6 Financial Tips for Wannabe Freelancers

28-08-2018 | Dojo |

6 Financial Tips for Wannabe Freelancers

I started freelancing 2 times, at first, without even noticing and then, the serious start, after losing my main job and also being deep in debt.

The first time was just for fun.

I had 2 years of web design experience and started getting few clients, who found out about my newly found passion and needed help with their business websites.

The real deal was in 2009, when my 10 year stint as small local radio star ended for good. I was in debt (had some hefty car payments) and no other chance than make my web design business profitable.

Based on my past experience and a lot of subsequent reading, here are few financial tips to help you, if you want to become a freelancer

Create a budget

Preparing for freelancing is not glamorous, if you want to make this right. Just with anything finance related, when you think about creating a side business, have a working budget.

This allows you to see how much you are spending each month, which are the ‘core’ expenses you can’t live without and where you can save some money.

Because, if you want to become an entrepreneur, you need money.

Pay off as much debt as possible

If you are already struggling to make ends meet, have a lot of debt and no savings, starting freelancing might be the straw that broke the camel’s back. Before considering quitting your job to start your own money venture, try to clear our as much debt as possible.

You might not be able to pay off your mortgage this soon, smaller loans should be dealt with.

Now, that you have a budget, use some of the money you clear each month to speed up debt payment.

Create your emergency fund

You should have it by now, if not create your emergency fund as soon as possible.

Going freelancing means you’ll most likely have slow months, with little to no income. And your taxes and bills won’t stop, just because you have money troubles.

This is why you should have an emergency fund to cover at least 6 months of your regular expenses, provided you make absolutely no income during this time.

Can you make it even bigger, to cover your expenses for an entire year? Wonderful.

Don’t think this is too much, most small businesses won’t become profitable in the first months anyway.

My business started earning me a profit since month one, but it was an exception to this rule and I was working 16 hours/day.

Having a nest egg to fall back on will make your freelancing start easier and more secure.

Save money for your business

Now that you are comfortable with your emergency fund and debt is taken care of, save some money for your startup. You’ll need a website, maybe an advertising budget, money to spend on software etc.

The good news is that you don’t need to save a fortune, but any money you save for your freelancing career will increase your chances to succeed.

Consider part-time freelancing

You can start your freelancing career in 2 ways: you are still employed and use some of your spare time to run your business or you quit your job and start freelancing full-time.

Both have their advantages and disadvantages, but, if I could start again, I’d rather run my small side business, while also securing a check each month from a job.

If you go this route, then you can start freelancing right away, since your salary should cover all your expenses and savings, as usually.

If full-time freelancing is more appealing, then make sure you are really prepared for it. This means sticking to a budget, having your debt under control, an emergency fund in place and few hundred bucks saved for your small business.

Once everything is in place, you can quit your job and become a freelancer.

Choose the right business structure

Doing some work without a business entity is OK, since you’ll need to see if your business idea is viable.

As soon as you test it out with few clients, it’s time to look for a business entity so that you can properly pay taxes and benefit from all business advantages.

You can choose a sole proprietor / partnership for your business, maybe an LLC (Limited Liablity Company) or an S Corp.

These would be my most important 6 tips for wannabe freelancers. Solve these pieces of your business puzzle and you’ll be set for success.

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