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This article is by staff writer Kristin Wong.

It seems like everybody’s goal lately is to leave their job and become a freelancer. And that’s great! Freelancing gives you flexibility and control — and, plus, you get to work from home in your yoga pants.

But as someone who has transitioned into that role full-time, there are certain things I do miss about having an employer:

  • 401(k) match

  • Insurance benefits

  • Free coffee

  • Office buddies

  • Income stability

Last year, I freelanced, but my monthly income was more or less the same — and, if not, it was easy to predict. This year, as a true freelancer with multiple clients, there are a lot of things that affect my budget (like how long it takes for a client to pay, for example) and they’re mostly out of my control.

For the most part, my income doesn’t vary too much from month to month. When I was in between work at the beginning of the year, however, it was a different story. Either way, here’s how I budget with an irregular income.

Zero-sum monthly spending

Zero-sum budgeting has always been my method of choice. I was using this method before I even knew it had a name. I find it works well with financial goals like saving or getting out of debt.

In her post on this topic, Holly Johnson outlines the steps to create a zero-sum budget. It involves listing all of your expenses, budgeting for them, and then putting the excess to work. Every dollar has a duty. For a monthly amount to budget against, I simply use the lowest amount I’ve earned in the past six months. I would go for the past 12 months, as J.D. recommended in his own irregular income post, but I was in emergency mode in January, so that amount is pretty low already.

I zero-sum budget according to that amount, and my excess income goes toward my savings goals. It used to go toward debt goals.

Checking account cushion

I’m too lazy to figure out how much I need to have in my checking account at various times during the month — after rent, after bills, etc. — so I simply keep a checking account cushion that’s more or less equal to the amount of my monthly living expenses. This helps ensure that, even after rent, I have enough in my checking to cover bills. Once I’m paid, and the amount in my checking exceeds my monthly expenses, I then transfer it to savings.

My savings method

I have a few different savings accounts:

  • high-yield online account (for estimated taxes and my emergency fund)

  • Traditional IRA (I want to switch to a Roth soon)

  • SEP-IRA (extra retirement account if I max out my traditional IRA)

  • Taxable brokerage account (for a medium-term goal)

Here’s what I do:

First, I have a baseline amount, a “cushion,” of $5,000 in my online savings. This is my emergency fund/estimated quarterly taxes account. If an emergency were to arise, I feel confident that this would be enough to get me by until I could …

  1. find extra work
  2. pull money out of that taxable brokerage account (or)
  3. replenish it by saving more.

(Note: When I was paying off debt and I didn’t have a brokerage account from which to draw, I had much more in my emergency fund. As my finances became more secure, I pared down this fund. Lisa Aberle wrote about this concept in her post on emergency funds.)

I save for about three to four months in this account; so during that time, ideally I will have more than the baseline amount. I think of it as a holding account, basically. And after I have saved up enough to invest, I take the money out, invest it, and leave the $5,000 baseline amount in the account.

My savings goals are simply to max out my retirement each year, save X amount for a medium-term goal, and then save the rest in my SEP-IRA. So when I’ve hoarded enough in my holding account, I save the surplus according to where I’m at with those goals.

Estimated taxes

Maybe you’re wondering what I do come quarterly tax time when I have to write a big, tear-soaked check to the IRS.

Let’s say I have $5,000 in my regular online savings come tax time. First, I calculate my estimated quarterly taxes. I estimate what I expect to earn for the year and then consider what I’ve already paid them. Let’s say the quarterly amount I owe is $3,000. I now have $2,000 left in my online savings — which is below my baseline amount. I simply keep saving until I get back to my safety number of $5,000. Then I go back to my system and save accordingly.

In his post, J.D. recommended creating a “business” account, separate from your personal account:

“From this money, pay yourself as if you were an employee. Your monthly salary is whatever you calculated as your monthly budget, your minimum monthly income from the past twelve months. On a set date each month, write yourself a paycheck. Leave the rest of the money in your business account.”

This is similar to my savings account. The difference is really just timing. He puts his income in the business account first, then pays himself. I pay myself from my income first, then put the rest in that account. He uses that account for estimated taxes too.

Really, my system boils down to just a few things:

  • Savings for quarterly taxes that double as an emergency fund

  • Investment accounts for goals, including retirement

  • A checking account cushion

  • Accumulating money in my savings account until I have enough to invest

Of course, my method might not be for everyone but, so far, it’s worked for me.

If you have an income that varies from month to month, how do you budget?

This article is about Budgeting, Retirement, Savings

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This article is by staff writer William Cowie.

Laughter and hooting filled the house as my wife had Karen and a few other friends over for a mid-morning tea. (Such are the joys of retired life.) The chirping of a cell phone rose from the pile of purses on the sofa. Nobody paid it any attention — whoever it is can leave a message was the general sentiment. Sure enough, the chirping stopped. But then they heard it again. The girls noticed it, paused, but went right on with their story.

Then the phone chirped again. “Whose is that? Don’t answer it!” After the ruffling of half a dozen handbags, Karen held up her little chirper. “Sorry, guys. It’s Rick.” Then she added, firmly, “I’ll call him back later.” Back into its pouch in the purse the phone disappeared, just like a little kangaroo.

It rang again. “Hey, Karen, maybe you should see what Rick wants.”

“No! He knows when I’m here. He needs to leave me alone.” Back into the little kangaroo pouch.

Never happen

Then it rang again. With an exasperated sigh and rolling of the eyes, she reached in and clicked the button. Suddenly, her eyes flew wide open and her entire face changed. “My house is on fire!?”

In one motion, she scooped up her bag, dropped the phone into it and ran for the front door. The rest of the ladies sat stunned. This is not supposed to happen to any of us.

The damage

That picture you see above, that was their house on fire. The neighbors’ kids played (unsupervised) with matches in the shed across the property line, not caring that there were gas cylinders in the shed. The blast of the explosion shot across the fence and set fire to the roof of their house and its siding. Karen was clear across town, having the convivial tea which took the ladies three months to put together, and Rick was at work. Fortunately, a neighbor heard the bang, saw the flames, and called the fire department.

When the smoke cleared from the fire, they surveyed the damage. As it turned out, they were a lot more fortunate than most.

The good news

The firefighters arrived at the house pretty early. One of them heard Toby, the family dog, in the kitchen. He rushed in, grabbed Toby amidst the flames and brought him to safety. As any pet owner knows, that is incredibly good news.

That’s not all. The integrity of the structure was intact, so no beams or framing needed to be replaced.

The fire was extinguished before anything was totally destroyed. It’s not the good news you’d expect, though: nothing was salvageable. The good news is that everything was still identifiable. That might not sound like much, but it turned out to be huge.

The final good news, of course, is that they had homeowner’s insurance with replacement value. That meant they were covered for the replacement value of every item, not just its original cost. True to their ad, State Farm was there, handing them a check for $5,000 the same day, to cover immediate expenses like hotel, meals and incidentals. That helped a great deal.

The bad news

As is usually the case, the fire destroyed some items which cannot be replaced. There’s just nothing you can do about that except to try to move on as best you can.

The disruption was next. It’s hard to prepare for living elsewhere temporarily for seven months, while you continue on with your life. As it turned out, however, that was a blessing in disguise because they got to live very close to Karen’s mom, who was nearing the end of her life. So they got to spend some good, quality time together.

The real hassle, though, is the process. They had to choose a restoration company, which is closely akin to a building contractor. Dealing with a contractor like that is an endless stream of battles, large and small. Our friends wanted some things restored because they were “antique-y” and high quality, while the contractor wanted to replace them with generic stuff because that would be cheaper.

Then, speaking of replacement, there was a series of “discussions” about the quality of the replacements. If you bought a high-end refrigerator, which is not made anymore, the restoration company will tell you the cheapest thing on the market is an “equivalent replacement.” On an almost daily basis, there was push-back over replacements which had our friends going back and forth as each item was considered.

The other thing they had to contend with is the tendency for even the best contractors to cut corners. They ended up going to the house every day, ostensibly to pick up the mail but mainly to oversee the work that had been done each day. Karen said that was one of the best things they could have done for themselves. It wasn’t easy, but definitely worth the effort.

In the end, though, they emerged from the fire in fairly good shape. As it happened, Karen’s mother passed away during this time and she received some inheritance, which allowed them to afford a few upgrades on things like kitchen counters, carpets and so forth.

By the time they moved back, they said it was like they got a brand new house for just the cost of the upgrades. That took the sting out of the fire’s hassle and inconvenience; and it will, of course, be with them much, much longer.

Tips and advice

I asked them what advice they would give others. It came in two parts: preparation, which applies to everyone, and restoration, which of course only applies to the victims of a fire.

Preparation

1. Keep a detailed inventory of your possessions. The fastest way to do this is to walk through the house with a digital camera, taking pictures of everything, especially the contents of all closets and drawers. Then copy the contents to the laptop you usually take with you and give the chip to a friend to keep. This will resolve the inevitable disputes that ensue over what you did or didn’t have.

2. Check your homeowner’s policy once every year or two. Things change that you don’t think of and, if nothing changed, it’s only a few minutes of your time.

3. Make sure you know which items your insurance company needs you to itemize. Some require things like art, guns, jewelry, etc., to be itemized if you want not to be limited to a small amount.

4. Keep receipts of every item you buy over $400 or so. When there’s a dispute over whether an item to be replaced is top of the line or run of the mill, those receipts are invaluable. Rick happens to be one who keeps everything; and that paid off in spades for them, especially when it came to the video equipment he kept in his basement.

5. If you have a house, keep your yard free of garden debris. Rick had just picked up about five trash bags’ worth of old needles, twigs and leaves the week before the fire. A fireman told him if that debris had still been on the lawn, the fire would have advanced around the house much faster and they might not have been able to save the house!

6. Try to plan an escape for pets left behind. It’s not easy, because pets will sniff out the escapes and use them all the time, but it is definitely important to give some thought to this.

7. Establish a good relationship with your insurance agent. There are always things that come up that are fuzzy in one way or another. It’s helpful then to have an agent who goes to bat for you. Human nature being what it is, friends bat harder than mere business acquaintances.

Restoration

1. Don’t go on a spending spree with the insurance money. Everything you get is only a reimbursement, not a gift or windfall. There’s a psychology that’s hard to put your finger on which happens when you hold a big check in your hand. Resist the temptation to tell yourself you’re entitled to that cruise or new car and put it in a high-yield savings account for the time being instead.

2. Keep receipts for everything. You will be required at the end to give a detailed accounting for everything you received and spent. In the end, the insurance company only reimburses you, and they will deduct all the advances they gave you. If you spent any of that on other things, those will end up coming out of your pocket.

3. Photograph everything the moment you get back to your home if, of course, things are still recognizable. Everything, down to the liquor in your cabinets and the steaks in your freezer. That stuff will all be tossed because of smoke or water damage and, if you don’t have a detailed record of it, you won’t get reimbursed. Of course, if everything is destroyed, you won’t be able to take those pictures, which is why the prior photographic record is so important.

The aftermath

When all the smoke had cleared from the restoration, our friends pretty much had a complete remodel for a fraction of what that would have cost. However, State Farm dropped them. The fire wasn’t their fault, but State Farm dropped them anyway, the end of a 20-year relationship. Fortunately, they have another friend who’s an insurance agent, and he helped them with the transition.

The bottom line is that anybody’s home can burn down through no fault of their own. It’s hard to overstate the difference in the outcome a little preparation can make.

[Editor's note: Since September is National Preparedness Month, and the theme this year is "Be Disaster Aware: Take Action to Prepare," we hope you'll take some time to learn about your local hazards and take action by practicing your own emergency preparedness plan, consider participating in a PrepareAthon event, and make sure your smoke alarms are in good working order too.]


This post is by staff writer Honey Smith.

I’ve written about the power of personal networks before. Unfortunately, lots of people find networking intimidating for a variety of reasons. Certainly, I used to! For me, breaking networking down into a system that I can follow helps me overcome nervousness and network effectively. Here are the two main networking strategies that I use.

Networking via “keeping it warm”

What it is: Keeping it warm is a pretty straightforward strategy. It means that you don’t wait until you need something before getting in touch with your professional connections.

I try to meet my grad school friends in the area every so often for lunch or a quick drink. I ask questions about their careers and lives and tell them about mine. If I hear about an opportunity that they’d be perfect for, I am proactive about letting them know.

Challenges with keeping it warm: This strategy assumes that you have the time, energy/health, at least a little bit of discretionary money, skills you are interested to market, and connections other people would find interesting. However, there are ways to get around these challenges. Setting calendar reminders can ensure people don’t drop off your radar. If you’re busy or sick or can’t afford lunch right now, an email may work just as well. This GRS article on job search advice even gives you some email scripts!

Why it works: Putting effort into keeping up with someone’s life and career, even when everything’s going great for you, has a couple of advantages. First, it means that they don’t view you as self-centered. Second, it means that their image of you is of someone competent and in control of their life. This prevents you from being the person who only contacts them when you need help. Regular contact also keeps you on the forefront of their mind if they hear of an opportunity that you’d be perfect for. Additionally, if you can help them first, they will be invested in returning the favor.

Who it works on: The main target for the keeping-it-warm strategy is former colleagues or even supervisors that you were friendly with. These are people who are familiar with your skill set. It’s like my friend said:

I already know you’re an excellent writer, so I don’t have to interview you. I just have to show you the nuts and bolts, and you’ll pick it up fast.

A significant percentage of jobs are either never advertised in the first place or are advertised but the company already has someone in mind for the position. That’s evidence of people out there keeping it warm.

My results: While the freelance work that my friend set me up with did peter out eventually, I earned almost $5,000 before that happened. I’d call that a success! And I’ve been able to send some work his way as well.

Traditional networking via group memberships and websites

What it is: This is what people usually think of when they think of networking. While you may have something in common with these individuals, they’re probably not anyone that you ever worked with directly. This may include people that you know socially but not professionally, or individuals you’ve never met but have something in common with as a result of your group membership (an example might be a college alum club or a professional conference).

Challenges with networking groups and websites: The issue with these sorts of groups is twofold. First, it’s easy to join (or be part of) a group, only to fail to put in the work (whether due to introversion, lack of time, or other factors) and then wonder why it’s not paying off. Second, even if you are putting in the work, it is challenging to come across as genuine when the whole point of the group is to (awkwardly) put people who (allegedly) have something (superficial) in common in the same space, whether physical or virtual.

Why it works: One of the reasons that this strategy can work is that everyone’s on the same page: If someone contacts you and references the group, then you don’t have to wonder what their motive is. Additionally, many people in these groups are ready and willing to help, but due to introversion, lack of time, or other factors, don’t end up reaching out themselves. They may be relieved if you take the initiative! Bonus points if you are friendly and attempt to make a personal connection so the exchange doesn’t feel clinical or self-serving.

Who it works on: People who are members of the group or website, natch. This approach does require a little more work in terms of demonstrating your fit, since the person doesn’t necessarily know who you are. Once a connection has been made, it’s important that you keep it warm. In other words, you want to think about making long-term connections. Since 9-to-5 jobs may be getting harder to come by, these types of connections may become increasingly important.

My results: In 2009, I joined the networking site LinkedIn and connected to everyone in my address book who also had an account. Within weeks, an alumna from my sorority who lived on the opposite side of the country had passed my name along to an editor who hired me to design an online writing course. At the time, my day job was furloughing workers due to the economic meltdown, and I made enough money with that one freelance gig to replace 10 percent of the salary that I’d lost.

More recently, I attended my local sorority alum club’s annual membership brunch. I ended up talking with a woman who used to work in a position very similar to mine before leaving to start her own business in a related industry. I made sure to get her contact information and sent a follow-up email. She’s already responded and we’re setting up a lunch. I’m looking forward to picking her brain about our mutual interests and sharing what I know in return!

Networking can be intimidating — but it doesn’t have to be

I really didn’t feel comfortable networking at first. But I found that, the more I practiced, the less intimidating it became. It didn’t take too long for me to build confidence and overcome my fear. Recently, by engaging in “pre-emptive networking,” I am starting to make connections before I need them. That way by the time I find myself in need, the groundwork has already been laid and all I will need to do is to reach out and ask for help.

Do you network regularly? What strategies did you find to be successful? Did you ever have reservations about networking, and were you able to overcome them? If so, how?


This article is by staff writer April Dykman.

For years I’ve tried to keep a daily meditation habit. Every time I read a new study about how meditation can improve your health, I vow to start again and to do it every day. Sadly, the habit lasts for about a week. But I recently learned about a non-health reason to meditate: Some money experts credit it with their financial success.

For instance, Reuters reported that some of the most successful hedge fund managers credit their success to meditation. According to the article, money managers who meditate cite the following benefits:

  • In a crisis situation, they’re able to remain calm and focus on what’s most important.

  • They are more willing to accept reality for what it is. For example, they report that meditation has made them less likely to succumb to “confirmation bias,” which is the tendency for people to favor information that confirms their preconceptions, regardless of whether the information is true.

  • They believe they are more creative at problem-solving.

Brent Kessel, cofounder of investment firm Abacus Portfolios, shows people how to combine good money management practices with meditation and yoga, arguing that most money problems start internally. “No matter if they are rich or poor, everyone struggles with money,” said Kessel in an interview for U.S. News. “I counsel people who have hundreds of millions [of dollars] of net worth and others who are $100,000 in debt. The money doesn’t seem to make a difference. The patterns that people are stuck in seem to go on and on, year after year, regardless of how many self-help books they read and what financial planner they’re working with.”

In the interview, Kessel says that a big source of unhappiness (and money problems) is the “wanting mind,” which is never satisfied.

But the wanting isn’t just about wanting and buying material stuff. “Virtually everything that passes in our minds has a wanting component to it,” said Kessel. “When you see that, you see it’s insatiable…The issue is: Are you blindly following an endless train of [desires], where as soon as you satiate one, another pops into its place?”

If so, Kessel says that meditation can break that cycle. “A big part of it is where you put your attention — if you put your attention on what you already have and what is enough,” he says. “One way to do that is when your mind is saying, ‘I don’t have enough,’ you ask yourself if that’s true. It’s a surrender game. You get to that place where that voice starts to lose more and more of its power.”

I’m definitely aware of my own “wanting mind.” It wants everything from a new fall wardrobe to homemade pumpkin spice lattes to a swimming pool in a xeriscaped backyard. I blame Pinterest.

The lack of data

Of course, unlike the studies on the health benefits of meditation, the benefits to your finances are difficult quantify.

For instance, hedge fund managers can’t really prove that meditation increases their creativity. “It may simply be that calm people are more able to be creative than frenzied ones, or it might in turn [out to] be that meditators wrongly attribute their good ideas to the practice,” writes James Saft for Reuters. “The lack of data is probably the biggest impediment to evaluating the impact of meditation on investment performance. It is also why we are not likely to see it becoming a widespread marketing point for fund managers any time soon.”

But the results, whether or not they can be quantified, caught the attention of at least one business school: In 2013, Georgetown University’s McDonough School of Business announced that it would begin to offer a semester-long class on meditation.

Another reason to try again

Whether or not the financial benefits can be quantified, I suspect that meditation is beneficial for money management, even if it’s only indirectly beneficial.

For instance, debt can be a huge source of anxiety and depression. When I had credit card debt, I definitely had anxiety about it. I hated opening the bank statements. I even hated checking the mail, for that matter. But meditation has been shown to ease anxiety and depression. And it seems reasonable to assume that someone in a more positive frame of mind will get out of debt faster than someone who feels like the situation is hopeless.

At any rate, it’s just one more reason that I want to give daily meditation another try. Now if only I could sit still long enough to do it…

Readers, what do you think? Would you try meditation as a way to improve your finances?


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