Tuesday, January 18

10 keys to a successful freelance career


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Many freelancers have jumped right into the business without much preparation. Some swim, others sink.

A blind plunge can work, but it’s risky. Defining the following things before you jump will help you stay afloat in your new venture.

1. A large emergency fund

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The self-employed and self-employed are some of the happiest workers in America. The key to enjoying that freedom is a strong emergency fund. With no money to help you when work is scarce, as it will be from time to time, you can forget your freelance dreams.

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

Tip: Do you dream 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 matching behind, there is a temptation to stop saving for retirement “just for a while.” Do not go there. Keep saving by funding an individual retirement account (IRA) or 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

Budget
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Dealing with equities is one of the biggest challenges in freelance work. Your payments may come in intermittently with long droughts in between. Therefore, you will need a budget structure that helps you plan with confidence. Some of us at Money Talks News use and recommend YNAB (needs a quote) to plan and spend.

Advice:

  • 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 tough times and surprises.
  • Adjust the monthly income of your budget as profits increase.

4. Stable nerves

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

Do a review to make sure you can accept the uncertainty before you leave a good job.

5. Backup copies for your backups

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Redundant systems are crucial for freelancers. Don’t let a computer crash cause you to miss a customer’s deadline. Have a reliable second computer for backup.

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

Plus, constantly and automatically back up your work to your computer. What’s more, receding both of them to a cloud storage system (Backblaze, for example) and to an external drive will give you peace of mind. That sounds like a stretch until you turn to one of your backups in a pinch and find that it’s not working as expected.

6. A little bit of computer knowledge

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

It doesn’t hurt to be a computer whiz, but you don’t have to. When your machine or software stops working, take a deep breath, think hard, check your connections, and search the internet for solutions.

7. Health insurance

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If you are moving away from a company-paid health insurance plan, learn in detail what your insurance will replace after the COBRA extension of your insurance coverage ends.

Learn in advance how much your premiums cost, how much they could increase, and how you will pay for non-covered medical expenses.

8. A tax advisor who understands the life of the self-employed.

A woman works on her taxes with an accountant.
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You will need a tax advisor with experience in working with freelancers. Even if you’re happy with your own taxes, consider first-year professional help to understand the requirements, get a good start with accounting, and get help weighing up whether to incorporate.

One thing you will miss is your former employer’s contributions to your Social Security and Medicare taxes. Now that you are an employer and an employee, you must pay for it all. According to the Internal Revenue Service, the self-employment tax rate is 15.3% in total. Here’s the breakdown:

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

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

9. A plan for fun

Aerobic exercise class.
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Many freelancers burn out by neglecting everything but work. Do not be fooled. The more tired you feel, the more you turn your wheels.

Work discipline includes making and sticking to a plan to get away from your desk, socialize, and exercise regularly.

10. Childcare

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Even with older kids, you’ll want to queue for child care in case you have to stay overnight to meet a deadline or leave town unexpectedly.

At the very least, make arrangements with a neighborhood teen or day care provider to cover you for a few hours a day or during important phone meetings.

Also line up the backups, in case your regular child care provider has a crisis of its own.

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