If you’re thinking of jumping into freelancing, you need to consider more financial matters than how much you should charge clients and what to spend on your equipment. Here are four financial problems that all freelancers need to think about:
What would happen if your computer stopped working in the middle of a project? What if your smartphone got stolen and you needed a new one to talk to clients? What if your car breaks down and now you can’t travel? There are lots of different emergencies that could put your work on hold, especially when you don’t have the funds to resolve them.
So, what can you do to prepare for emergencies? You can put together an emergency fund as soon as possible. That way, you can withdraw your savings at a moment’s notice and resolve the issue.
It takes time to create a substantial emergency fund. In the first few months, you might not have enough to cover an urgent expense. So, what can you do then? You could apply for a personal loan. If your application is approved, you could use the funds to help pay for it. Click here to learn details like what is a personal loan and what qualifications you need to apply for one. Who knows; you just might be eligible.
You need to have these backup plans so that you can get past these obstacles and jump back into work.
As a freelancer, you have to juggle many roles at the same time this includes the role of an accountant. You will have to handle your work budget to make sure that your expenses don’t overtake your earnings. You have to practice bookkeeping to track every single purchase and payment. And you have to organize everything so that you can file your tax returns properly and on time.
If these tasks are too much for you to juggle, you will want to get some professional assistance. You can hire a bookkeeper to help you record your financial activities. You can also hire an accountant to help you create a reasonable business budget and prepare your tax returns. These additional expenses could be worth it.
A lot of healthcare opportunities are offered through workplaces. Unfortunately, as a freelancer, this won’t be available to you. You will have to organize your healthcare coverage on your own.
You can go through the Healthcare.gov website to search for an affordable healthcare plan. If you’re having trouble finding coverage on your own, you should consider joining the Freelancers Union or a similar collective. It’s free to do so. Unions can help you access lower-cost coverage for health insurance.
Don’t skip coverage to save yourself money! Medical costs can be debilitating. You will want to have some type of insurance to keep you from getting into serious medical debt when something goes wrong.
Clients don’t always send their payments on time. You could wait weeks, even months, to get what you’re owed.
You need to prepare for this problem. Set aside some savings so that you can manage essentials like groceries, bills and rent, even when a payment comes in late. You should also make freelance contracts that protect you from this precarious situation. Have the client agree to pay you a portion of the funds upfront and add late penalties so that that they’re incentivized to pay the rest on time.
Now you won’t be surprised by these financial problems. In fact, you’ll be ready for them from the start.
Photo Credit: Artem Podrez