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8 Financial Steps to Take Before Going Freelance

Posted by Sandra Quadros Bowles on Aug 16, 2019 8:23:21 AM

woman-working-freelance-at-computer-weboptImagine having a job where you can work in your pajamas and the longest commute you will make all day is from your home office (it’s OK if that’s the couch) to the coffeemaker. More and more Americans are trading in the nine-to-five grind to be their own bosses. Fifty-six million Americans freelance, which is an increase of 3.7 million in the past five years, according to a study released October 2018 by Upwork and Freelancers Union. But is it for you, and more importantly, do you have the wherewithal to make a go at it?

If full-time freelancing sounds appealing, it’s because it is. You can set your own hours. You don’t have to maneuver draining and often defeating office politics. You can work whatever hours you choose to get the job done. And sometimes you can avoid what can be the greatest obstacle to completing tasks in a traditional work setting: Meetings.

But there are drawbacks as well. Freelancing requires discipline, because so many distractions compete for our time at home...from the big-screen TV luring us to Netflix, to the kids who see a parent at home and, perhaps understandably at first, think they are free to give them attention.

Having no boss might seem like a dream but remember: You are now your own boss, responsible for motivating yourself and making sure quality work is done on deadline.

Yet the biggest challenge for most is financial. One major perk of a traditional job is a steady paycheck, whether the workload has been slamming or slow. When you freelance if you don’t work, you don’t get paid.

Before you turn in that your ID badge and bolt from corporate America, here are some steps to take and financial realities you should try to understand.

  1. Don’t quit your day job too soon. You will have better success if you start freelancing while still having the financial cushion of a full-time job with benefits. This will give you the time to set up the nuts and bolts of your business. Assuming you already know what type of services you plan to offer, start working on the next steps. Build a web site. Find clients now, so you will have a base to work with. Do at least a few projects so you can gain a realistic sense of how much you will make, and how much time it will take to earn that money. Get references to promote on your web site. You might even consider doing some pro bono work, particularly for a non-profit you support, to gain experience and have work to show. Every situation differs, of course, but six months is a good goal to set between starting your freelance work as a “side hustle’’ and becoming a full-time freelancer.
  2. Secure the supplies you will need now. After a month of running to the library or office supply store, you will no doubt see that having your own printer will save time and headaches. Although there are tons of online resources to keep you organized, you might find a good, old-fashioned whiteboard to be a huge help for writing to-do lists, erasing tasks when they are done, and keeping projects on track. 
  3. Use the money you earn while still working as a financial cushion to bolster your full-time freelancing. Keep budgeting as though you have no extra income and tuck away the earnings. No matter how talented you are, building a freelance business takes time and having some finances established will lower your stress level.
  4. Figure out how to compensate for the benefits you will lose from a paycheck. Health insurance, of course, is generally the major expense. Your employer is required to continue your coverage for at least 18 months through the government-mandated Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA. This mandates you will receive the same coverage as when you were working, but without the financial contributions of the company. While continuing coverage is reassuring, it isn’t cheap. The cost could be equal to your mortgage. Consider whether you could be added to a spouse’s coverage or whether group plans might save you money.
  5. Ask about taking your work with you. Can you use the the articles you have written as samples, show code you've written to a new client,  or put the designs you have created for your company on your freelance Web site? Check with your company’s human resources or legal affairs departments. You may be prohibited from doing so if you've signed an non-disclosure agreement. Best to find this out before you leave your job.
  6. Get tax savvy. Tax accounting will now be your job as a freelancer. Check in with your accountant for advice on what to do in your specific situation. Save receipts of purchases such as that aforementioned white board or comfy office chair.
  7. Start marketing your business. You're not only responsible for accounting, you wear the marketing hat for your business, too. The more people know about you and what you do, the better the chances that you will land clients. Post on all social media forums, and don’t hesitate to ask for feedback. Similarly, spend some of your time on social media forums, such as LinkedIn, and share information that inspires you. You want people to recognize your name and associate it with thoughtful, professional work.
  8. Prepare for success, but brace yourself for rejection. You won’t land every contract, and every idea you pitch won’t be accepted. Don’t over-analyze why and never take it personally. The company’s budget might be tight, they may have similar services provided by another business, or it just might be the wrong fit. Accept any constructive criticism and move on to the assignments that will make your freelancing business the success you deserve!

Not quite ready to go solo? Hanscom FCU offers a comprehensive benefits package, friendly and supportive work environment, competitive salaries, and an opportunity to receive training in a stable, progressive, and challenging industry. Learn more here.

Hanscom FCU is Hiring Apply Today!

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