If you’re a freelancer or run a side hustle, check out Broke Millennial Erin Lowry’s method for ensuring business and travel expenses don’t disrupt her cash flow.
The little tidbit was tucked into an email hashing out the particulars of a forthcoming paid speaking gig:
Try to book your airfare ASAP as the team has given me approval for up to $500 for travel.
Suppressing the urge to roll my eyes at the computer screen, I shot back a quick response.
Just to confirm, you’d like me to book my own flight and expense it?
Yes—that’s exactly what needed to be done. Sure, it would be getting expensed, but this was January, and the gig wasn’t until May. Then it would probably take 30 to 60 days to receive payment (pretty standard), so I wasn’t going to see that $500 in travel expenses until July. This had become my norm as a self-employed author turned speaker, but it was starting to cause an issue for my cash flow.
As my paid speaking opportunities began to blossom in mid-2016, I quickly learned the variety of ways companies and institutions pay out. Some clients pay a larger lump sum, but you’re responsible for booking and paying for travel. Others give you a speaker fee and a budget for travel and food expenses, which you need to book and then submit receipts for reimbursements. My preferred method of reimbursement: You get a speaker fee, but the company handles booking and paying for all your travel directly. You just need to submit receipts for food. Even with that last option, I’m still left waiting to get paid for the gig and get reimbursed.
Since the reimbursement checks weren’t showing up before my credit card bills were due, I found myself pulling money out of savings to cover the bill—because I’m not interested in carrying a balance on my credit cards. Once I got paid, the reimbursed costs went right back into my savings account. However, given that payment could be a full six months away and the speaking gigs were steadily increasing, I wasn’t sure this strategy would work well in the long run. I would eventually look wealthy in outstanding invoices, but be rather cash poor.
Considering all these factors, I’ve made it part of my 2017 business strategy to better prepare myself (both mentally and financially) for covering expenses months in advance of payment.
Step 1: Set Up a Dedicated Business Travel Savings Account
Admittedly, I need to get better in general about separating my business accounts from personal ones. I found it challenging to transition from traditionally employed with a side hustle (in which I saved 100 percent of my side income) to self-employed. Ideally, my earnings will get put into a business account and I’ll have a set salary I plan to pay myself for the year; that way, money can get reinvested in my business, and I won’t feel tempted to overspend during flush months (since lean ones are bound to occur).
The strategy is to start depositing all of my paychecks into a business account: 40 percent of funds will immediately be routed into savings for taxes, 15 percent will be earmarked for savings goals, and the remainder will fund my business, with $2,500 each month going toward living expenses. Part of the money to fund the business will be put in an account dedicated to business travel and reimbursed expenses.
Step 2: Request a Non-Refundable Deposit for Booked Speaking Gigs
My fellow self-employed friends and mentors empathize with the cash flow crunch that can come with waiting for checks to arrive and reimbursements to be doled out. Several recommend requesting a non-refundable deposit for booked speaking engagements or request a percentage of the fee upfront. While clients aren’t always open to doing this, it certainly helps keep finances a little more stable throughout the year, while also removing the burden of booking my own travel and accommodations. Additionally, it mitigates the risk of getting burned by a client who “forgets” to pay up.
Step 3: Consider the Silver Lining
Despite the cash flow annoyances and occasionally having to hound clients for payment, there is one silver lining: I put these expenses on my credit card, which means I get the points. These flights, even when booked by another company, are in my name and I get the frequent flyer miles. As a personal finance writer and speaker, it’s my duty to know how to maximize travel rewards. Additionally, learning how to level up my travel hacking game is a personal goal for this year.
I may get frustrated having to pull money from savings occasionally, and anxious when it takes months for a check to arrive—but I’m getting paid to do something I love. Now that I better understand how companies tend to operate, I can play defense and be ready for the expense-it-and-wait-for-reimbursement game.
Erin Lowry is a Millennial personal finance expert, speaker, and author of the book, BROKE MILLENNIAL: Stop Scraping By and Get Your Financial Life Together. Based on the successful blog, the book is a choose your own adventure guide to personal finance that uses wry humor and real-life examples to demystify the basics of money for Millennials. Erin lives in New York City with her spunky rescue dog Mosby.
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