Tuesday, July 5th, 2022

10 Keys to a Successful Freelance Career

10 Keys to a Successful Freelance Career

Information about 10 Keys to a Successful Freelance Career

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Many a freelancer has plunged right into business without much preparation. Some swim, others sink.

A blind plunge might work, but it’s chancy. Nailing down the following things before making the leap will help you stay afloat in your new venture.

1. A fat emergency fund

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Self-employed folks and freelancers are some of the happiest workers in America. Key to enjoying that freedom is a solid emergency fund. Without money to tide you over when work is thin — as it will be now and then — you can forget your freelance dreams.

Some financial advisers suggest your emergency fund should cover you for six months. Consider more, though. It can take 60 to 90 days or more to complete some jobs, land new clients or get some clients to pay you.

Tip: Dreaming of becoming a freelancer and wondering how to get started? Read “21 Hobbies You Can Turn Into a Business” for ideas.

2. An IRA or Solo 401(k)

individual retirement account
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When you leave the world of automated 401(k) contributions and employer matches behind, there is a temptation to stop saving for retirement “just for a while.” Don’t go there. Keep saving by funding an individual retirement account (IRA) or a Solo 401(k) plan.

Tip: The Only Retirement Guide You’ll Ever Need explains how to start or update your retirement planning.

3. A budget

Budgeting
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Dealing with a variable income is one of the biggest challenges of freelancing. Your payments might arrive intermittently with long droughts between. So, you’ll need a budget structure that helps you plan confidently. Some of us at Money Talks News use and recommend YNAB (You Need A Budget) for planning and spending.

Tips:

  • Calculate the minimum monthly income you can expect, and base your budget on it.
  • Identify all expenses and keep them as predictable as possible.
  • Refrain from spending any excess income. Instead, keep it as a buffer against lean times and surprises.
  • Adjust your budget’s monthly income as earnings grow.

4. Steady nerves

Woman meditating outdoors by the ocean
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Freelancing is great for all the reasons you’d suspect: flexibility, freedom from office politics, less commuting and more job satisfaction are a few. But the insecurity never stops.

Do a gut check to be sure you can embrace the uncertainty before leaving a good day job.

5. Backups for your backups

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Redundant systems are crucial for freelancers. Don’t let a computer failure make you miss a client deadline. Have a dependable second computer as a backup.

It doesn’t have to be a brand new top-of-the-line system, just something good enough to reliably get you online and back to work.

Also, back up your work constantly and automatically to your computer. In addition, backing up both to a Cloud storage system (Backblaze, for example) and to an external drive will give peace of mind. That sounds like overkill until you turn to one of your backups in a pinch and find it’s not working as hoped.

6. A wee bit of computer savvy

Woman using the internet on her laptop
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Nothing makes you appreciate your last employer’s IT department like being up a creek without technical support.

It doesn’t hurt to be a computer genius, but it’s not required. When your machine or your software stops working, take a deep breath, think things through, check your connections and search the internet for solutions.

7. Health insurance

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If you’re walking away from a company-paid health insurance plan, know in detail what will replace your insurance after the COBRA extension of your insurance coverage is up.

Learn in advance how much your premiums cost, how much they could grow and how you will pay noncovered medical expenses.

8. A tax adviser who understands freelance life

A woman works on her taxes with an accountant
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You’ll need a tax adviser experienced at working with freelancers. Even if you’re happy doing your own taxes, consider professional help for the first year to understand the requirements, get the right start with bookkeeping and have help weighing whether to incorporate.

One thing you’ll miss is your old employer’s contributions toward your Social Security and Medicare taxes. Now that you are both employer and employee, you’ve got to pay all of it. According to the Internal Revenue Service, the self-employment tax rate is 15.3% total. Here’s the breakdown:

      • Social Security tax (for old-age, disability and survivors insurance) is 12.4%.
      • Your Medicare (hospital insurance) contribution is 2.9%.

Now, you also must file quarterly tax payments and master the rules for estimating what they should be. An accountant helps there, too.

9. A plan for having fun

Aerobic exercise class.
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Many freelancers wear themselves out by neglecting everything but work. Don’t fall for it. The more tired you get, the more you spin your wheels.

Work discipline includes making and sticking to a plan for getting away from your desk, socializing and exercising regularly.

10. Child care

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Even with older children, you’ll want to line up child care in case you have to pull an all-nighter to meet a deadline or jet out of town unexpectedly.

At the minimum, arrange with a neighborhood teenager or a day care provider to cover you for a few hours a day or during important phone meetings.

Line up backups, too, in case your regular child care provider has a crisis of his or her own.

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