Rainy day fund

The method of living at home modestly and within our income, laying a little by systematically for the proverbial rainy day which is due to come, can almost be listed among the lost arts.

George Washington Carver

Feast or Famine

If there’s one thing you can almost guarantee as a freelancer, it’s that there will be an element of ‘feast or famine’ in your workload. That, of course, affects the regularity and consistency of income.

Something I decided to do very early on in my life as a freelancer, was to have a system for putting aside some money as insurance for any period when I didn’t have much coming in, or if there was suddenly a larger than normal amount to be paid out.

Negative Visualisation

If you think about it, there are a lot of things that can go wrong. Much like Stoic philosophy (all the rage currently and something I’m learning more about as it seems to offer some very pragmatic ways of thinking about things) suggests practicing ‘negative visualisation’, which is to reflect on the worst that could happen, in order to be able to appreciate things more and to be prepared for what disasters, minor or otherwise, may befall you.

Take a moment to consider some things that could happen which would affect your income:

  • illness or injury, to you or someone you’d have to stop work to care for,
  • work drying up for a few weeks or months,
  • your computer suddenly giving up the ghost, requiring instant, expensive replacement,
  • some kind of life-changing situation that means having to stop working for a time,

I’m sure there are more, but those are just off the top of my head.

Plan Ahead

Also, there’s a need to make sure you have money available for certain times of the year: such as now – Christmas and new year – or for a summer holiday.

For some things, there is private insurance cover. There’s also social security, depending on where you live and what your situation is.

However, I like to have some funds under my own control. Easy to access and available to me whenever, without penalty and also actually earning something in the form of interest, not just losing value while gaining nothing in a bank account.


I have used a so-called ‘peer-to-peer’ lending service called ‘Ratesetter’ (follow link at the end of this post) which is based in the UK and available to anyone with a UK bank account (FAQs). This is the kind of thing that puts the fear into some people, as they imagine lending money directly to people who they don’t know, can’t trust and might not repay. However, it doesn’t really work like that at all.

With Ratesetter, you offer up an amount to loan out and somebody, or a business, borrows the money at a rate of your choosing. They are required to repay the loan on or before a particular date. The borrowers are vetted by Ratesetter, so there’s a level of security from that. Furthermore, Ratesetter has its own back up system that they call a ‘Provision Fund’ which is in place to reimburse investors, i.e. lenders, should a borrower default on a loan. In a number of years of using the service, I’ve never had a problem.

Your options are flexible, so that a loan can be ‘Rolling’, or a fixed term of ‘1 year’ or ‘5 years’. They also added the option of an ISA earlier in 2018, so that might be something to consider for UK residents who are eligible.

It’s the one year and rolling options I like. I tend to put a lump sum in the 1 year market in July (for summer holiday) and another at the beginning of December (to cover Christmas). It’s useful to know that this money is already put aside. The interest rates rise and fall a little, but are generally better than most savings accounts, as far as I’m aware.
On top of these lump sums, I put in bits and bobs when I have more than I need into the ‘Rolling’ market, which serves as my rainy day fund; some money to rely on if something happens that leaves me in need of extra funds.

This did actually come in handy in October this year, when an extended contract discussion left me unable to invoice in time for the publisher’s monthly processing deadline. As a result, I ended up going unpaid for a couple of months in a row (following a long summer break). I was able to withdraw funds from Ratesetter and use them as a salary for those months.

I think Ratesetter is a really useful, flexible option, which has been useful for me and appears to be able to guarantee the safety of your money as much as any bank can. From personal experience, I recommend it. And if you’d like to invest something yourself, follow this link and you can take up the option of a £100 bonus! Of course, if you do invest via this link, there’s a little something for me too, but you wouldn’t begrudge me that, would you?!

If you do it now, it could be waiting for you this time next year! 😉
I hope this is useful, whether or not you do invest. If you have any comments or info to share, feel free to comment below.

Thanks for reading!

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