Still have a day job? Don’t quit it just yet
Becoming a freelancer can be one of the most liberating career changes anyone can make, and with close to a third of the global workforce going for it, it is a trend that is certainly catching on. A freelancer decides which clients to take and what hours to work. The freelancer says how much a project should cost and can veto bad ideas or undesirable assignments. Basically, freelancers get to call all the shots of who, what, where, when, and why.
That utopia doesn’t happen overnight though, and many freelancers make the mistake of quitting their day jobs before they’ve gotten a solid footing in the freelance world. While freelancing can be rewarding, it has to be done in a financially viable way.
Some say freelancing has more job security than a regular 9-5. The key to this success is planning. Before you ditch your day job, make sure you have yourself covered practically and financially.
Here are a few important steps to creating the financial freedom and working model you’ve always dreamed of.
Step #1: Have a plan
As with any career move, creating a plan is critical. When switching from standard to self employment, freelancers need to have a solid business plan, including:
- A plan for how you will market yourself
- An understanding of the assets you possess
- A monthly budget (use last year’s bank statements to show you how much you realistically need to live off of each month)
- A step by step guide on how to achieve your goals
Having a professional on your side for this stage of the process can change everything for a new or would-be freelancer. There are organizations out there offering free assistance to help advise freelancers and arm them with the right tools to be successful. The Freelancers Union is an American organization that delivers free guidance and tools to independent contractors all over the world. There are also tools like Bonsai and Shake that give legal document assistance. Let the professionals guide you, and your road to employment independence will be a much smoother one.
Step #2: Learn how to sell yourself
If you are just starting out in the field, you’re probably relatively unknown. Before leaving your current job, create a profile so people can easily get to know you, recognize you, and find you when it’s time. A few pointers:
- Make connections: Go through all your contacts, get in touch, and make more connections via friends and acquaintances on sites like LinkedIn. The more people that know about you, the more potential clients you have. A survey conducted by Payoneer found that over 43% of freelancers find work through networking, both in person and online.
- Create a brand: Selling yourself can be difficult, but it’s the only way to make it on your own. You need to be out there, prominently displayed so clients can see and find you with ease. Have a Facebook business page, Google Business listing, professional website, LinkedIn profile, and any other niche listings for your skill.
Step #3: Have backup savings
Making sure that you have a safety net in the form of savings is a crucial step towards the financial stability you need to become a successful independent contractor. Dry spells are inevitable, especially at the beginning of a new freelancing career. With a well-supplied savings account, though, you can weather these down times, and cover yourself until the wellspring turns back on.
Once you have a monthly budget, experts recommend saving at least six months’ salary as a cushion for dry work spells. If you haven’t quit your day job yet, this is the time to put as much away as you can. Even if you are working solo already, it’s important to take a reasonable amount from your monthly salary to put away as savings. This may be more difficult at the beginning of your freelancing career, but as your client base and brand grow, it will get easier.
Step #4: Be smart about finances
While you still have a job (but even more so if you don’t), make sure you are managing your finances properly. Having a savings account is just the first step. Here are a few more:
- Open a separate business account where all business credits and expenses are handled. This will include business-related expenses, your salary, taxes, and a retirement fund. This business account should be separate from your savings account.
- Some freelancers have another account just for taxes. Now that you are the boss, you will have to take taxes out of your monthly paycheck and set it aside for the end of the year’s (or quarter’s) tax collection. Not doing so can land you in hot water when a massive tax bill comes and you don’t have the funds to pay it.
- Know about freelancer tax deductions, and take advantage of them.
- Keeping finances straight can be a trapeze act many can’t hack. Mint is an amazing free tool that will help keep your finances in order. FreshBooks also offers good finance management for a small monthly fee.
- Finally, don’t forget to pay yourself first. This may seem obvious, but many freelancers who aren’t staying on top of their finances will likely pour all their income back into the company, forgetting to leave a slice of the pie for the one doing all the work!
Step #5: Know what to charge
Knowing what to charge is possibly the knottiest concern of potential freelancers. Charge too much, and competition will undersell you. Charge too little, and you become the starving independent contractor stereotype everyone warned you about. Finding that middle ground is imperative to your survival as a freelancer.
Consider the costs that you now need to cover when setting a price for an assignment. This includes any business expenses (office space, printer paper, travel expenses, equipment, supplies), insurance, retirement funds, taxes, any other salaries you have to pay such as an accountant, secretary, social media organizer, and anything else that goes into your work.
Step #6: Bill frequently
Knowing how and when to bill can get sticky for a freelancer. An expert tip is to bill frequently and use clear, uncomplicated terms and contracts for even the smallest jobs. This way, you are more likely to get paid on time and to avoid unfortunate miscommunications or misunderstandings that will prevent payments from coming.
There are several online tools to help you keep your invoices in order. Take advantage of these useful tools for easier billing:
- This free tool is a real breakthrough for the freelance community. It offers a standard freelance contract that anyone can use for any client.
- Wave is a more comprehensive billing app that also lets you keep track of receipts and manage deductibles.
- Billing more frequently will ensure that you get paid in a timely fashion. For example, it’s not uncommon for a freelance contract to include a payment schedule of 50% upfront, 25% when half the work is delivered, and the final 25% upon assignment completion.
- Payoneer’s Billing Service enables you to bill clients directly and provides them with several ways to pay you (credit card, bank transfer or eCheck). This is a simple solution for both you and your client.
Step #7: Use technology to get more clients
When you feel like you are ready to take on more work, slowly increase the amount of clients/projects you take on.
- BidSketch lets you send out professional bids with ease.
- ProBlogger, PeoplePerHour, Fiverr, and Upwork are all great tools for helping independent contractors land jobs.
Handled properly, freelancing can open new doors and opportunities you never thought possible. Discover a whole new way of earning money, and love every minute of it…when you’re ready.