> ## Content Index > Fetch the complete content index at: https://blog.annabyang.com/llms.txt > Use this file to discover other available public pages before exploring further. # Reduce the Risks of Freelancing With a Financial Plan - URL: https://blog.annabyang.com/freelancing-financial-plan/ - Published: 2026-11-09T16:15:00.000Z - Updated: 2026-11-09T16:14:59.000Z - Description: A job is not the safe option by default. - Author: Anna Burgess Yang - Tags: Financial Management **Key takeaways** - A job concentrates your income risk with a single employer, while client work spreads that risk across several clients. - You can reduce the stress of unpredictable self-employment income with planning and budgeting. - Paying for a tool or an outside expert is worth it when your freed-up time can go toward higher-value work. You've probably heard that a full-time job is the safe option and self-employment is a gamble. I believed that too, for years. I spent most of my career in banking, where self-employment is considered risky because the income is unpredictable. Then I was laid off, and my income went from the salary of a full-time employee to zero in a single day. Unemployment covered a fraction of my salary, and employees in the U.S. have almost no protections against an employer’s decision to cut ties. If you're a freelancer or solopreneur in your first couple of years, you may be thinking about money constantly. But there are ways to plan around unpredictable income. Both paths — working for an employer and working for yourself — carry risk. The real decision is what kind of risk you’re willing to take on. ## Is self-employment riskier than a corporate job? Losing my job showed me just how risky full-time employment can be. These days, when I lose a client, I lose a portion of my income, not my whole income. But self-employment adds a kind of risk a job doesn't have. The amount of money coming in goes up and down from month to month, and I make every [business decision](https://blog.annabyang.com/dont-apologize-for-your-business-decisions/) myself. Forces I can’t control, like the market or my clients’ budgets, can force changes faster than I’d like. So it comes down to risk tolerance. My own preference is being in control of the outcome, and [corporate life prepared me](https://blog.annabyang.com/corporate-life-prepare-solopreneur-life/) for what that takes. I'm also upfront with people that running a business alone is stressful in its own way, and it’s not the right fit for everyone. ## 3 steps for planning around unpredictable income Unpredictable income gets manageable once you know your floor and look at your money regularly. Some people are uncomfortable with money, so they don’t look too carefully — and that’s the wrong thing to do when you’re running a business. Because I have a background in banking, money was one of the first things I considered when I struck out on my own. The financial steps I set up in the earliest days are what I still follow today. ### 1\. Work out your bare minimum Your bare minimum is what you absolutely need amount you need to earn to pay your bills in a given month. Your budget might have more wiggle room than you think once you look at cutting anything unnecessary. I started with my entire budget, personal and business, because I already had both set up. Mortgage had to be paid, but other things could be paused for a bit. I knew the cuts were not permanent, but I needed to preserve cash until my business picked up. When I was laid off, I asked my spouse to give me six months to make it work with my own business. After that, I’d go back to a corporate job, if needed. A fixed end date gave me the push I needed, with a backup plan if clients didn’t materialize. So you have two numbers to work out: 1) how much less you can afford to make and 2) how long you can afford to make less. ### 2) Set up a low, medium, and high budget My freelance budget itself is a simple Google spreadsheet showing three columns: 1. What does my budget look like in a low-earning month? 2. A medium-earning month? 3. A high-earning month? I operate on medium almost all the time. Because low and high are already planned out, a lost client or an unusually good month doesn't turn into a snap decision. I don't move fully to a different budget unless something drastic changes. Then I look at how much I pay myself and how much goes to savings. A low-earning month means I set nothing aside other than the taxes I have to pay. A high-earning month means I put extra aside as a rainy day fund. [Budgeting for Freelancers: How to Budget Irregular IncomeTips to get started.![](https://storage.ghost.io/c/fe/e9/fee9a30d-4c70-4bd2-af95-fe6abc8afd29/content/images/icon/annabyang-logo-light-orange-b6d8bcb6-d266-4141-aef1-c7476a99bc5d.png)Building SoloAnna Burgess Yang![](https://storage.ghost.io/c/fe/e9/fee9a30d-4c70-4bd2-af95-fe6abc8afd29/content/images/thumbnail/annabyang-financial-management-hero-image-8-95b4dc72-6040-4237-a53a-a9c6ebbfeafd.png)](https://blog.annabyang.com/how-to-budget-as-a-freelancer/) ### 3) Check your cash flow at the start of each month Cash flow is a comparison of your money in and money out each month. At the start of each month, I look at what's in the bank and what I expect to come in from client payments that are due. Then I compare that against my normal outflows, like my subscriptions and how much I pay myself each month. If the [bank balance](https://blog.annabyang.com/choose-a-bank-for-your-freelance-business/) would fall below a threshold I've set, I move money over from savings. That month is effectively a low month, because the money coming in doesn't offset what's going out. The transfer from savings keeps everything running smoothly. My monthly habit of checking on my cash flow has created [financial stability as a freelancer](https://blog.annabyang.com/financial-stability-freelancer/). It’s one quick transfer from savings to checking at the start of each month, if I need it, and then I don’t have to worry about having enough money to pay my bills. If I have a surplus when I look at my cash flow because I had a high-income month, I move the extra to savings. ## What is worth paying for in the early days A lot of solopreneurs I know try to preserve cash in the early days of their business. And that’s totally fair, especially if you’re operating at a bare minimum. But as you start to earn more, you have to think about ways you can reduce your business’s dependence *on you* for every little task. The things worth paying for are the ones that buy back your time. My starting point is how much my time is worth. If an expense saves me time, it's worth the money in almost every instance. ### Paying for tools In addition to saving time, tools also let me do things I couldn't do otherwise. I can't make another me, so tools extend my capabilities further than I'd get on my own. The time a tool frees up can go toward work that brings more money into the business, which is my whole argument for [investing in tools as a solopreneur](https://blog.annabyang.com/paying-for-tools-as-a-solopreneur/) early. For example, Zapier automates hundreds of tasks for me in the background. Each task might take only a few seconds, but that adds up to hours of savings every month. ### Paying for expertise Paying a bookkeeper or a lawyer costs money now, but saves you a tax or legal headache later. I actually managed my own books for a long time, because I have a background in banking and felt comfortable doing so. But eventually I realized that even though I *could* do it, it didn’t mean I *should*. My time was better spent on client work than categorizing transactions in QuickBooks. Paying for expertise might be one-time (like a lawyer to [set up your contract](https://blog.annabyang.com/legal-protections-freelancers-contract/)) or ongoing (like [outsourcing your bookkeeping](https://blog.annabyang.com/solopreneur-bookkeeping/)). ## What is your risk tolerance? If you're still in a corporate job and thinking about the leap, map out what a single month looks like with no salary. Can you find enough clients to earn your bare minimum? If not, can you cover the difference from savings? If so, for how long? Once you’ve done the math, think about the harder question. How would you *feel* going several months in a row below your bare minimum and relying on savings? That answer is your risk tolerance. Run the numbers before you ever need them. The financial planning is the same whether you leave your job next quarter or stay for another two years. With a plan in place, you can make a more informed decision about your next step. ## The 5 Types of Career Pivots Not sure what comes next? Check out this **free** guide. Get it! Fill out your email address to download the guide. ## Common things to watch for when you go solo - **Planning self-employment income around what you earn today.** Plan around your bare minimum instead. Your self-employed income will catch up at some point. - **Treating tools as a cost only.** Compare the cost against what an hour of your time is worth before you say that a tool isn't worth it. - **Skipping a budget because the income is unpredictable.** Unpredictable income is exactly the reason you need a plan. - **Switching decisions before they settle.** Taking too long to decide and changing course too fast both create problems. It helps to recognize [how you make decisions](https://blog.annabyang.com/thinking-fast-and-slow-in-business/) before you're under pressure. ## FAQs #### Is self-employment riskier than a full-time job? Both carry risk. With an employer, someone else is making decisions about your career. With clients, you're in charge. However, self-employment adds month-to-month income fluctuation and puts you in charge of every decision you make. #### How do you budget when your income changes every month? Set up three versions of your budget — low-, medium-, and high-earning months. At the start of each month, compare what's in the bank, what client income you're expecting, and what payments you have to make. Having three budgets means you're not making decisions on the fly. #### What happens to your income if you lose a client? Losing a client usually costs part of the income, which is the main difference from losing a job, where you lose all of your income overnight. The shortfall is what savings are for, and you can pull from your savings during a slow month. #### How do you know if a tool is worth paying for? Compare the cost against what your time is worth. If a $20 subscription saves an hour and your time is worth more than $20 an hour, it pays for itself. Check the combined total across every subscription once in a while, because small amounts can add up fast.