Want to go Freelance? Here’s What You Should Know First.
According to Forbes, the majority of workers in the U.S. will be freelancing by 2027. Want to take your shot at freelance life? Here are some important things to consider before you make the leap.
Figuring out freelance taxes
One problem new freelancers face is not putting away enough money to pay taxes at the end of the year. If you’re a first time freelancer, try to set aside 20-30% of your income for taxes. It's also important to pay estimated taxes throughout the year, or you’ll be penalized come tax time.
The good news about the freelance tax situation? You can write off all business expenses—so start saving receipts for anything you use for your business. Supplies like laptops, software subscriptions, internet and phone bills, or even a percentage of your rent if you work out of a home office can all be used as freelance tax write-offs.
Finding health insurance
Health insurance is another important consideration for freelancers. Unless your spouse or partner has a plan they can add you to, you’ll have to find your own health insurance. Luckily, there’s several options, including COBRA plans, high-deductible private insurance plans, or signing up for a plan through the Affordable Care Act. Find your states’s marketplace online at Healthcare.gov. But don’t wait too long to explore your options - you generally only qualify for a special enrollment period for 60 days after losing coverage.
Working from home
Working from home sounds great in theory, but it can be hard to stay motivated when you’re sitting just a few feet from your couch. Try to create a space in your home that you only use for work, and establish a routine to keep yourself on schedule. Some people even like to dress up like they’re going to the office to help put them in the right mindset.
If you’re someone who likes being around other people when you work, the freelance lifestyle might get lonely - so consider looking into co-working spaces where you’ll get the human contact you crave. Or invite other freelancers to meet up at a coffee shop to work side by side.
Advocating for yourself
If you work for a large company, there’s a whole team of lawyers available for legal advice. When you freelance, it’s just you. So make sure you have contracts or written agreements for every job before you begin work. You may even consider setting up an LLC for your business to protect yourself from liability.
Take extra care to price your services at a level you are comfortable with, and be very clear in your contract or agreement exactly what you’ll be delivering for the price. And once your invoices go out, it’s up to you to follow up until it’s paid.
Adjusting to a new income
As a freelancer, your workload will ebb and flow, so don’t get nervous if you have less gigs than you expected. Just keep working hard and networking harder. Try to budget during booms so you can cover your expenses during lower income months.
Don’t be surprised if it takes a while to get paid after a job is complete. Many large companies require 60-90 days to pay invoices.
Save up some money before you take the leap to freelance. Putting away a couple month’s worth of expenses (at least!) should give you a solid financial cushion. Trust us, it will ease your transition and your nerves!
Set yourself up for success
Freelancing can be very rewarding, but you have a better chance to succeed if you’re prepared. Take the time to get everything in order, and you’ll be sure to make a splash on the freelance scene.