5 Crucial Details To Figure Out In Your First Year Of Freelancing
In many creative pursuits, it seems like freelancing has become the industry norm. From writing and content marketing to social media and web design, professionals have traded in their nine-to-five desk jobs for the title of independent contractor. In fact, an estimated one in five Americans operates on a freelance basis, according to a 2018 survey from NPR. Not to mention, within the next decade, freelancers might even make up half of the United States workforce.
There are some obvious benefits to taking this path: no commute, flexible hours and a certain degree of autonomy. But these perks come with a share of obstacles, too. Freelancing does not afford the same level consistency and stability that’s offered in the corporate world. There will also be seasons of feast and famine — no customers for weeks traded in for 15-hour days. Most notably, the lack of benefits as an employee means insurance, retirement, and payroll are all on your shoulders. As you wade into your first year freelancing, prepare for all of these obstacles by sorting through these five questions. With the details worked out, you’ll find more consistency and peace of mind in your work.
1. How Can I Establish a Brand Identity?
Freelance revenue is contingent on who you are why people should work with you. That’s why your personal or freelance brand is important. Your brand includes the aesthetic details, like your logo and the fonts and colors used of your website, but you need to also consider the tone of engagement on your social media accounts and the voice you use in your website content.
“In truth, branding encompasses nearly every aspect of a company’s personality, including its logo, how it speaks to its customers, and how it is perceived by the public. Branding is not just for the power players. It’s for every business of any size, including freelancers that want to grow their income and create a powerful reputation for themselves,” says branding expert Wes McDowell.
The goal of a brand identity is to build a voice and narrative to create a business that’s accessible, recognizable and personable.
2. How Can I Attract and Retain Clients?
In order to maintain a dependable stream of clients, you need to drive two things: trust and value. There are many ways to do that, starting with your brand and reputation. How do you work with clients? What deliverables do you provide? Are they likely to recommend you to a fellow business owner?
If referrals aren’t flowing for you yet, check out websites like UpWork, which found that 64 percent of freelancers found work online in 2018. Even online, it’s critical to remember to build trust and stick to your brand.
- Trust: Do great work for clients and ask for reviews on your profile pages. The more great reviews you have, the more likely you are to get hired for more work.
- Brand: Remember to use the same tone and voice you do on social media and your website; your unique brand will attract like-minded clients and help you stand out.
3. How Can I Get Health Insurance?
This is more of a logistical consideration, but it can’t be overlooked. The good news is, unlike at a company, you have many options. You’re not stuck to just one or two plan options and can shop around for the health insurance that’s best for your budget and needs.
For example, if you’re less than 30 years old, one insurance option that delivers some of the lowest premiums is catastrophic coverage, suggests HealthMarkets. These plans “include all mandatory health benefits, but there are limits on the number of primary care visits and preventative services covered before the deductible kicks in.” As a first-time freelancer with limited income, options like these ensure you’re covered without the high costs.
4. How Can I Plan Ahead for Taxes?
Because your income taxes aren’t deducted from each individual paycheck, you’re responsible for setting aside a certain percentage of what you earn for taxes. This is called the self-employment tax, and accounts for 15.3 percent of your income if you make more than $400 per year. To prepare for this, the rule of thumb is to calculate how much is owed to the IRS from each month’s income, and put that portion into a savings account for when your tax return is filed.
You will also need to pay estimated quarterly taxes. The IRS explains, “Those who have income from their own business will need to make estimated tax payments if their tax liability is expected to be more than $1,000 for the year. This includes both part-time and full-time enterprises.” Meaning, if you expect to owe more than $1,000 in taxes, you need to pay quarterly estimates. This is why it’s important to work with a CPA all year long. This person will ensure that you’re planning ahead for taxes throughout the year while avoiding penalties.
5. How Can I Work toward Retirement?
Freelancers don’t have the benefit of an employer-backed retirement pension, which means now is the time to start planning for this yourself. Without a sponsored 401(k), an estimated seven out of 10 full-time independent contractors are unprepared to sustain their current lifestyles in retirement, according to a survey from Betterment Financial Advisors.
In order to sidestep this potential issue and secure a comfortable future for yourself, get up a self-employment retirement plan. Your options include Roth IRA, SEP-IRA, and Solo 401(k).
Your First Year of Freelancing: Figure It Out
If the perks of a freelance job sound appealing, and you’re about to take the plunge — or already did — maximize your chances for success by figuring out the details ahead of time. In the end, you’ll save money, drive more clients, and enjoy greater peace of mind as you embark on your own venture.
Jessica Thiefels has been writing for more than 10 years and is currently a full-time writer and consultant. She’s written about spending, saving, salary and more for Reader’s Digest, GlassDoor, Lifehack and more. Follow her on Twitter @Jlsander07 or connect on LinkedIn.
Image via Unsplash
Like this story? Follow The Financial Diet on Facebook, Instagram, and Twitter for daily tips and inspiration, and sign up for our email newsletter here.