Why entrepreneurs need a buffer more
Employees get a steady monthly salary. An entrepreneur's income is irregular. After a slow month or a late payment, you can quickly be short of money. With a buffer, you can pay your costs in that period and avoid a crisis.
How much should you save?
A common target is enough money to cover three to six months of your business and personal fixed costs. If your income is very irregular, aim for the higher end.
Keep it separate
Keep your buffer in a separate savings account, away from your day-to-day money. Money in your main account tends to get spent. In a separate account it remains available for when you need it.
Build it up step by step
Build it up step by step, a little at a time. Set aside a fixed percentage of every payment you receive, even a small one, and let it grow.
Keep it separate from your tax money
Your buffer and your tax reserve are two different pots. The tax money belongs to the Tax Authority. The buffer is your own, for emergencies and opportunities. Keep the two in separate accounts so you avoid spending one on the other by accident.
When to use it, and refill it
Use the buffer only for real gaps and emergencies, and keep it away from impulse spending. If you take money out, top it up as soon as you can, so the money is there at the next setback.
Related articles
See also Managing Your Cashflow in the First Year as a Dutch Entrepreneur and Making a Budget for Your Business. You can also read Your First 30 Days as an Entrepreneur.