Becoming a freelancer is an excellent option for those who seek independence and flexibility in their careers. If you have the base network, you can choose the clients you want to work with and the projects you have the bandwidth for. Plus, you get to make your own schedule. Who wouldn’t love that?
Whether you’re a consultant, designer, artist, writer, or engineer – freelancing gives you full control of your career. Not to mention it’s becoming more popular – the freelance workforce contributes to $1 trillion of the economy and Gen Z’ers are freelancing more than any other generation of workers.
With freelancing, there can be a lot of unknowns. As a self-employed individual, you’ll be responsible for managing your own benefits and business growth. And you may have some challenges with cash flow and taxes. Overall, there’s less security than if you were to be a salaried employee. But don’t let that crush your dreams of being a self-sufficient freelancer – there are many ways to successfully be self-employed and financially savvy.
Determine a reasonable rate
Before anything, you’ll have to set a rate that will dictate your income based on the expected demand. There are many factors to consider when determining a reasonable rate. Some people might decide to bill by the hour, while others like project-based rates. A good step is to calculate your expenses as an independent professional. Some items may include:
- Your office space
- A computer and other electronics
- Your internet and phone bills
- Office materials
- Programs like cloud storage tools, bookkeeping platforms, design software, and more
- And of course, your typical living expenses (your other utility bills such as electric and heat, rent/mortgage, food, etc.)
From there, you should have an idea of what you will need to make to afford a living and cover your expenses without going into debt. On top of that, it’s best to do some industry research to see what others with your experience are charging their clients.
Get prepared for tax season
It can be challenging to correctly calculate how much in taxes you may owe as a self-employed person. Tax experts say the best way to avoid tax issues is to plan ahead and find a record-keeping system. There are some platforms out there that can help with this as you get more established in your freelancing journey, but you can always start small. For example, start a filing system that keeps all your business receipts, invoices, mileage records, and more in one place. As a freelancer, it will be crucial to track your income through an accurate invoicing system that is easy for you to find later.
Outsourcing your taxes to a CPA or other platform still may be your best bet. At First Financial, we offer savings on tax services like TurboTax and H&R Block every tax season to our members through the Love My Credit Union Rewards program.
Build a strong savings account
Building good savings is a must for freelancers (and everyone!). There are many unknowns and things you’ll need to plan for when you’re self-employed, so a savings account can help get you prepared for whatever life throws your way. Here’s what savings to consider.
- An emergency fund: It’s possible your workload will ebb and flow, which can make your income unpredictable. A savings account can add some extra financial security.
- Retirement savings: As a freelancer, you’re not eligible for a company 401(k). This means you’ll need to open an individual retirement account (IRA) as either a traditional or Roth IRA. If you have a 401(k) from a previous employer, you can roll that over into your current plan as well. You can get started with a 401(k) rollover through the Investment & Retirement Center located at First Financial, if you live, work, worship, volunteer, or attend school in Monmouth or Ocean Counties in NJ.**
Don’t forget about health insurance
Obtaining health insurance is a big concern for many self-employed individuals. Luckily, there are options for those who aren’t able to get insurance through their employer. One option is to buy health insurance through the Affordable Care Act Marketplace. You can also see if there’s a suitable plan available through the Freelancers Union or if you’d qualify for Medicaid.
No matter where your freelancing career takes you, First Financial will be with you along the way. We’re here to help you plan for self-employment and financial success. To discuss your options, call us at 732.312.1500, email firstname.lastname@example.org or stop by any of our local branches.
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*A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Click here to view full Rewards First program details. Some restrictions apply, contact the Credit Union for more information.
**Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and The Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using The Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or The Investment & Retirement Center. Securities and insurance offered through LPL or its affiliates are: Not Insured by NCUA or Any Other Government Agency, Not Credit Union Guaranteed, Not Credit Union Deposits or Obligations, May Lose Value.