Building the buffer: taking the panic out of self-employment and short-term sickness

Thursday, 07/05/2015

However annoying and unreasonable the boss might be, there are clear advantages to working for yourself from home. The commute is shorter, you don't need to remember to get your suit dry-cleaned, and the coffee is better. However, on the day when you wake up with the flu and need to stay in bed, you will miss the sick pay, and the knowledge that someone will pick up the important slack in your absence. Even if you're not overly affected by spending one or two days recovering from a bug, it will still eat into your profit margin. You may deliver your work to your client on time, but you've lost that important 24 to 48 hours of pitching for new jobs, improving your skills, or simply networking with other self-employed professionals. 

If you know that you will catch that time up over the next month, it can be extremely cost effective to take out a same day loan, especially for a sole trader who has not been established for that long, or who has a small turnover. You will need to prove to your lender you will be in a position to repay the loan by providing bank statements with your regular incoming and outgoing expenses. The short interest term can be worth it to buy you that extra day or two of living expenses and operating costs, so that you can stay ahead and pitch to new clients without working into the small hours and setting back your recovery.

However, it is important to bear in mind that you shouldn't be spending up to the hilt every month; one of the most important things a freelancer should consider is building up a buffer of at least a month's cash for living expenses and bills, and preferably enough to allow them to survive for three months should they fall ill and require hospital care and lengthy recuperation. As soon as it becomes affordable, you should consider taking out an income protection plan, which will stop you falling into a debt trap. After all, same day loans might be a smart financial and business move to buy you a couple of days to catch up when you have a bug, but if you don't budget for longer-term problems, then you may really catch a cold.

Payday loans are not suitable for, and would be expensive as, a means of longer term borrowing and are not appropriate if you are in financial difficulty.

Representative 1269.7% APR


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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk