Is Freelancing Right For Me?

There has been a great deal of talk about home businesses and online businesses over the past 10 years. In fact, as the U.S. Department of Labor reported, more than 20 million people work from home, and approximately half of them are not working from home as a part of their traditional job. Instead, they are working for themselves.

Now, among those numbers, you can bet that freelancers exist. A freelancer owns a business of their own, but they are not actually considered as business owners per se. A freelancer contracts their skills and services out to those who need them. The product that they sell is themselves — their skills or knowledge. While this operates on the same principle as owning a business and selling a product such as books, it is quite different. A freelancer does not work to find customers. Instead, they work to find clients.

Freelancers can either work from their home, or from a client’s office or home, depending on the job that they are doing. For example, a freelance writer typically works from his/her own home. A freelance consultant may, on the other hand, do the contracted job at the client’s place of business.

There are numerous skills that can be turned into a freelancing career. Writing seems to be the most popular, but freelancing can also include photography, web development, graphical design, proofreading, translating, tutoring, or any other number of careers. The only requirement for freelancing is to have a marketable skill; but of course, it takes more than that to actually become a successful freelancer.

A freelancer must also know how to market their skills and services and how to work with clients, and they must be disciplined. A freelancer doesn’t have a boss, and they rarely punch a time clock. The freelancer typically sets their own hours, and this really does require a certain amount of drive and discipline.

Freelancing — any kind of freelancing — is quickly becoming one of the hottest career paths in the world today. People simply want the freedom to choose their own work hours, and to choose their own income level as well.

The freedom of freelancing is absolutely wonderful. Unfortunately, few beginning freelancers consider the legal aspects of freelancing. Here is some information to get you started in the right direction.

First, you need to determine what, if anything, you may be held liable for while doing your work for a client. This is dependant on the type of work that you do, and for some freelancing careers, there won’t be any legal liability involved at any time. If there is, however, it is a good idea to contact a lawyer to discuss potential liability, and how to avoid it. It is also wise to seek insurance that would cover any of that liability.

Other than this, you need to protect yourself in the legal sense. You will need contracts for your clients. A contract should state what work is being done, how much that work costs, and how that work will be paid for. This way, the client has legal recourse if you do not complete the work as specified, and you have legal recourse if the client doesn’t pay you, as agreed. Having a contract in place is vital. You can download sample contracts that can be changed to suit you and your clients from numerous legal websites on the Internet.

Based on the nature of your work, your clients may also request a Non-Disclosure Agreement (NDA) and/or a Non-Compete Agreement (NCA). The NDA essentially states that you will not share your client’s information with anybody, including information concerning their business, or the work that you do for them. The NCA states that you will not use the client’s ideas to compete with them in the marketplace. Both of these documents are fairly standard, and you can find examples in numerous places on the Internet.

In most cases, these are the only legal considerations that you will have for your freelancing career, but it is important not to overlook them. This is the first step to protecting yourself, your freelancing business, and of course, your future success as a freelancer.

Financial Information for Freelancers

If you have broken into freelancing, or you are considering it, the chances are very good that you are seeing dollar signs. Unfortunately, those dollar signs don’t always pan out for freelancers, and it is important that you consider numerous financial concerns in advance.

The first concern is that you will not have a steady paycheck each week, in most cases. When you are asked to estimate your monthly income, you will find yourself blankly staring at the person who has asked for that information — such as a loan officer — because you really won’t have any clue — from one month to the next — what your monthly income will actually be. In some freelance professions, where you have steady clients, you may be able to guess very closely at the amount, but not in most cases, where there are not steady clients.

Because you will not have a steady paycheck, a personal savings account is absolutely vital to your financial survival. In this account, you should accumulate approximately three to six months of your living expenses. This account is not to be touched for any reason, except when you do not have enough work to pay your bills. This is to cover your living expenses when your current work is not. It is extremely important to remember that, and ideally, you will have this account established before you leave your steady paycheck job to start freelancing.

You need a business account as well. This account is separate from your emergency living expenses account. There will be costs involved with your freelancing business, no matter what it is. You may need to purchase materials or supplies, but even if you don’t, you will more than likely have to spend money on advertising and promotional materials for your freelancing business. The amount of money needed is dependent on what freelancing business you are in, and how you intend to advertise your business.

These financial concerns are why most beginning freelancers start out freelancing on nights and weekends, while holding down their steady jobs. Make sure that you are financially ready to quit that job before you do so! Also consider other aspects of freelancing, such as insurance coverage and retirement funds.

Freelancers and Taxes

Taxes are one of the constants in our lives. You’ve heard it before, and you will hear it many more times throughout your life — the only two things that you can be certain of in life is death and taxes. You are going to die at some point, and the IRS wants the tax money that you owe, and they will go to great lengths to get it.

As constant as taxes are in our lives, those who are just breaking into freelancing often don’t consider the tax dilemma. They have been working at a 40-hour-per-week job, where they are given a paycheck at the end of the week, which has already had taxes and Social Security payments deducted from it. If you freelance, this isn’t the case. You are responsible for paying your own taxes.

In most cases, when you gain a client, you will need to supply that client with your legal name and your Social Security number. You may be asked to fill out a W-9, which is similar to a W-4, but designed for contract laborers, who are not regular employees. In January, you will receive a 1099-MISC form from every client for whom you have worked throughout the year. This 1099-MISC will show how much was paid to you for the work that you did.

So, with the 1099s that you will receive, you will know how much you earned. The problem is that you have not paid taxes on that money throughout the year. On top of this, no Social Security has been paid in, either. You will be required to pay in self-employment taxes, which is actually Social Security. What this amounts to is a huge tax bill for you in April — unless you have planned well.

If you want to keep your taxes manageable, and keep the IRS off your back, the easiest way to do this is to contact the IRS. That’s right — don’t wait for them to come to you. Instead, you go to them. The IRS is surprisingly helpful, and they will help you to start paying your taxes in quarterly, based on what you expect to earn. This is much easier, and keeps you in the good graces of the IRS.

If you are a freelancer, it is vital that you visit the IRS’s website today, at http://www.irs.gov, and find out how to contact them for help and instructions! When April rolls around, you will be very happy that you’ve done this.

Benefits of Freelancing

If there were not benefits to freelancing, there wouldn’t be approximately 10 million people in the United States alone doing it. There are downsides to freelancing, but the upside of freelancing is far more enticing. Freelancers benefit in a wide variety of ways.

The first benefit is not punching a time clock. What you must realize, however, is that if you are paid by the hour, you actually do have to punch a time clock, in the form of timekeeping software — but at least it is your own time clock, and not that of an employer.

Most freelancers have the option of setting their own work hours and days. In a traditional job, you have to either work when the office is open, or work during a particular time of the day or night, if you do shift work. This isn’t the case with freelancing. If you have children in school, you can opt to work on their school days, during their school hours, and not work when they are home. If you are a night owl, you can opt to sleep all day, and work all night. The only thing that you must remember is that your clients most likely will keep regular work hours, and you will need to be available during those hours for contact.

Freelancers don’t have to worry about vacation days, sick days, or personal days. If they are sick, they can opt to work or not work — and they don’t need to clear that with anybody. If they plan a vacation, they don’t have to wait until their vacation days have accumulated, or ask anyone if the days that they have chosen are okay. If they need to run personal errands, they do so, without asking anyone’s permission. Freelancers are truly free in this sense.

Freelancers have numerous other benefits as well, such as the opportunity to choose their own workspace. Most freelancers have home offices, but may take a laptop to the porch or to the park to enjoy a beautiful spring day while working. They are not tied to a cubicle in most cases. Yes, there are definitely benefits of freelancing.

The Downside of Freelancing

Freelancing is a wonderful career path if you have a marketable skill or service. Unfortunately, there is a downside that you won’t hear much about — and possibly not even know about — until you are actually freelancing.

Freelancing can be lonely — especially if you are used to having others to talk with throughout your workday. When you are freelancing, the chances are good that you won’t talk to anyone during the day, other than clients, potential clients, and any vendors that you may work with. In many cases, you won’t even be talking, but will be emailing instead.

The wonderful world of freelancing can be very isolating, which can lead to social withdrawal and depression. As a freelancer, you must be very aware of the potential for these things, and work to ensure that you are not captured by either.

The downside of freelancing can also go to the other extreme. You may be inundated with conversation — to the point where you can’t get anything done. In offices, there are secretaries to field calls, and rules in place to ensure that socializing doesn’t prevent work from being done. If you work from home, there is no secretary, and the chances are good that friends and family will view you as being home and available, instead of accurately viewing you as at home, but working.

The only other downside of freelancing is not having enough work at all times — or having too much work at any given time. When a freelancer doesn’t have work coming in, they can easily start to panic. At the same time, when they have too much work coming in, they have to learn to say no. Unfortunately, the typical freelancer remembers those times when there is no work, and they have a hard time saying no to incoming work, even if they are overloaded.

So, yes, there is a downside to freelancing, but in most cases, there are more ups than downs. If you are considering freelancing, you should consider these potential downs carefully, to determine whether or not you will be able to deal with them as they come up, effectively.