortably—say, ₱50,000 per month.
If you had a successful month with an income of ₱150,000, then you deposit only ₱50,000 in your personal account; the extra ₱100,000 will remain in your “business” account.
In case of a bad month when you earn only ₱30,000, you still take your ₱50,000 from the money that you saved during successful months. You are effectively functioning as your personal payroll department.
Practical Step 2: Building Your “Pondo” (The Real Emergency Fund)
Saving comes natural to us. We were taught to have our “ipon.” But as a freelancer, your emergency fund is not only used during unexpected illnesses or car trouble; this is your unemployment insurance.
According to conventional financial wisdom, one needs to save at least 3 months’ worth of expenses. Freelancers, however, are recommended to save more: 3 to 6 months of basic living expenses.
Why six months? Simply because sometimes the market turns against you. Sometimes Upwork becomes oversaturated, or you wish to shift your skills set, or you get tired and just want to take a month off without starving. Six months will give you time to look for good clients rather than scramble for whatever offer you can get to keep your electricity working.
Where to put your safety net (Localization is Key):
Don’t let your six months’ safety cushion sit in a conventional Payroll ATM account that earns an interest of just 0.0625%. The inflation rate will literally consume it.
The best thing about today’s scenario for Filipino freelancers is the rise in digital banking. They must utilize the services of high-interest savings accounts.
These are those digital banks, which are licensed by the BSP (Maya, Seabank, GoTyme, Tonik, or CIMB), which provide interest rates between 4% to 10% per annum at some balance points.
Having your emergency funds in this type of account means you’re making use of the funds. They are liquid enough that you can get access to them immediately in case of an emergency. At the same time, they are sufficiently separate from your regular account such that you won’t spend them on Lazada deals.
And if right now you have no savings at all, do not be intimidated by the “6 months” target. Just aim for one month of expenses, then three. Kapit lang!
Practical Step 3: The “Always-On” Pipeline (Never Stop Selling)
The most significant blunder that makes freelancers succeed is that once they become busy enough to be entirely booked, they cease their marketing activities.
It might seem tempting to avoid portfolio updates or reaching out to new leads while you have no time but are working with the clients you currently have. However, if you cease feeding your marketing pipeline from the top, it will sooner or later run out at the bottom.
If you wait until you lose a client before starting to look for a replacement, you will be too late. You will find yourself in a desperate position when marketing, and the clients will be able to feel it.
You should maintain an “always on” pipeline. Here’s what I mean by it:
- The Weekly LinkedIn Update: Write an article on LinkedIn every week about something you did for one of your clients. Continue to let your professional network know that you are a dynamic and well-informed freelancer.
- The Referral Ask: Whenever a current client compliments your services, immediately say: “It’s so great that you are pleased with the result! Oh, by the way, if you have any other people in your circle who need the same services as you, I have a place available for them next month.”
- Build Relationships with Other Freelancers: There is no competition among other freelance workers – it is the best source of referrals. Every graphic designer would need a partner like copywriter. Web developers need UI designers. Meet people in reliable Filipino freelance networks.
Practical Step 4: The “Client Loss Protocol”
All right, you’ve got your safety net and your pipeline. But it still happens. Your major client fires you. What do you do?
Don’t freak out. You should have a plan. Once the storm breaks, take these actions:
- Allow 24 Hours to Sulk:Yes, it’s alright to be sad, mad or scared for a while. Give yourself time to feel bad for just one day.
- Check Your Budget Right Away:Do some calculations. How many months can you survive using your savings? The precise number of months actually helps decrease your stress level.
- Reduce Discretionary Expenses:Stop your unnecessary subscriptions, order no more food delivery and start economizing. Keep your cash flowing through the lean period.
- Go Hunting: This is the point where your “no-off” pipeline will come into play. Start contacting all your warm prospects that you’ve nurtured so well. Announce your availability to everyone. You can do it calmly because you have your finances to back you up.
Conclusion: Freedom Requires Discipline
The appeal of freelancing is freedom—the ability to own your time, your space, and your income. However, true freedom is not just being able to do your work while sipping on a coffee; it is the freedom of mind that knows you will be alright even if everything falls apart.
Building such a security net involves making sacrifices. This entails not spending on some things now so that you can spend on something much more valuable—your peace of mind—in the future.
If you know that you have enough money in your savings account for you to weather any unforeseen situation, then you have reached a point where losing one client will no longer matter much to you.
