A coffee mug, calculator, and financial documents sitting on a table

One of the best perks of freelancing is your freedom to choose. You choose the projects you work on. And you choose the people you work with. But what many freelancers may not realize is the level of your choices is often influenced by something called your backbone fund.

Unlike what the name may suggest, your backbone fund doesn’t help finance your business. Your backbone fund’s main purpose is to help you say “no.”

So what’s a backbone fund?

It’s what successful and notoriously rebellious copywriter John Carlton calls the money you set aside for living expenses. It’s there for those times when your business may hit a slow patch.

During these lulls, the fund lets you…

Succeed by saying “no”

When business slows, it’s tempting to let uncertainty influence your decisions. As the bills continue rolling in, our instinct to bring in income—any income—may cloud critical thinking around the projects we select.

In the beginning, most of us take on any project for experience and to build our portfolio. That’s understandable. But if you take on less than optimal projects just to stay in business, it could backfire on you. Because no matter what the situation, these projects often end up stressful, physically exhausting, and unfulfilling. What’s more, while your time is committed to those projects, you may have to pass up more fulfilling ones when they appear.

A backbone fund gives you options, so you can avoid these difficult situations. When you know your bills are covered, you can confidently say “no thanks” to the wrong projects. This enables you to remain focused on pulling in the right projects—ones that are gratifying and support your business growth.

How to get started now

If you haven’t gone out on your own yet, start building up your backbone fund now. If you’ve been freelancing for a while, it’s never too late to start. Begin with a month’s worth of your current living expenses: housing costs, average monthly food costs, average monthly utilities, an occasional movie out with friends…everything. Then build up to a year’s worth as projects continue rolling in.

Yes, a backbone fund sounds a lot like a savings account. Depending on your situation, it could be. But it’s more like a savings account or cushion for your business.

As in all of your other business transactions, you should keep business income and expenses separate from your personal account. Your backbone fund should reside in your business account to cover business expenses and your pay if things get slow.

The thing is, you may never need to dip into the fund. But you’ll always be grateful it’s there.

Be your own powerhouse

Building a business takes time and an ability to balance the stress of risk with the emotional and financial satisfaction of success. No matter if you’re just starting out or already well-established, it’s always comforting to know someone’s got your back. Thanks to your backbone fund, that someone is you.

For more freelancer tips like this, check out Upwork’s Hiring Headquarters. You’ll find practical advice on how to grow your business, save time with handy tools, and more.