So, you’ve decided to officially work from home. After all, there are numerous high-paying work-from-home jobs that lend themselves perfectly to the remote work world. In fact, it doesn’t matter if you want to shift into full-time freelance work or you’re simply looking for some extra cash while you twiddle your thumbs during the coronavirus shut down, freelance work is a practicable, well-tested solution.
However, just because contract work comes with a slew of different benefits — like flexible work hours, investing in your passions, controlling your schedule, operating from home, and so on — doesn’t mean it’s a cakewalk. Here are a few of the most important considerations that any self-employed freelancer should keep in mind as they launch out on their own.
Establish a Solid, Budgeted Business Plan
Experienced entrepreneurs always talk about “business plans” and with good reason, too. Establishing a good business plan is ground zero for a successful startup — even if you’re a one-man operation. While things like product creation, supply chain management, and marketing are all critical factors of a good business plan, though, the financial end of things is arguably the most important of all.
If you want to protect your self-employed gig from the get-go, make sure to create a soundly budgeted business plan that takes into consideration things like:
- Any and all predictable expenses.
- How much income you’ll need to operate your company.
- How much income you’ll need to maintain the quality of life you want.
This plan doesn’t have to be set in stone, but it should be thoughtfully created and fleshed out enough to provide clear guidelines for what you’re trying to accomplish.
Track Your Income and Expenses
Once you have your business plan in hand, it’s time to launch your company. As you do so, it’s important to track everything properly. Keep tabs on your cash flow and bank balances. Create invoicing templates and maintain spreadsheets to track what you’re owed and what you’ve been paid. Basically, make sure that you’re at least generally aware of the financial end of your business at all times.
Make a Tax Plan
You saw this one coming, right? All freelancers are technically self-employed, and as such, the task of paying your taxes falls to you and you alone. While this can sound daunting, though, it really boils down to a series of mundane — though essential — activities.
For instance, start by estimating roughly what percentage of your income you’ll need to pay in taxes for the upcoming year. Remember, this is a rough estimate. There are plenty of resources out there that can help you find an approximate number. Once you have that number, set aside the correct amount out of your income.
Then, when each tax quarter rolls around, go online and set up an account in order to pay your federal and state taxes. This process can vary depending on your situation, but it should be fairly straight forward. Make sure to take notes as you go so that you remember how to do it again three months later.
The question of incorporating your freelance business is always important. Financially the costs of incorporating your business often offset any tax savings unless you’re making a significant amount of money — often around $30,000 or more.
However, even if you don’t save money through this process, often incorporating your company can be a good idea legally speaking, as it provides an additional legal safety blanket over your freelancing efforts.
Remember the Lack of Benefits
It’s critical for a freelancer to remember that they won’t have the same benefits that a traditional worker can often count on. For instance, worker’s comp and unemployment often won’t be an option, 401(K) matching and health care won’t be available, and even perks like a company phone will be eliminated.
Make sure to consider these extra costs as you budget how much income you’ll need to maintain your quality of life.
Don’t Be Exploited
Another area where freelancers are often given the short end of the financial stick is through exploitation. Often clients will request extra unpaid work. While this can happen occasionally, if it becomes a habit, it can cost you thousands of dollars per year.
In addition, make sure to protect your personal privacy when applying places. The sheer quantity of applications that many freelancers have to submit can increase the danger of their information becoming compromised. Always consider doing a little extra research to ensure that a job application is legitimate.
The World is Your Oyster
Whether you’re looking for a lucrative second job or you’re considering shifting your career into a self-employed direction, freelancing is a tremendous option that provides many clear benefits.
As long as you take the time to consider important things like taxes, the lack of benefits, and the question of incorporation, you’ll be able to meet the challenges of the freelance world head-on. In fact, if you can go into your contracting activities with all of the above considerations addressed, you’ll likely have a distinct advantage over the competition — which is a great way to boost your efforts and ensure your eventual success.