Balancing the Risks and Rewards of Freelancing
While freelancing is becoming increasingly popular, there are plenty of myths and misconceptions about going solo. From the image of the urban yuppie sipping a latte and casually typing on a Macbook to the harried business owner hounding clients to pay their invoices, freelancing is often cast as one of two extremes. The reality, however, is that there are plenty of shades of grey.
The challenge lies in the fact that there are few clear cut rules, and for the most part, each individual has to figure things out on his or her own. That said, there are a few guidelines that can help you maintain your sanity and maintain a successful, productive, and balanced freelance life.
Leverage multiple channels to fill your pipeline
When you’re a full-time employee, you don’t need to think about the source of your next assignment. As a freelancer, you’re wearing many hats: CEO, accountant, project manager, and salesperson. Your livelihood depends on forging client relationships, delivering on projects, gaining stellar referrals, and most importantly, keeping your pipeline full.
One of the best ways to do this is by leveraging multiple channels — this will help ensure that you have a steady stream of business coming your way, and also that you are not too dependent on any one source. A few examples — join a network of freelancers like Hired that connect you with companies who are looking for contract workers, offer a discount to encourage referrals from existing clients, attend networking events to ensure that other professionals are aware of you and sending business your way, and try taking on new projects or clients to expand your reach.
Create a routine
One of the most desirable aspects of solo work is the ability to set your own schedule. This is especially true for those early birds or night owls who don’t enjoy conforming to standard business hours. That said, it’s important to create a routine for yourself so that you can stay on top of deliverables and avoid having work spill over into every aspect of your personal life.
When coming up with a schedule for yourself, don’t forget to factor in time for market research, networking events, courses or training to help keep your skill set up to date, and marketing, so that even when you’re not working on something for a client, you’re growing your business.
An effective approach is to block off time on your calendar as if each event is an important meeting. Schedule 60-minute to 2-hour chunks of time to execute on creative work without the interruptions of checking email or calling clients. Add time into your schedule, preferably at the end of the day when you’re mentally taxed from doing creative or code-intensive work, to catch up on odds and ends like emails and invoicing that would otherwise interrupt your productivity.
Get your taxes under control
As a freelancer, you’re responsible for paying both income tax and self-employment tax. Many people find that without an employer withholding taxes, paying them can become a convoluted burden. As a best practice, you should put aside 25-30% of your income each month.
Despite the challenges, there is one major advantage of paying your taxes as a freelancer: business write-offs. The key to making the most of these and to avoid facing a massive bill from the IRS at the end of the year is to stay organized and implement a system for record keeping. The help of a good accountant can’t be understated here, especially when you are just starting out. Almost all freelancers find that the the cost of an accountant far outweighs the time, money, and headaches associated with tax troubles.
Don’t neglect retirement savings
Without a company-sponsored 401K, it’s easy to let retirement savings fall by the wayside. But in reality, planning for retirement doesn’t need to be complicated. An easy way to start is simply to set up an ongoing monthly transfer to a retirement account. Freelancers Union has a insightful post describing all of your retirement savings options.
Give yourself a break
At first glance, working for yourself sounds like a vacation in and of itself. No rules, no boss. However, without a supervisor or HR department encouraging you to take time off, it becomes easy to bypass a vacation in favor of logging more hours (and hopefully, making more money). But everyone deserves a relaxing, restorative vacation from time to time. Be sure to plan ahead, communicate to your clients that you’ll be out of pocket, close out as many things as you can, and take the time to truly unwind so you can return to your work recharged and refreshed.
Navigating the world of freelancing can be tricky, but by staying organized, planning ahead, and locking down your finances, you can reap all of the benefits of solopreneurship and enjoy a fulfilling career.