4 ms·
You need to have way more of a buffer held in cash and probably a significant lifestyle cut. Paycheck-to-paycheck sucks but is workable if you're a W-2, but abs
by ThrustVectoring 9y ago
You need to have way more of a buffer held in cash and probably a significant lifestyle cut. Paycheck-to-paycheck sucks but is workable if you're a W-2, but absolutely insane if you're self employed.
Like, money you earn today should get earmarked to expenses you need to pay six months from now. The discount for self-employed dollars should be keeping six months of expenses in cash rather than invested in the market - if that's $30k and you lose out on 4% gains, that's only $1.2k per year.
- ryanmarsh 9y agoYes this has been really tough for me to learn. My cash outflows can vary by up to $30k per month. I’m self employed and often have to travel and various clients pay me net 30,45, or 60. I thought maybe 60 days of cash would cover net 60 but it turns out I need more like 180 days of cash.
- kayhi 9y agoMaybe instead of negotiating rate, you get all your clients to pay on net 30
- sokoloff 9y agoGet clients to agree to pay net-30 is easy. Getting them to actually pay net-30 is much harder.
- Maultasche 9y agoOne tactic I've heard is to increase the price by 5% and then give them a 5% discount if they pay within 30 days. I've never tried this myself, but I've heard that this greatly encourages prompt payment because everyone loves a discount.
- abalashov 9y agoI offer significantly higher discounts than that for quarterly or annual prepayment, in the case of recurring revenue. Cash is king. Even to the degree where taking a 12-25% haircut can be worth it.
- ryanmarsh 9y agoLOL my clients are Fortune 100. Im lucky if I get to negotiate anything. I usually get the same payment terms as all of their suppliers.
- shostack 9y agoShouldn't you have ~6mo living expenses as an emergency fund regardless?