Don’t Let the Pitfalls of Freelancing Freak You Out

By Bethany Johnson, Contributor, on December 7, 2016

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Let’s be honest: The thought of freelancing full time can be downright terrifying.

After all, striking out on your own is, by nature, a risk. To make the gamble worth it, creatives often weigh the risks against the benefits and, seeing the benefits far outweigh the potential pitfalls, make the leap. Most, however, freeze. The dream ends at the mere thought of all the things that could (and sometimes do) go wrong.

To help you decide once and for all whether the freelance life is for you, let’s look back at 2015’s most common freelancer fears—as reported by Statista. We’ll also hook you up with options for each scenario, so you know (one way or the other) whether you’re up to the task.

1. Health Care

Topping the list of menacing threats is the thought of having to find and secure your own health insurance without the help of an employer. To nix this fear, you have a number of choices. The smartest freelancers explore them all. Here they are:

  • Join a freelancer’s health care group, like the nonprofit Freelancers Union, to score health insurance rates at a fraction of the cost. Extra benefits of joining include political advocacy, social support and relevant financial advice.
  • Take charge of your own health. You are in control of you. Resist the sedentary lifestyle so common to freelancers, manage your stress, eat right and, if you smoke, quit. Tackling risky behavior has always been (and always will be) a top strategy for keeping your health care costs low.
  • Calculate your subsidy. Did you know that 85 percent of Americans are eligible for financial subsidies when opting for a federal exchange? Calculate your own tax break using the official 2017 Subsidy Calculator.

2. Unpredictable Income

The second highest-ranking concern freelancers cited was, unsurprisingly, a fluctuating income. The trick to managing an unpredictable cash flow is as simple as a budget that accommodates your leaner months. In other words, set up your spending plan assuming your income will be low every month. Then, keep a list near your work space of things you’ll do with extra money when you do encounter a windfall. Ideas could include investing in marketing to new clients, improving your equipment or stashing away for retirement—an idea that brings us to major freelancer fear No. 3.

3. Saving for Retirement

Sure, the 401k plan your boss offered is attractive, but you don’t need a company match to make your own future. Remember: You’re in charge. That sounds fun at first (and it usually is), but it eventually carries responsibilities like cutting a couple of lattes each week to pad your nest egg.

4. Tax Rates

High taxes were the next item that had freelancers freaked in 2015, an issue that can be easily negated by adding a simple line item on every contract you sign. Clients are used to seeing “tax” on bills, and as a consumer, so are you. As a vendor of services, don’t hesitate to charge your loyal customers a portion to cover the costs of doing business legally.

Boosting rates just a fraction of a percentage can also help you cover the cost of a CPA, whose knowledge of indy worker deductions can help you save even more. And, finally, establish a super-strict tracking system to capture all your operating costs so you’re only paying precisely what’s fair. For further reading on the subject, check out CPA Tom Wheelwright’s Tax-Free Wealth.

If you don’t have at least a little fear about the possible pitfalls of freelancing, then you should re-think your perspective. There are true risks involved. On the other hand, don’t let fear paralyze you; do your research, save extra and charge to cover your true costs. Doing so will help you control what you can, and let the rest fall into place.

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