For many people, being able to start freelancing full-time is the dream. After all, you get to pick your own projects, set your own schedule, and even work from home.
While it is possible to make a living by freelancing full-time, you do need to prepare for the transition. If you aren’t sure if you’re ready, here are some questions you need to ask yourself.
Are You Comfortable with the Unknown?
Stepping out as a full-time freelancer is like taking a plunge into the void. Even if you have some clients and a solid plan, a lot can change once you begin.
Generally, your finances will be much less predictable, and you never know if a client is going to fulfill their end of the bargain. Plus, once a contract ends, you’ll need to find a new one, and you can’t always tell how long that will take.
If you aren’t comfortable with uncertainty, then freelancing full-time might not be right for you. However, if the unknown doesn’t frighten you, you could be the right person for this kind of work.
Do You Have a Financial Reserve?
Freelancing can be unpredictable. You can’t always count on clients to stick around, and your income will inevitably fluctuate.
Having a financial reserve is a necessity before you start freelancing full-time. This gives you a source of funds to keep on top of your finances should times get lean.
Ideally, you need at least three months of living expenses in the bank before you make the transition. That way, you have a buffer in place in case you lose a client, or a large contract ends.
Do You Know Which Form of Business You Want to Use?
As a freelancer, you can operate in a few paradigms. You can be a sole proprietor or set up a limited liability company (LLC). Both approaches have benefits and drawbacks, so you need to see which option suits you.
Ultimately, you can always start as a sole proprietor and form a business at a later date, but understanding the implications of both from the beginning is best.
Do You Understand the Tax Implications of Freelancing Full-Time?
Managing your taxes as a freelancer is different from when you are an employee. Money isn’t automatically withheld to handle your obligation, so you need to be ready to take care of this yourself.
Luckily, there are software programs that can help. Look for options geared towards self-employed individuals as these are best equipped to manage the nuances of working as a freelancer.
Do You Have a Portfolio?
Typically, you aren’t going to land freelance gigs without being able to provide samples of your work. That means you need a solid portfolio before you begin.
If you don’t have a group of great samples, then create these first before you make the leap. Usually, it won’t take a lot of time to get these together, so handle this before you formally transition.
Are Your Financial Processes in Place?
As a freelancer, you’ll need to set your rates, invoice clients, and track your transactions. In most cases, trying to do this one at a time isn’t ideal, so you’ll need to invest in some software to streamline these processes.
Luckily, there are a lot of options out there, so you can likely find one that fits your needs. Often, reputable providers will offer free trials, so check out a few and see what they have to offer.
If you answered “yes” to all of the questions above, you’re possibly ready to start freelancing full-time. However, if you answered “no,” then focus on those areas before you jump in. You’ll be glad you did.
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Tamila McDonald has worked as a Financial Advisor for the military for past 13 years. She has taught Personal Financial classes on every subject from credit, to life insurance, as well as all other aspects of financial management. Mrs. McDonald is an AFCPE Accredited Financial Counselor and has helped her clients to meet their short-term and long-term financial goals.
Posted in: Career
Tagged with: freelancing
