Don’t Get Caught Swimming Naked: Five Finance Lessons From Warren Buffett

As I’m sure you’ve guessed, I’m not talking about bare butt cheeks bobbing just above the waves. You can do whatever you want in your free time – I’m not here to judge.

No, I’m talking about how to manage your finances, and more specifically how to manage debt.

Warren Buffett, arguably the most talented businessman of our era, has a wonderful quote about debt.

“It’s only when the tide goes out, do you see who’s been swimming naked.”

What Mr. Buffet means, is that when things get f-bombed, only then do you see who’s in deep financial trouble.

The inflow and outflow of money is the most important metric to monitor in your business. Money is a business’s lifeblood, it’s what allows you to keep the lights on, pay your bills, build your lifestyle and survive the vicissitudes of the Freelance Economy.

Using lessons from the greatest businessman of our time, Warren Buffett.
 Let’s explore 5 secrets to financial success and tips you can use to plan for your freelance business’s financial future.

“It’s only when the tide goes out, do you see who’s been swimming naked.”

I wanted to return to this quote, because I believe it’s one of the most powerful things anyone has said about the perils of debt.

Taking on debt to grow your freelance business can be a risky move to make. In some forms, debt can act as an accelerator – giving your business the boost it needs to get off the ground. In other cases, debt can cause friction that prevents a freelance business from finding financial success. And more importantly, it can put your personal finances in serious risk.

There are two forms of debt. The good kind, which I discussed above. And, the bad kind.

I’m talking about high-interest credit card debt, payday loans, and the like. These high interest loans seem like a simple solution for providing the interim cash needed until your business takes off.


Debt of this form can create a vicious cycle of over-spending. And overspend is a precursor to more debt, financial difficulty and a business’s failure.

“Do not save what is left after spending, spend what is left after saving.”

As human peoples, we have a tendency to spend at the limit of our earnings. If we earn $60,000 per year (or $5,000 per month) we’ll typically spend the entire $5,000 per month. Minus a piddly sum most people put in savings – usually less than 10%.

The same is true for a person earning $120,000 (or $10,000 per month). Typically, the person will spend toward the upper end of their earnings, putting less than 10% in savings per year.

This is why so many people are “caught swimming naked” because they spend to their limit, and do not prepare for the “tide to go out”.

What happens when things go wrong?

  • Maybe you get sick and can’t work for a month.
  • You lose your top paying client.
  • Your equipment is damaged or stolen.

What happens when you no longer can pay your bills?

Like real world skinny dipping – it’s no fun getting caught swimming naked.

My recommendation is to become a saving (not a spending) machine. Save at least 3 months worth of expenses to cover you through the launch of your business, and the turbulent times that may be forming off in the distance future.

“If you buy things you do not need, soon you’ll have to sell things you need.”

Again, debt is a bad thing – and overspending, especially during the launch of your freelance business, can lead to a precarious financial situation.

My recommendation…

Cut your expenses down to the bare minimum.

Do you really need that new pair of jeans? Do you need 200+ channels you never watch? Is eating out four times a week really a wise use of your funds?

When starting out you need to be RUTHLESS in minimizing your expenses, and lowering the liabilities you have on your personal balance sheet.

“Investing in yourself is the best thing you can do. Anything that improves your own talents; nobody can take that away from you.”

Assuming you start to run a successful business (thanks in small part to an amazing freelance website!), how should you invest the funds?

Well, Mr. Buffett believes in investing in yourself. And, I couldn’t agree more.

When things are good, we have a tendency to get a little bit lazy. And, we wrongfully believe we can continue to grow our business by making investments in our sales and marketing alone.

Although sales and marketing are obviously important, investing to continue to educate yourself, improve your craft, and learn new skills is equally as important.

This isn’t restricted to increasing the skills of your trade alone. In fact, I would argue increasing your entrepreneurial skills is a better use of your time.

Learning about accounting, finance, business management, project management and human resources will position you to one day expand your freelance business into a full-fledged agency (if that’s what you’d ultimately like to do, of course).

“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

As with anything in life, things just take time.

Saving money is hard. Growing a business is hard. Building your reputation as an expert is hard. Everything that is worth doing is, well… hard.

But, given enough time things have a tendency to work out.

Over time, a small number of clients turn into a big number. A few dollars of savings multiplies into a few thousand. And, a humble reputation can blossom into a flourishing one.

Your efforts, like dollars sitting in a bank account, compound over time when they have the opportunity to do so.

One of the great unsung qualities of a successful freelance business is simply having the stick-to-it-ness, and perseverance needed to wake up every day, sit down at your computer, and do the work.

We’ve reached the end.

Now that you’ve learned from the oracle of Omaha himself it’s your turn. What are your favorite tips for managing your finances as a freelancer? Did I miss any?

Written by: Calin Yablonski
Calin is a freelancer, local search marketer and founder
of the Freelance Business Guide.