Switching from being a full-time member of staff to going it alone as a freelancer is something that many people dream of doing. However, the reality of taking a leap into the unknown and becoming self-employed can be a scary and confusing time. The idea of being completely in control, setting their own rates, and no longer answering to a boss is certainly an appealing prospect. However, failing to understand what freelancing actually involves and neglecting to prepare for this can be disastrous. So, before you fire off your resignation letter to your boss, it’s vital to gain a clear understanding of what life as a freelancer will look like in reality and how you can ensure that it will work for you, and your bank balance.
Knowing that a regular wage will hit your bank account at the same time each month is something that should never be taken for granted. For many new freelancers, the absence of a regular wage is often their number one concern and a source of great anxiety. Being a freelancer will always involve some degree of risk, and won’t come with the same levels of financial security as working in an employed role. However, there are some steps you can take to help improve your financial security while being self-employed. Here, you will find some tips to help you consider how you can keep your finances healthy while working as a freelancer.
Photo by Peter Olexa:
Avoid an All or Nothing Approach
Making the decision to take the leap and become a freelancer is an exciting opportunity to make a huge change in your life. This is such an exciting time, but it also pays to approach it with a little caution. Taking an all or nothing approach to becoming a freelancer may mean that you quit your job to fully commit to your new way of working. The trouble is, winning clients and getting paid work may be trickier than you anticipated. This can mean that you are stuck with no job and little to no income as you desperately try to build a client base. This situation can be upsetting and demoralising.
Avoiding an all or nothing approach is often a helpful way to avoid the risks involved in freelancing. Rather than quitting your job and then looking to build up your freelance clientbase, it can be most helpful to do things the other way around. Taking a gradual approach can help you to dip your toe into the world of freelancing and slowly build-up a client base while still working for your employer. You may decide to discuss reducing your working hours with your employer. Potentially, this would allow you to spend part of the week working on your employed job and the other part slowly working on establishing a customer base for your freelance gig.
Keep up with Your Accounting
Gaining financial security as a freelancer certainly takes time, but one of the most useful ways to make this happen more quickly is by keeping up with your accounting. Keeping all of your financial information about your new business up to date will give you a far clearer picture of how it’s performing. Having financial information about your earnings and expenses that is as up to date as possible is essential if you are to make informed decisions about the operating of your freelance gig and to reduce financial risk.
Finding an appropriate platform to help you keep up with your accounts and maintain accurate financial records can make it far easier for you to understand your financial position at all times. Choosing the right accounting platform can also help you to deal with one main concern many freelancers experience. Worrying about how much tax they owe can become a huge source of stress and worry for freelancers. No one wants to be hit with an unexpectedly high tax bill, especially when you’re self-employed and solely responsible for paying the bill. To avoid any nasty tax surprises, you may wish to use a free self-assessment app so you can view how much tax you owe in real-time, and even use it to submit your tax return directly to HMRC. Knowing that all your financial information is accurate can provide the peace of mind you are looking for and allow you to focus your attention on doing what you do best.
Make Connections
Knowing where to look for clients and understanding how to maintain a consistent workflow can be a concern for the self-employed. If you only one or two contracts, you may worry that if one of these is cancelled you’ll suffer significant financial hardship. Doing your best to keep hold of your clients by impressing them with your work is the obvious way to ensure they keep using your services. However, sometimes clients may leave for reasons beyond your control. Being prepared for this eventuality is crucial.
To ensure you always have potential income sources available to you, it helps to make connections within your industry. You can do this by attending conventions, workshops, trade fairs, and networking events in your own community to help you make valuable connections. Each of these connections provides you with a wider pool of potential clients. This means you have a readymade contact list to reach out to if you want to expand your client base, or are simply looking to fill gaps in your income if another client leaves.
As well as making connections with potential clients at formal events, it also helps to stay on the look out for opportunities within your industry in general. Understanding the needs of the industry and what potential clients are looking for will better place you to serve their needs and understand who you need to connect with.
Take Time to Plan
The life of a freelancer is infamous for its feast or famine unpredictability. One month you may earn enough to fund an extremely lavish lifestyle. However, the next month things may be pretty meagre and stretching to a can of beans on toast can be a challenge. Understanding that you will have good months and bad months is so important – almost every freelancer has them, especially at the start of their self-employed journey. While having lucrative months followed by extremely tight months is to be expected, the most important thing is to understand how you mitigate these and gain some level of consistency. One of the best ways to achieve this is by planning your workload effectively.
Attempting to plan your work and deadlines so they are spread evenly wherever possible can make your life as a freelancer a lot easier for you. Spacing out your jobs so that you have enough time to work on each will make it much less stressful for you to meet your deadlines. It also means that you will send out invoices more regularly, rather than completing a raft of deadlines and invoicing for all of them at the same time. This may help you to reduce your stress, and make your workload more manageable while also being paid more consistently with money coming in each month.
Every freelancer operates differently, and how you plan your work will vary depending on the type of clients you have and the kind of work you complete. However, once you get more settled into your new role, you should be able to identify ways that help you to plan better and achieve more balance and consistency with both your workload and your income.
