Slow seasons come for most professions. But when you don’t have a salary you need to prepare for slow times.
Build up an emergency fund
In a business where you have slow seasons, an emergency fund will support you during those months. By preparing ahead of time, you can have peace of mind knowing you won’t be living paycheck to paycheck for a few months a year.
Generally, we recommend an emergency fund for 6-9 months of expenses. If you are starting from scratch, that can be an intimidating number to save up to. But it’s doable, especially if you set lower milestones. Start by saving up for 3 months of rent or your mortgage payment, then increase your goal from there.
Your savings should be in a high-yield savings account (HYSA). With a HYSA the interest rate you receive on money sitting in your account is higher than a standard checking or savings, you also can earn compound interest. There are a lot of different banks that offer HYSA. Some options we use are:
Each bank has pros and cons, we recommend reviewing all your options for HYSAs and choosing one that works for you and your lifestyle.
Since your income is variable, it makes sense to save a percentage of your income every pay period rather than a set dollar amount. In general, we recommend saving 20% of your income. If you have debt or other goals you want to save for, the percentage may be lower.
Allocating your savings
Keep in mind, an emergency fund is important. But, if you already have 3 months of housing payments saved, you can start splitting your savings between other goals.
Saving for time off
If you want to take a break from work, whether it’s a vacation or sick days, you need to ensure you have enough cushion to do so. Having a 6 month emergency fund helps with this. Some people prefer to have clear amounts for each goal. In that case, you can set up a different account specifically for a PTO fund.
Have multiple forms of income
Taking a break during the slow season is always an option! Some people prefer to have income throughout the year though. It also comes in handy if you want to take a break during the busy season. Every industry has different options and slow seasons. Photographers could offer editing services. I have worked with dancers who start making online content during the slow season. Therapists can offer group therapy. Whatever your second source of income is, plan ahead and make sure it can help cover some expenses during the slow season.
A buffer allows for peace of mind
Allow yourself to relax during the slow season by planning ahead and building up an emergency fund. Follow the check list below to ensure you’ve covered all your bases:
- Calculate your monthly personal and business expenses. Use that to calculate your emergency fund.
- Open a HYSA
- Decide on a percentage of your income to save every month and save it into your HYSA
- Once your emergency fund is full, allocate that savings to other goals such as vacation or retirement
Are you looking for a plan specific to your lifestyle and goals? We’d love to help. Schedule a free consultation!
