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Call it a ‘rainy day fund’ or a ‘war chest’, it is a vital tool for the survival of a contractor as it plays as a safety cushion, especially during times of economic uncertainty, or if you’re desperately stuck between contracts. A war chest is a large sum of money, almost like a bailout pot for your business and personal life (to an extent) if funds are desperately low.

The war chest functions as a ‘reserve’ fund for difficult times. It will essentially function as a final resort for emergency situations, rather than a pot of money that ties up loose ends at the end of every month. War chests can also be used to further your own career development or for investments to create more wealth.

If you’re thinking of taking the leap into contracting, it may be worth putting the idea of building a war chest into immediate effect. As a first-time contractor, you’ll still be testing the waters which means that your working status could be unpredictable.

If you’re an experienced contractor, it’s just as important to create an extra level of financial security for yourself and your limited company. If you fall into a pitfall of financial difficulty, this shouldn’t affect your standards of living as your war chest can help support your business by keeping it ticking, and provide a roof over your head.

Building a war chest is a form of future proofing and it should ideally be expanding as you earn. As a contractor, uncertainty is at the core of your working life, by keeping a healthy pot of money aside, if you were to experience financial difficulty, your war chest should have you covered.

How much should I put aside?

This depends on individual circumstance, so we’ve rounded up the key points that you should consider:

  • Assess your working life and private life. You need to be able to run your business, and fulfil the essential needs of living.
  • Are you expecting additional income? Running your household may be covered by a partner, so this could influence the size of your rainy-day fund.
  • Demand for your service (or lack of). If you’re a project manager running a Summer campaign, you may specialise in gearing your work towards the seasons. This may mean that your services could be high in demand during the Summer time. If your services lack demand during the alternate seasons, your war chest may be in need during this period, just to patch you over.

It may be worth forecasting how your skill set as a contractor may require development in the coming years in order to adapt to technology and to beat competitors. E-learning and online tutorials are a productive and cost effective way to build on your knowledge base, keeping your skill set sharp.

If you’re an IT contractor, it’s obvious that as technology elevates, so should your skill set in order to respond to the demands of the market. It may be researching into how to market yourself as a ‘modern’ contractor.

  • Shifts in economic climate.Theresa May has called for a snap election on June 8, 2017, which will affect the economic state of Britain. Since Brexit, the economic climate has been rapidly shifting, affecting the value of the British pound. The Spring Budget 2017 was also geared towards changes for the self-employed, including the IR35 reform 2017.

The common answer is to build a war chest that will have you covered for between 6-12 months, this should fulfil the overall operational management of your limited company. You should foresee what bills are on the horizon, and prepare accordingly.

At Gorilla Accounting, as part of our all-inclusive accountancy package, you will receive unlimited support from a dedicated accountant for just £85 plus VAT per month.

If you have any questions about our service, get in touch with a member of our New Business Team on 0330 024 0406 or email