Yahoo Finance 11 Keys to a Successful Freelance Career
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 these 11 things before making the leap will help you stay afloat in your new venture.
1. A fat emergency fund
An emergency fund is the rock-bottom basic thing you need. With no money to tide you over when work is thin — as it will be now and then — you can forget your freelance dreams.
What’s “fat”? Financial advisers like a fund that can cover you for six months. Consider more, though. It can take 60 to 90 days or more to complete some jobs and get paid. That’s not counting how long it takes to land new clients, or to get some clients to pay you.
2. Steady nerves
Freelancing is great for all the reasons you’d suspect: flexibility and freedom from office politics, the short commute and excellent job satisfaction are a few. But the insecurity never stops.
One freelancer I know likens the life to Tarzan’s: It’s great swinging from vine to vine but awfully scary when you’re hanging in midair and can’t see the next vine to grab. Be sure you can embrace the uncertainty before leaving a good day job.
3. Backups for your backups
Redundant systems are crucial for freelancers. If a computer failure makes you miss a client deadline, you’ll look like a bozo. So keep a dependable second computer for such events.
It doesn’t have to be a brand new MacBook Air with Thunderbolt display and 12 hours of battery life. It just needs to get you online and able to communicate and send files to client. A nearby internet cafe that rents computer time might be a fine backup. Make sure it’s open when you need it.
Back up your work, too, including at least a couple of years’ worth of work emails. Back up constantly, to both the cloud and to an external hard drive. It sounds like overkill until you — like me — have turned to your backup disk in a pinch and found that it was corrupted. Practice retrieving work from your backup systems so your IT struggles will be invisible to clients.
4. A wee bit of computer savvy
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.
5. Business cards
Old-school, sure. But, depending on the business you are in, a few dollars’ worth of business cards go a long way when you are sitting on a plane or in a meeting next to a stranger who turns out to be a potential client. Start with just a few. Find deals at a local print shop or promo codes for online outlets like VistaPrint.
6. Health insurance
If you’re walking away from a company-paid health plan, know in detail what will replace your insurance after the COBRA extension is up. Know how much the premiums cost, how much could they grow and how you will pay noncovered medical expenses if you get a high-deductible plan.
Also, keep your eye out for any changes to health care laws in 2017. President-elect Donald J. Trump has promised a major overhaul to existing regulations including the Affordable Care Act.
7. An IRA or solo 401(k)
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. Every dollar you contribute can be deducted from your taxable income at tax time.
8. A tax adviser who understands freelance life
You’ll need a tax adviser experienced at working with freelancers. Even if you’re happy doing your own taxes, consider professional help the first year so you understand the requirements, get the right start with bookkeeping and have help weighing whether to incorporate.
There are plenty of perks to freelancing. But one thing you’ll miss is your old employer’s contributions toward your FICA taxes. Now that you are both employer and employee, you’ve got to pay all of it. According to the IRS:
The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
You’ll probably also miss the tax contributions your old company deducted from your paycheck and sent to the IRS. Now, you must file quarterly tax payments and master the rules (the Freelancers Union website explains them) for estimating what they should be. An accountant helps here, too.
Take note: Freelancers are expected to pay state and local sales taxes. The Sales Tax Institute lists state sales tax rates here and contact local governments for local rates.
9. A plan for having fun
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 regular vigorous daily exercise.
10. A budget
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. A one-person service business may do fine by adopting any of the personal budget products available. Money Talks News founder Stacy Johnson recommends MTN partner PowerWallet.
Or, do this:
Calculate the minimum monthly income you can expect, and base your budget on it.
Refrain from spending any excess income and instead keep it as a buffer against lean times and surprises. Adjust your budget’s monthly income as earnings grow.
Your key to success: Identify all expenses and keep them as predictable as possible.
To protect your emergency fund, keep a buffer account with two or more months’ expenses to help you face surprises and irregular expenses.
11. Child care
Even with older children, you’ll need child care if you have to pull an all-nighter to meet a deadline or jet out of town unexpectedly. At the minimum, make arrangements with a neighborhood teenager or a day care provider who’ll cover you for a few hours a day or during important phone meetings. Line up backups, too, in case your regular provider has a crisis of his or her own.
Are you a freelancer or self-employed? How do you make sure you can survive the lean times, and build your business? Share with us in comments below of on our Facebook page.
This article was originally published on MoneyTalksNews.com as '11 Keys to a Successful Freelance Career'.
