First, readers of the blog have probably heard me say it before: I believe that people need to adopt entirely different money management strategies in order to be successful when they make the leap from full-time employee to self-employed.  (See related posts.) But to my knowledge, the Freelance Finance system explained in The Money Book is the first complete personal finance system for “people with not-so-regular jobs”. So I’m thrilled to have a one-stop-shop resource I can recommend to my self-employed clients.

I’m also pleased to have played a small part in the project coming to fruition, and to be quoted in the book (see page 196!) When Joe contacted me about a year ago during the research phase of the book, I was more than willing to share what I’d learned, both as a self-employed and a financial planner, if — I must confess — a tad mystified by the monkey metaphor. (Read the book! Or check out the March 2010 edition of The New Means News, coming soon.)

Finally, it’s especially gratifying to have been involved in a project that made Liz Pulliam Weston’s list of 5 Money Books That are Worth Every Penny in her recent MSN article. I’ve been following — and continually impressed by — Liz since she spoke on credit reporting at the NH Jump$tart MoneySmarts Teacher conference a few years back. Congratulations to Joseph D’Agnese and Denise Kiernan on having earned such high praise for their work shedding light on this topic, which grows increasingly important as the ranks of independent workers expand.

This is exactly the kind of financial planning I recommend prospective career changers do before making a transition. Doing an analysis like this is even more important if your transition is likely to result in a lower annual income for life, as for the woman profiled in the article and the client I discussed in this recent post (4th bullet).

That’s because:

1. it can determine the viability of the proposed change with much less risk than a “jump and grow wings on the way down” strategy;
2. it can pinpoint any gaps (e.g. here, the need to earn $12,000 a year and increase portfolio diversification) and opportunities (here, a Roth IRA conversion) ahead of time.

Having this information and acting on it — making the most of her money through this time of change — could well mean the difference between a career change that sticks and an unwelcome return to the salt mines.

In my article Survival Skills: Man vs. Wild Economy in last month’s NEW MEANS News, I discuss how cash is the water that enables an unwitting participant in a wild economy to survive.  For those in or perilously close to the land of the laid-off, the case for cash cannot be overstated.  Without reserved cash (water) to get you through a dry spell when access to a fresh supply is cut off, the system starts to break down, and things start to get ugly, in a hurry.

So if you do one and only one thing to thing to survive the wild economy, my recommendation would be this: calculate how much money you’d need to cover living expenses through a period of unemployment, and pull out all the stops to fill up your Emergency Fund with that amount. 

• How to calculate?  Use the New Means Cash Flow Questionnaire, mint.com, Quicken, MS Money, or pad/pencil to figure out what you need to pay the bills each month.  (Don’t forget those paid annually or semi-annually like real estate tax.)
• How long?  Research how long it’s been taking others in similar situations to find new work.  Check both online and locally, perhaps via job search networking groups such as Network for Work.
• How to save?  Read the Survival Skills article for ideas on how to scrape together cash, even if you think you’ve exhausted all the possibilities. 
• How to invest it?  Put this money in the safest, most stable vehicle you can find: a savings or money market account, maybe a portion in a CD, preferably all FDIC-insured.  Yes, it will earn a paltry return, but making a killing is not its job.  Being around if and when you need it is.

Then, once back in a safer, more predictable environment, you can put this precious ingredient (cash/water) to more interesting use – as a key component of Pink Slip Lemonade. 

• Net Worth Statement (PDF or Excel)
• Cash Flow Statement (PDF or Excel)

Enjoy!