What’s it like to live life as a freelancer?
It’s liberating and exciting… scary and stressful.
Earning a living as a freelancer isn’t easy, but with some forethought, planning, and a touch of luck, you can make it happen! Pretty soon you’ll be setting your own hours, and working in your underwear!
- 1 Freelancers Are The Future
- 2 What Do I Need To Become A Freelancer?
- 3 Freelancers DIY
- 4 How Do I Make Money As A Freelancer
- 5 How To Really Make Money As A Freelancer
- 6 How Much Do You Need To Make?
Freelancers Are The Future
Not long ago, “freelancer” was a derogatory term for people who couldn’t hold down a full-time job. But times have changed.
Now freelancing is a $1.2 trillion industry in the US alone (imagine what would this number be for the global freelancing market).
As more and more businesses outsource work, freelance employees have become a vital part of the workforce. This means more opportunities to earn your living strictly from freelance work.
The gig economy means connecting with clients for a specific job. Once the job is done, there are no additional obligations between the employee and the company. Many larger companies are outsourcing certain tasks once done in-house. Also, some professional freelancers hate being called “gig workers,” saying it implies un-skilled, un-sophisticated manual labor jobs when freelance definition has already evolved into a much more complicated and nuanced concept.
Prospects are pretty good for freelancers. According to the “State of the Freelance Nation” survey conducted by Wisebrand, 42% of freelancers hit their income goals in the first twelve months.
The average freelancer will reach those goals within the first two years:
At the same time, Upwork conducted a Freelancing in America study last year that showed nearly three-quarters of full-time freelancers earned more than when they had a full-time job!
So, based on the quick overview provided above the very first statement we would like to make is that it feels really good to be a freelancer in 2019 and beyond. Freelancing provides better work-life balance, higher levels of satisfaction from the work you do, significantly less stress compared to the corporate environment and way better career opportunities.
It’s not surprising that 54% of freelancers won’t return to full-time employment no matter what they may get in return.
In the Wisebrand’s survey we cited above they rejected better income, good position and social benefits as sufficient incentives to return to full-time employment.
Importantly, all these trends are likely to strengthen and grow further over time. So, yes, freelancers are indeed the future.
What Do I Need To Become A Freelancer?
The first prerequisite for becoming a freelancer is a marketable skill. Everything starts with what you know and what you can do and if what you do and what you know sells. In other words, there must be a sufficient market demand for your skills and expertise to turn your freelancing dreams into a stable real-world income source.
However, this does not mean that if there is little to no market demand for your existing skills and expertise you can’t be a freelancer. It’s actually the opposite – this can be a hidden opportunity to learn new things that are in a higher demand and that can take you much further (and usually much faster) compared to what you could have achieved if you just stuck to your current skills (given there is enough market demand for them).
So, the area of freelancing is an important aspect that may affect your growth speed and earnings potential. For the best results you need to be in a trendy and dynamic field such as the Internet, Technology and Programming. More specific examples include AI, E-commerce, WordPress (during the last decade WordPress completely transformed the Internet and there is a rising demand for WordPress related skills), websites (around 380 new websites are created every single minute in almost any field you can imagine which generates rising demand for website-related skills), mobile apps, digital marketing (including the digital parts of omnichannel marketing) and other things digital.
So, to be a freelancer you need a skill that sells but your results will also depend on the business sector you are in.
You may also need some basic equipment to start off. In addition to whatever tools or equipment your specific profession demands, freelancers will usually need the following:
- Internet access
- Organized storage
- Quiet work space
This last can be the most challenging. (Kids! Shut up!) Even if you move pianos for a living, you’re going to need some place “office-y” to do your invoicing, scheduling, and marketing.
You’re not really a freelancer. You’re a small business owner, and the product you’re selling is you and your skills. Like any small business owner, you’re going to have to wear many hats, from CEO, to Marketing Director, to mailroom employee. You’re going to have to learn new skills and overcome some typical drawbacks that most of the small businesses face.
But do not worry. Whatever the challenge, there are tools to combat it. You can learn a lot from a deep Google dive, and a YouTube rabbit hole! Armed with informational resources, freelancers can do anything from calculating federal withholdings, to calculating your printing costs or even cleaning your printer cartridges! Life as a freelancer means rolling up your sleeves and getting your hands dirty!
How Do I Make Money As A Freelancer
Emil Lamprecht at Career Foundry offers these suggestions:
- Contact everyone you know and keep hustling. Every new contact is a potential new client. As one freelancer puts it, “doing the job you’re hired for is only half the job.” A good portion of your work time must be dedicated to lining up future jobs.
- Work on your personal brand. You might not feel like a product, but as a freelancer, you’re selling yourself. Make yourself easy to find, easy to remember, and good to know.
- Write a plan of action and stick to it. Pay attention to the competition. Anything they can do, you can do better…or cheaper…or faster! Find your marketing edge, and use it to leverage clients.
- Charge more than you’d expect. Freelancers have to pay for their own equipment, insurance, taxes, etc. You’re expected to charge a bit more. However, don’t shy away from offering discounts for repeat business. Suggest different product packages to employers. Maybe they only need you for one job, but if you give them a good deal on five jobs, they may rethink their budget.
- Get yourself a mentor. Nobody knows your business like someone who has “been there, done that.” Find yourself a good mentor, and listen to their advice!
How To Really Make Money As A Freelancer
What are most freelancers NOT doing that you should?
Marketing yourself properly.
The Wisebrand survey also revealed that 85.5% of freelancers do their own marketing.
But they’re not doing it very well.
Most freelancers spend less than $100 a month on advertising. The majority spend only three hours per week marketing themselves.
So you can use this disparity to your advantage.
Find what your competitors are doing and do it better. Put more energy into marketing, and you’ll make more money as a freelancer.
While “freelance nation’s” do-it-yourself attitude is commendable, it might not be the best course when it comes to promoting your business. A professional marketing firm can make your meager $100 advertising budget go further and deliver better results.
So, being a freelancer also means consistently investing in your marketing.
How Much Do You Need To Make?
Well, how lavishly do you like to live? What kind of food do you like to eat? What kind of clothes do you wear? What’s your monthly “nut” — your average expenses each month?
You’re going to need the answers to these questions — especially that last one — before you can figure out how much you need to make to survive. Chances are there will be additional expenses you haven’t thought of, like, health insurance and self-employment taxes. These two expenses alone can cost you well over $10K per year.
The amount you need to make as a freelancer depends on your specific circumstances such as your country, your expenses, taxes, the market you are in, your competition and so on. This means that you need to sit and research every single factor that contributes to your potential expenses and then calculate your hourly or project-based fees on that.
This is not an easy task and at times you can find yourself undercharging your clients, but this is also a part of being a freelancer. You and only you are in charge of everything and you are the only person who must control all parts of your freelance work, including the amount you need to make to sustain.
What Does Health insurance Cost For Freelance Employees?
Whoa. You’re asking big questions; too big to answer here. Everybody’s healthcare costs vary. The average American with health insurance through a federal marketplace plan paid $106 a month after subsidies in 2016, according to the Department of Health and Human Services. That number seems low to us. According to data gathered by eHealthInsurance, the average health insurance cost for single coverage was $440 per month in 2018. Of course, health insurance costs can vary greatly depending on your age, health, and lifestyle. As expected, family plans cost more than individual coverage.
How Much Do I Need To Save For Taxes?
You’re going to get hit with a 7.65% tax increase on top of your usual tax rate. This is the federal self-employment tax, which covers your contributions to Social Security and Medicare. Your full-time employer used to pay it, but as a freelancer, it’s now on you. Figure on setting aside roughly 25-30% of your income to cover your annual income tax and your self-employment tax. That’s the price you pay for being your own boss in America!
How Much Do I Need To Save For Retirement?
If you’re like most Americans, you’re probably not saving enough. Studies show that less than 4-in-10 freelancers regularly save for retirement. But a bit of forethought and sound advice goes a long way in the financial sector.
Barron’s has a helpful guide to setting up a solo 401(k) plan as well as other retirement savings options for freelancers.
Funding your retirement varies according to age and income, but a good rule of thumb is, save as much as you can afford!