Review: The Money Book For Freelancers

The Money Book for Freelancers, Part-Timers, and the Self-EmployedIt took me a long time to get through The Money Book for Freelancers, Part-Timers, and the Self-Employed. That's not usually high praise for a book, but in this case I mean it to be. It took me a long time to read because it was so darn useful. I had to keep stopping to go do the exercises the authors suggested. Now my files are organized, my retirement funds are set up, and my favorite bookmark is free to be slotted into the next finance book I read.

Writers Joesph D'Agnese and Denise Kiernan have been freelancing a long time. Along the way, they've made all sorts of mistakes with their finances, but they've also gotten to a place where they have a stable, smooth financial system that works. As journalists, their work has appeared in The New York Times, The Wall Street Journal, Wired, and a dozen other places. Now they've turned their considerable writing talents to sharing their financial expertise. It's a winning combination.

Freelancers are People Too
The basic principles of money management are the same, no matter which book or expert presents them. What changes is how the information is presented, and how likely you are to be motivated to follow the advice. The Money Book for Freelancers is special because it frames simple money management wisdom in a way that makes sense for freelancers and contractors.

Independent workers have special financial needs. It was a huge help to me to see them laid out in black-and-white. I knew abstractly that I should be saving for retirement, for example. Now I know the details of an SEP-IRA, how it differs from a Roth IRA, and why a self-employed person can benefit from having both accounts. I now have a percentage of my income set aside for retirement each month instead of a flat dollar amount.

The beauty of The Money Book for Freelancers is the organizational system it brings to sound money principles. The authors advocate a system of dedicated bank accounts very like the one I've been using for the past year. (J.D. uses a system similar to this, too.)

To whit:

  • You want one account at a local bank that you use for your deposits, spending, and daily cash flow.
  • You have savings accounts dedicated to particular goals that you keep in a high-interest savings account at an online bank.
  • The core of their system is a Holy Trinity of Savings Accounts that includes an Emergency Fund, a Tax Account and a Retirement Account.

For most people at a traditional job, the employer handles the bookkeeping related to taxes and retirement. You may want to add additional retirement funds like a Roth IRA to your retirement portfolio, but at its most basic, retirement accounts and taxes are handled by your company. Doing it yourself isn't that complicated, but it can seem intimidating. If you're starting out like I am, it's nice to have someone hold your hand through getting set up.

The other great thing about The Money Book for Freelancers is the writing style. D'Agnese and Kiernan are like personal trainers for your financial life. They're constantly cheering you on to stretch your abilities and resources, while candidly holding you accountable for your choices. Whether you freelance or not, their attitude is refreshing. If you do freelance, you'll likely find their life lessons and anecdotes eerily familiar.

Keep It Simple
The weakness of this book is its authors' love of complexity. They often recommend multiple accounts in places where one would do. For example, harkening back to the example above, they recommend two or three retirement accounts for each self-employed worker: an SEP-IRA that functions a lot like a 401K, a Roth IRA, and a taxable brokerage account. For most of us, that's overkill.

I make a decent salary freelancing these days. Even so, if I succeed at saving 10 percent of my income for retirement this year, I won't save more than the $5,000 I can put into a Roth IRA. There's no reason for me to maintain other accounts unless my income and savings jumps to a point where I've capped out my contributions to the Roth. I really don't need an SEP-IRA, and won't until my income is double my current one. While a lot of freelancers make enough money to worry about SEP-IRAs, most people are probably served just fine by a Roth IRA, and maybe a traditional IRA to pick up additional retirement savings in a good year.

Likewise, the authors' focus on saving for retirement before paying off debt probably means paying more interest over the long term. Yes, it's good to establish good habits. Freelancers especially need to rely on their own savings practices. No company pension will save you if you screw it up. But saving up a big emergency fund and a retirement nest egg while you're recovering from credit card debt can be penny wise and pound foolish. A lot of pounds of foolishness, depending on how much debt you have and what interest rates you're paying. I've recently shifted some of my own debt snowball to savings, but my remaining loans are all very low interest (under 5%), and I'm willing to pay a little more interest in exchange for building up a secure emergency fund.

The Bottom Line
I'd like to see this book take a somewhat more streamlined approach to financial savvy. If you're self-employed, especially if you're just starting out, there's plenty of good in here. It was well worth the read, and I got a lot out of the exercises. I'd just recommend it alongside another basic money book like J.D.'s Your Money: The Missing Manual or Dave Ramsey's The Total Money Makeover.

Probably the ideal system for any individual will be a hybrid of what various experts offer. D'Agnese and Kiernan have some wonderful ingredients in their soup, but don't follow the recipe blindly.

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El Nerdo
El Nerdo
9 years ago

Bravo! This is the post I’ve been missing since I started following this blog. A lot of financial advice is almost always skewed towards the regular paycheck crowd, so it’s of little use to my hired-gun family. “401 what?” “Employer contribution to uh?”

Even Dave Ramsey Total Money Makeover, which you mention here, deals cursorily with budgeting and emergency funds for the self-employed. Yes, we are only 1 out of every 10 workers in America, but we do exist.

Thanks for your review of this book. I’m going to look for it RIGHT NOW.

Nicole
Nicole
9 years ago

Great post!

Sierra Black
Sierra Black
9 years ago

@El Nerdo: thank you. I’ve really enjoyed it, and it easily passed my bar for “worth the cost” by saving me more than I spent on it.

Debbie
Debbie
9 years ago

Sierra:

I think you need to do some more research regarding the difference between SEP IRA’s and Roth IRA to understand the difference.

I have been self employed since 1987. The SEP IRA is tax deductible and will lower your taxes. The Roth IRA is not. To me, it makes more sense to fund the SEP and lower my taxes. Only after the SEP is fully funded, would I put money in a Roth account.

I will check out the book. Thanks for your review.

Debbie

Suzanne
Suzanne
9 years ago

I read this book a few months ago too and really like it. The key takeaway for me was the simplicity of taking a percentage approach to managing your money as a freelancer.

As income often fluctuates from month to month, it’s hard to put aside a set amount so this often paralyzes freelancers into doing nothing. It sounds ridiculously simple once you learn it (and it is) but it really helped me be more disciplined.

It was also great to read a book dedicated to my situation.

Claude
Claude
9 years ago

Is this book specific to the U.S. or is it applicable to other countries, like Canada?

Thanks for your review!

Snowballer
Snowballer
9 years ago

“While a lot of freelancers make enough money to worry about SEP-IRAs, most people are probably served just fine by a Roth IRA, and maybe a traditional IRA to pick up additional retirement savings in a good year.” Unless the author of this post knows something I don’t, which is very possible, the $5000 (as of now) annual maximum for contributing to a Roth IRA is reduced dollar for every dollar contributed to a traditional IRA. In other words, you can put $2000 in a Roth IRA and $3000 in a traditional IRA in the same year, but you can’t… Read more »

Pamela
Pamela
9 years ago

I’ll have to check this one out. I often recommend matched savings plans for my clients (Individual Development Accounts). But these programs require a commitment to save the exact same amount month after month to get the matched funds. Since many freelancers get paid in big chunks on an irregular basis, this can be tough.

I look forward to seeing the books’ suggestions for evening out uneven income.

Pat S.
Pat S.
9 years ago

Sounds like it may be worth a read! Thanks for the review.

El Nerdo
El Nerdo
9 years ago

Ok, the local libraries don’t have it so I’m going to do the non-tightwad thing and actually buy it from your affiliate link as a way to say thank you. I’ll just wait a little to avoid the impulse buy reflex. I’m really interested in the retirement suggestions and other ideas. The way I’ve managed to even out my random income is to spend as little as humanly possible and save the rest. Clearly that’s no way to live, but this is the first year of my life I’m not totally broke or relying on credit cards to make ends… Read more »

Sonya
Sonya
9 years ago

I love it when a book on finance is actually useful, great post

tb
tb
9 years ago

el nerdo-did you try inter-library loan?

Erin
Erin
9 years ago

First of all, great post! Thanks for reviewing a book just for us freelancers (though it sounds like there’s good advice for everyone in there). While I don’t want to harp on single sentence in an otherwise completely awesome post, I do feel it’s worth pointing out that Snowballer is correct -every dollar you put in a Roth IRA is a dollar you can’t put in a Traditional IRA. The maximum is a $5000 total for both types of accounts. However, SEP IRAs are *really* easy to set up. I set mine up in Ameritrade in 15 minutes. You just… Read more »

Jen
Jen
9 years ago

#4 and #9

I thought it was clear that she was talking about SEP-IRAs for money AFTER the 5K. Perhaps the very last sentence muddies the water, but prior to that,I got it and I’m not even a freelancer who needs to know about SEP-IRAs!

El Nerdo
El Nerdo
9 years ago

@8 tb – i suppose i could have gone that route, but i decided i really would like to thank GRS for putting the focus on the irregularly paid, and if i buy from their affiliate link they get a percentage– which is why i didn’t run to the local B&N to get it. also, after discussing it with my wife, we thought we might want to keep the book around as a handy manual, since we’re really focusing on our finances this year. i’m still gleaming what i can from the amazon “look inside” feature though 😉

Wilson
Wilson
9 years ago

Excellent timing! Just what I was thinking about with tax time here. Always looking for more ways to take advantage of being self-employed especially when there are so many disadvantages, i.e. health insurance.

Aaron
Aaron
9 years ago

I agree with #4, why pay taxes on retirement savings now when you can pay them in retirement when they’re likely to be lower? Why not fund the SEP-IRA first (reducing your tax) and then when that’s maxed out then go to the ROTH-IRA if you have more to invest. There are reasons to fund an ROTH IRA first, (easier to remove contributions if needed, able to take out for first home etc…) but if you’re using both for strictly retirement and don’t plan to touch it, maybe it makes sense to consider the SEP-IRA as an option. As J.D.… Read more »

the other Tammy
the other Tammy
9 years ago

I second the request for more self-employed posts!

KSK
KSK
9 years ago

I’ve been freelancing for 14 years. I used to contribute to a SEP-IRA, but switched to a Individual 401K about 5 years ago because it allows me to make larger retirement contributions. The maximum contribution that you can make to a SEP-IRA is $15,500 per year. With an Individual 401K, you can contribute $15,500 per year, plus 20% of your profits. My accountant always recommends maxing out the Individual 401K (or a SEP-IRA) first, before making contributions to a ROTH IRA. Contributions to an Individual 401K or SEP-IRA reduce your taxable income. I’ll have to take a look at this… Read more »

Joseph D'Agnese
Joseph D'Agnese
9 years ago

Thanks, Sierra, for a great post!

And thanks to all of you for some great comments.

Best,

Joe & Denise
The Money Book for Freelancers
feed-the-monkey.com

Judy
Judy
9 years ago

Just chiming in to concur with #4, #13, and #17. I became self employed in 2006 and consulted with a financial planner about a retirement account. He recommended a SEP-IRA because of the tax advantage and the high limits on the profit sharing contribution portion. Mine is through Fidelity, very easy to administer – I’m quite happy I set one up!

rumorsofmydemise
rumorsofmydemise
9 years ago

THANK YOU! I am in grad school for a field that is almost exclusively freelance and have been fretting about my financial future. This book will go a long way towards making me feel in control of my finances outside of the nine to five world.

Chipmunk
Chipmunk
9 years ago

Hear, hear! More posts for freelancers/self-employed types. That book sounds great, but because I don’t live in North America I doubt it will be relevant to my particular situation (especially if it uses up a lot of ink dealing with health insurance, which is not an issue where I’m living). Still, I’m so happy to see this post up! Thanks Sierra.

By the way, don’t forget to watch the video on the Amazon page. It’s a hoot!

working mom of 2
working mom of 2
9 years ago

In “The Gospel of Roth- The Good News About Roth IRA Conversions and How They Can Make You Money” by John Bledsoe it clearly states in the book that NO ANALYSIS is needed and that everyone should convert to a Roth IRA regardless of income. There is NO risk! The IRS is giving us a year to recharacterize or “undo” the conversion. This book gives the ins and outs for Roth IRAS! It really helped answer all my questions.

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