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Freelancers, Are You Prepared for the Worst?

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When the freelance life goes well, it’s a great way to live. I’m writing this from a pavement café in Belgrade. The sun is shining, I’m in good health, the music is great, and I’m feeling a lot happier than I ever did in a corporate office.

But the good times don’t always last. In the future I may get sick, I may be in an accident, I may be unable to work, or I may face financial crisis. All of these things could happen years from now or hours from now, or perhaps, if I’m lucky, never. But one thing’s certain: one day I’ll die, and so will you.

As you may be starting to realize, this is not a feel-good tutorial. It’s a tutorial about the things we don’t want to think about but should prepare for nonetheless. It’s about sickness, disability, death and other disasters. We can’t prevent these things. But we can prepare for them so that they are easier to deal with, both for us and for our loved ones.

In this tutorial we’ll look at all the things a freelancer should have in place in order to be prepared for the worst, from life insurance to a plan for your digital assets. There’ll be ten items in all, and in each case I’ll give a brief explanation of what you need and how you can set it up.

So consider this your freelancer’s checklist for dealing with disaster. If you can get all of these things in place, you’ll be well positioned to minimize the effect of the worst things life can throw at you. And if you think there’s anything else a freelancer should do, please let me know in the comments box at the bottom.

A quick note: In some cases I’ll refer to legal documents. The law varies in every country and sometimes within countries, so please be sure to check your local situation, and seek professional legal advice if you’re in any doubt.

1. An Emergency Fund

When disaster strikes, it can strike harder for freelancers. If you’re a salaried employee and suddenly you or a loved one gets sick or has another emergency, it’s likely that you’ll be granted at least some paid leave. But as a freelancer, you don’t have that option. If you need to stop working to take care of yourself or someone else, you’ll stop earning money.

I covered a few strategies for dealing with illness in a recent tutorial, but to ride out all kinds of emergencies, the best strategy is to have a dedicated pool of savings that you can draw on. It’s good practice for everyone, but particularly important for freelancers. For more information on how much you need and how to build it up, see this tutorial on saving and investing.

2. A Will

OK, let’s go straight to the worst-case scenario now: your death. It will happen one day—and when it does, do you want to make things easier for the people you love, or harder? If you don’t make a will, you’re ensuring that on top of all the grief and pain, they’ll have to endure a lot of hassle sorting out your affairs.

So even if you don’t have a lot of assets, make a will. If your affairs are simple, you could consider using a simple template or online solution. For example, LegalZoom offers a basic will for $69 in the U.S. If you use a DIY solution, just make sure you know what you need to do to make the will valid: you may need to have it witnessed and/or notarized, for example. And make sure it not only lists who gets what, but also designates a person to execute the will. If you have a lot of assets or want to do something more complicated like setting up a trust, it’s probably a good idea to hire a lawyer to handle things for you.

3. A Funeral Plan

What should happen to your body after you die? What kind of funeral do you want? Some people have very specific wishes; others don’t care. Whatever the case, you should make sure that your loved ones know your preferences.

This is not usually a situation where you need a legal document: it should be enough simply to explain your wishes to the person who’ll be in charge of your affairs. If you have very complex requirements, however, or anticipate any disputes between family members, then putting it in writing is a good idea. It’s also good to cover the cost if you can, either by prepaying for the funeral, buying insurance that pays a death benefit, or setting aside money earmarked for the funeral. If you prepay, read the fine print. And if you want to make your organs available for donation, you’ll usually need to join a register.

4. A Living Will and Power of Attorney

A will covers the case of your death, but what if you’re alive but unable to make decisions? In this case you’ll need a living will and a power of attorney. The living will spells out in as much detail as possible what your wishes are for things like medical treatment in the case of serious illness, and with the power of attorney you are designating a person to act as your proxy, to make decisions when you’re unable to do so.

The detailing of your wishes is easiest to do using a prepared template like the ones available at CaringInfo, in which you answer yes or no to a series of questions/statements like: “I want to have life-sustaining treatment if I am terminally ill or injured.”

As with all the legal documents mentioned in this tutorial, make sure that what you set up is legally valid in your jurisdiction. The templates on CaringInfo are designed for all the different states in the U.S., but if you live in a different country, either find a local equivalent or seek legal advice.

5. Solid Insurance

In a recent tutorial I looked at the different kinds of insurance you may need as a freelancer. And for particular types of freelance work, you may need other types: see this tutorial by Marie Gardiner on the insurance needed by freelance photographers, for example.

But those were dealing with insurance to do with work. Since we’re talking about death today, you’ll also want to consider life insurance. It’s particularly important if you have family members who are dependent on your income, but it’s worth considering in a range of different situations.

In case you’re not convinced, here are some words from Chanel Reynolds, whose husband died suddenly in 2009:

Even a few months after the accident, the fog was just starting to clear, if I had to go right back to work full-time while trying to single-parent, or else face financial ruin — I. Would. Have. Caved. Completely. And I am not the caving type. Knowing some life insurance was coming, even though a modest amount, bought me time. Honestly, it was the financial bridge I needed between my old life, and the rest of my life.

The pain of dealing with her husband’s death led Reynolds to set up the site Get Your Shit Together!, an excellent resource on planning for the worst. See her advice on life insurance.

6. A Succession Plan for Your Business

This one doesn’t apply for most freelancers. If you’re a solo freelancer, your business consists of your own skills and labour, and if you die or are incapacitated, there is no business to pass on.

But if you’ve built a larger empire, perhaps consisting of books and courses that can be sold even when you’re not around, or perhaps including employees and property, then you’ll need to make provision for its continuation after your death or incapacity. That means not just passing it on in your will, but making a comprehensive succession plan so that your designated successor can figure out how things work and keep the business running. For more information, see this New York Times guide.

7. A Plan for Your Family

If you have children or other dependents, you’ll need to plan for their future without you. You can appoint a legal guardian in your will, but it’s worth considering as a separate point because there’s much more involved. With money or property you can just specify who to leave them to, but with kids you need to think long and hard about who would be the right people to take care of them after you’re gone, and have detailed conversations to make sure those people are willing and able to take on the responsibility, and that they understand your wishes fully.

8. A Plan for Digital Assets

Considering all the serious issues we’ve discussed so far, the fate of your Facebook profile may seem trivial. But digital assets are becoming more and more important, and in some cases have real, lasting value. Think about what matters to you about your online life, and what you’d want to happen to your website and other online identities after your death. Then check out this Tuts+ tutorial series on Preparing Digital Assets for Your Eventual Death. There’s also a useful list of online services aimed at helping you plan for your digital death at The Digital Beyond.

9. A List of Important Information

Whether you die or are incapacitated, your nearest and dearest will need access to some of your personal information. Think about what they’ll need, and then make it easy for them to access it. The important thing here, of course, is to keep the information extremely secure, especially if you’re listing passwords and account details.

As for what to list and how to list it, there’s a useful template at Get Your Shit Together! There’s also some good advice at legal site Nolo.

10. A Tough Conversation

We’ve talked about financial provisions and legal documents so far, and all of that stuff is important. But one of the most important things you can do is completely free, and only takes an hour or so.

Sit down and have a conversation with your partner, parent, son, daughter or friend—whoever would be the person to take charge in the case of your severe illness or death. Depending on your circumstances, you may need to talk to several different people, to make sure everyone knows your wishes.

Expect resistance: the person loves you, after all, and doesn’t want to talk about something terrible happening to you. Many cultures, too, have deeply-rooted beliefs or lingering suspicions that talking about bad things invites them to happen. You may be told you’re being morbid or depressing. Have the conversation anyway. It’s important, and the person will thank you later.

The goal of the conversation is to ensure that your loved one knows exactly what to do when disaster strikes. Talk about what you want them to do if you’re not in a position to make a decision yourself. Talk through different scenarios, so that when the time comes they feel comfortable making the choice that they know you would have wanted. Tell them where to find all the documents they’ll need. Take them through all the preparations you’ve made, and make sure they understand everything.

Remember that you don’t have to reveal every detail of your financial affairs if you don’t want to. The aim is simply to tell the person where to get more information when they need it.

Next Steps

So now you know what you need to get set up to prepare for the worst. The next step is to go through this list and start dealing with each item. It’s not the sort of thing that anyone really wants to do, but it’s important. And the good news is that unless your affairs are very complicated, it really shouldn’t take too long.

Remember, though, that your life changes constantly, so it’s worth quickly going over this list again once a year or so. Your list of accounts may need updating, your insurance needs may change, or you may change your mind about what you want your loved ones to do in the case of your illness or death. So set a reminder to review your plans once a year, and notify your loved ones of any changes they need to know about.

Have I missed out any important items? If so, let me know in the comments below. 

Resources

Graphic Credit: Alternative icon designed by Arthur Shlain from the Noun Project.

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