Freelance PTO: How to Plan and Budget for Time Off

What's stopping you from funding your own PTO package?

Photo by Author

Happy Wednesday!

Welcome to the first official weekly Finance for Freelancers newsletter! 🥳

In this week’s newsletter, I’d love to discuss something that’s been on my mind: planning for time off.

Before we dive in, let me start with two quick polls.

If you feel comfortable, I’d love to gather your answers to these questions. I’m curious about how other freelancers approach taking time off.

Note: Other readers can only see the poll results, not who voted for what!

Now, let’s dive deeper into this topic.

Don’t overlook planning for time away

I often see freelancers complain about the lack of paid time off. In theory, they’re right that the gig doesn’t come with PTO.

Unlike many full-time W-2 jobs, freelancing doesn’t come with a benefits package that includes paid time off for illness, mental health days, or vacation.​

But you can plan ahead financially for time away. And you should.

Prioritizing taking time off can benefit your business and your well-being.

I didn’t always save up for PTO

For many years, I operated my business with the understanding that the freelance lifestyle doesn’t include PTO. In my mind, that’s just how it was.

When I stepped away due to illness or took a vacation, I knew I would not be getting paid. And sometimes, my bank account took a hit because of it.

The issue with this approach is that freelancers can feel financial pressure to keep working even when they need a break or time to rest.

But that’s not all. If you’re going through a difficult time with your mental health or are fighting an illness, you’re not able to work to the best of your abilities.

That means the quality of your work will likely suffer, and you’ll be unable to focus on your wellness.

Eventually, I realized I needed to change my approach to taking time off.

Here I am in Peru, visiting Machu Picchu!

Here’s what I do now

These days, I operate my business differently.

Here’s what I do to prepare financially for time away from work.

At the end of each year, I tally up my income and calculate my monthly average. Then I determine how much I’d need to set aside regularly to contribute that amount to my high-yield savings account.

Let’s imagine my income was $78,000. I would plan to set aside $6,500 over the next year to cover up to one month away from work.

That $6,500 becomes my PTO package.

Why one month? That’s what works best for me.

Travel is a big passion of mine, and I aim to travel for at least 3 weeks each year. I also know that there will be times when I need to step away from my work due to illness or personal reasons.

Having money set aside allows me to pay myself back for time spent away from my desk — regardless of the reason.

Make a plan for PTO

You may want to consider taking a similar approach.

Here’s how to get started. Determine how much PTO you need. Perhaps setting aside two weeks’ worth of income is plenty. Do what works for your lifestyle.

Once you know how much money you need to save, start making regular contributions to your savings account.

(Quick side quest: I love Ally Bank. Their savings bucket feature makes it easy to organize multiple savings goals. One of my buckets is a PTO bucket.)

How often you set aside money is up to you. For some, it may be easier to set aside money every month. I like to set aside money on a bi-weekly basis.

I suggest setting up automatic bank withdrawals so you don’t have to transfer money from your checking account to your savings account manually.

This ensures you stay consistent. When it’s time to pay yourself back for time off, transfer a portion of your PTO savings back to your checking account.

Here I am in Peru, thinking about the breathtaking views —not client projects or money.

Remember: you’re the boss

Setting aside money for PTO can be a great money move for you and your business.

If you’re like me, one reason you chose to freelance was the flexibility it offers. But if you never take time off, are you really taking advantage of that?

Ready to shift how you approach and think about time away from work?

I dare you to try this strategy.

Take the sick day.

Take the vacation.

Plan now so you feel less stress later.

That’s all for today! I look forward to chatting more next week.

Do you plan for time away from work? How do you prepare financially? Let me know by replying to this email.

If you have a topic you’d like me to cover or feedback to share, I’d love to hear more.