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"Pending Clearance...." - You Need a Financial Buffer!


smashradio
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Whenever I see sellers complain about the 14 day clearance period for revenue on Fiverr, I wonder why they haven't made themselves a buffer. 

As a freelancer, making sure you have a buffer is crucial. if you think the 14 day wait is "too long", you're doing something wrong. 

In most business transactions, a net 15, 30 or even 90 (!) is normal. In other words, if I do a job today, I might not get paid for 30 days. I don't accept net 90 clients, since I find that to be disrespectful, but net 15 or 30? Sure. That's the norm. 

You do the work now, the client pays you in a few weeks. Businesses operate, in large part, on credit. It's just how the system works. 

Knowing that, you have to plan for it. Ideally, you should have enough money in your account to keep yourself afloat for six months or more. 

I realize this isn't realistic for most freelancers on Fiverr. But two weeks? If you can't manage that, you need to spend some of that revenue on a self-help book about personal finances. 

The revenue "pending clearance" right now, should be the money you're planning on spending two weeks from now. Or longer, if you can. If you need the money now, that's because you didn't plan well. 

That means you gotta save. For the first couple of months as a freelancer, I tried setting aside as much as possible. I still do. 

So should you. Take back control by planning ahead. 

Edited by smashradio
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That's a challenge in the beginning. The first step in any freelance career should be to establish an emergency fund that covers expenses for at least 6 months. If you're able to do that, you'll be much less stressed by dry periods and will be able to wait for the clearance times easily. Once you have that money set aside it's easy, but it can be hard to get to that point if you're merely scrapping by. There are millions of people with "normal" jobs that are living pay check to pay check, and still are not able to make ends meet, and freelancing is no different. It can be hard to get to that point where you can wait.

Fiverr is taking advantage of that with the cash advance systems, a lot of people taking them to get some cashflow immediately, but that just makes it harder to get to that point where you have enough capital set aside to be able to wait for payments. It's the poor tax at work, the less money you have the more fees and interest you'll be willing to pay to get some cash quickly, perpetuating the cycle.

Edited by visualstudios
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14 minutes ago, visualstudios said:

Fiverr is taking advantage of that with the cash advance systems

Indeed. I think a cash advance could be a good thing. Credit isn't always bad. What I find strange is that the people who've got it seems to be sellers who aren't performing very well. I perform fairly well on Fiverr. I don't have that option. People who are earning way less than me per month, on the other hand - they've got it. That tells me it's set up to become the bad circle you describe. 

I remember when I was younger. I started taking up microloans at a very high interest, that had to be paid back in 30 days. Every single month, I had to take up a new microloan to pay for the previous one. I'm sure the bank laughed all the way to the vault. I, on the other hand, did not. It took moving to a low cost country and working ungodly hours as a freelancer, to get myself back up again. 

Now I have a six month backup for living expenses, plus a one year backup for SHTF situations. 

I know how hard it can be to build that kind of buffer. But if you start with just two weeks, you'd be less stressed. You can keep on building it from there, little by little. But you gotta start somewhere. 

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Yeah, I also have over a year of expenses set aside in cash, not to count all the investments that are pretty liquid as well if really needed. If I had a fixed salary job I would have way less set aside, and invest more of it. But as a freelancer, I find it useful to have a really big buffer, as that allows me to be more discriminating and turn down more leads that give me any red flags. If I really needed the money, it would put me in a worse position to negotiate, and would force me to take bad deals since I wouldn't be able to wait for the good ones.

But it takes time to get there. In the beginning I took everything that I could.

And I also don't have the option for cash advance, but then again I would never take it (unless the value was something unreal and the interest rate was such that I could put that money to work for me with higher returns). I've never taken a credit in my life for this precise reason, never seen one that paid me to take it lol

Edited by visualstudios
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10 minutes ago, visualstudios said:

Yeah, I also have over a year of expenses set aside in cash, not to count all the investments that are pretty liquid as well if really needed. If I had a fixed salary job I would have way less set aside, and invest more of it. But as a freelancer, I find it useful to have a really big buffer, as that allows me to be more discriminating and turn down more leads that give me any red flags. If I really needed the money, it would put me in a worse position to negotiate, and would force me to take bad deals since I wouldn't be able to wait for the good ones.

But it takes time to get there. In the beginning I took everything that I could.

And I also don't have the option for cash advance, but then again I would never take it (unless the value was something unreal and the interest rate was such that I could put that money to work for me with higher returns). I've never taken a credit in my life for this precise reason, never seen one that paid me to take it lol

I use my credit card for shopping because I get points with airlines, upgrades, free lounges and discounts. But I always pay everything at the end of the month.

I have a few years worth of expenses invested, but I don't count on those investments, as they are meant for the day I no longer wanna work. 

I agree 100% about being a better negotiator if you can say no. It truly makes a huge difference.

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4 hours ago, smashradio said:

Indeed. I think a cash advance could be a good thing. Credit isn't always bad. What I find strange is that the people who've got it seems to be sellers who aren't performing very well.

Have you considered that the cash advances are only available in geographic locations where that kind of [predatory] lending is legal? They sound a lot like payday loans, which are legal in some of the United States, but not others. It's about half and half here. I'm not sure which other countries have rules about things like that. When I saw it wasn't available to me, I assumed that was why.

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8 hours ago, rachelbostwick said:

Have you considered that the cash advances are only available in geographic locations where that kind of [predatory] lending is legal?

Interesting, but I doubt it. It's all based on the seller, not the location. I don't have it, and in my country you can easily find personal credits at higher rates.

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On 9/21/2021 at 5:24 AM, rachelbostwick said:

Have you considered that the cash advances are only available in geographic locations where that kind of [predatory] lending is legal? They sound a lot like payday loans, which are legal in some of the United States, but not others. It's about half and half here. I'm not sure which other countries have rules about things like that. When I saw it wasn't available to me, I assumed that was why.

Most countries allow banks to set their own interest rates. You can get short-term loans with insane interest because the interest is based on the fact that you should pay it back in a short while. 

But some countries might have laws against that sort of thing. Still, I believe it's more about the seller than the country, but it's curious that most sellers who have it seem to come from low-income countries. 

When I spoke to Fiverr staff about it, they couldn't say what the criteria was, so I assume it's not something they want to go public. 

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