Dad died in February 2021 after a short illness; it was a shock. We are still dealing with it.
The grief of a loved one is hard; there is no dress rehearsal, even if you've lost loved ones before, each one is uniquely different.
It was during this time I found out a surprising fact about UK employment law. Other than the parents of children, there is no provision for statutory bereavement leave. Any leave granted to someone who has lost a loved one is entirely at the employer's discretion and usually called compassionate leave. For most, it's a few days and a week if you are lucky.
So if you need time off work to deal with a death, then it's entirely on the employer to give you time off. It may be different in your country.
However, I'm not employed; I'm self-employed, so no statutory provision would help anyway. This leads me to the reason for this article.
I took extended leave. This means every day I don't work, I don't earn any money. My clients have been brilliant, they been patient and kind, but if I'm not doing any work for them, then there's no billing. As each week passes, that amount becomes thousands of pounds.
It would be the same case if I took time off sick, or to have a baby, or even took a vacation.
Self-employment means no sick pay, no maternity or paternity pay, no paid vacation.
Get A F*ck Off Fund
So how did I cope with the extended leave? I did what everyone reading this article should do, and that's over the years I’ve built a pot of money for those times when I can't work. I once heard it described in a book as your ‘f*ck off fund’. How did it get that name? Well, it's the amount of money you need to have in the bank if you ever need to tell your boss to f*ck off!
Setting aside that somewhat graphic way of describing the scenario, it illustrates the point clearly.
So how big should that pot of money be? I asked around the team, and we all agreed it should be around 3 months worth of your average income. So if you earn £60,000 a year, then it's about £15,000.
Thankfully, that's exactly how I've lived for many years; I put as much money in savings (and pensions, but that's a different story) as I can. You might be reading this and thinking that you can't afford to do that. YOU CAN'T AFFORD NOT TO DO IT.
If you are currently running a business and don’t have any provision for savings, for taxes and for the times you can’t work, then you need to reconsider your business model. Working hand-to-mouth is unsustainable for any length of time, so plan to grow your income to ensure you don’t find yourself in financial trouble.
In my book, I talk in detail about the point in my life when I was in serious debt, about a year's worth of income sized debt. It took me years to dig myself out of that hole. For this reason, I decided that once I was debt-free, I would, as much as I possibly could, make myself debt protected.
How To Build Up A Pot Of Money
So how do you build up a war chest? Here's how I did/do it.
I set myself an income figure; irrespective of what money comes into the business, I don't take any more than that figure out of the business. That goes into savings and the tax pot. Too many people let their income fluctuate based on the income coming in. Set a number, stick to it, save everything else you can.
Don't buy stuff you don't need. Profit is what you don't spend. It might be nice to have a new $15,000 Mac Pro, but the $4000 Mac mini might well be more than adequate for your needs. It won't look as impressive on your social media feed, but Likes and Shares won't pay the bills. It’s unlikely that a single Facebook friend will bail you out if you find yourself in financial trouble. It was surprising how many of the Facebook d*ck swingers who post all day about their ‘amazing’ life didn’t say a word when Dad died. There’s very little equity in your social media contacts.
Go through your business with a fine-tooth comb and find things you can stop spending money on. You'd be surprised how quickly you can build up savings just by cancelling things like software subscriptions. I recently moved from Adobe Creative Cloud, which cost me several hundred pounds a year, to the brilliant Affinity Suite, for a one-off payment of around £70.
Rent or lease high-value items that you need instead of buying them and protect your cash reserves. For example, I lease my car through the business. It's a brand new VW Tiguan R Line, with a purchase value of around £35,000. The company pays about £350 per month (£4200 per annum) for it, and after 3 years, I hand it back. Over 3 years it's going to cost about £13,0000, that's a fraction of the £35,000 I could have spent on it had I bought it outright. You can do the same with large studio items like mixing desks.
Work from home if you can. If you don't need a facility and clients don't visit you, don't burn the money renting a separate unit or office. Read Working From Home In Audio Production? This May Be Everything You Need To Know
One small word of advice. Don’t spend time looking for the best possible interest on your savings, those days are largely over. Just put it in an account you can get to quick when you need it.
Get Ready For The Storm
In summary, I'd like to set you a little exercise.
Go through the list I've written above and perform the same on your own business. See how much you could start saving and how much money you could start putting away into savings.
There's an old expression life insurance salespeople use when trying to get you to sign up. They say, "if the worst should happen…" they mean should you die. Fact is, there is no IF about it; what they should say is "when the worst should happen."
Even if you don't have to face the death of a loved one or sickness, you might still need time off to celebrate the birth of a child or take a vacation. Make financial provision to ensure you're not going to be facing financial hardship when these things occur.
Stop spending and start saving; it really could be a matter of life and death for your business.