There are a number of things freelancing offers, but a guaranteed steady paycheck is not one of them. Neither is paid time off for vacations, health insurance benefits, retirement planning, or free breakfast on Thursdays from your manager. Unless you buy yourself breakfast on Thursday, in which case, congratulations, you have at least one perk.
However, just because these things are not provided for you by your employer does not mean you cannot have all of them. Since you are your employer, you can set these things up for yourself. “How?” you ask while eating a peanut butter and jelly sandwich and trolling job boards for your next gig.
It’s easier than you think. Here are some simple steps.
A Guaranteed Paycheck
Okay, so you don’t have luxury of a human resources director cutting you a check twice a month, but you can structure your business so that when things are good, you save, that way when things are lean, you have money in the bank to pay yourself a salary.
Set yourself up as an LLC. You should do this anyway, as it protects you from personal liability in some cases, but also because you can be your own employee and pay yourself like one.
Don’t dip into the company funds. If you have it saved for a rainy day, leave it. The newest MacBook Air is not reason to delve into savings. Promise yourself an annual bonus if you do well. Other than that, leave the money in the bank.
Don’t forget taxes. Not saving a portion of the money you are paying yourself for taxes? April could be a bad month for you. Open a tax savings account and save your own taxes for when you will inevitably have to pay them. Beware of tax fraud too, and be sure you know your rights or consult an accountant.
This system is not perfect. You will still have lean months you won’t be able to cover, but it will help equal things out for you.
Paid Time Off
This works the same way your taxes do. You not only have to save for that dream vacation, but you need to save so that you can pay your bills while you are gone. You also have to consider your client load: no one will pick up the slack while you are gone, so you need to plan accordingly so you don’t have to come back from vacation and work twice as hard to catch up.
- Make A Calendar: Give yourself some time off each year, plan it in advance, and let clients know what days you will and will not be available.
- Needs and Wants: How much do you need to have in the bank when you get back to pay your bills? How much do you want to have so that you feel comfortable. Come up with a number, a plan to reach it, and stick with it. Don’t dip into this fund unless it is absolutely essential.
- Book it Early: One of the surest ways to ensure you will actually take your vacation is to book it early. Put down a deposit, book the room and airfare (although you might want to make sure it is refundable just in case disaster strikes).
This takes some self-discipline, patience,and planning skills, but you already have those as a freelancer, right?
Health Insurance Benefits
This one has a lot of freelancers worried with the new administration, but don’t worry. Freelancer’s Union offers a way to find and purchase insurance, but even if you live in a state where they do not have plans set up yet, there are things you can do to find your own insurance.
- Shop Around. Use the healthcare.gov marketplace, an agent, or other internet resources to compare plans and rates. This is a little tougher since Google shut down its insurance comparison tool, but there are other options. Beware of the spam that might fill your inbox from some of these sites though, and be sure you read the fine print before submitting your information.
- Know Your Limits. Know what you can afford. I am sure you have already structured your annual budget by now and at least have some estimates of what you can afford based on last year’s numbers. Make your health insurance a priority.
- Evaluate Your Health. If you are young and in good health, a high deductible plan coupled with a Health Savings account might be a good idea. If you are a little older, it may be wiser to spend more on premiums and get a PPO type plan.
- Open a Flex Savings Account or Health Savings Account. Not all plans allow for a Health Savings Account, but even if they do not, you can open a Flex Savings Account. Different rules govern each of these, so be sure to do your research or consult an agent before you open either one.
- Take Care of Yourself. One of the best things to insure your health is to take care of your body. Go to the gym. Have regular checkups. Watch your diet. Many of these are difficult for writers. Set yourself some fitness goals and abide by them.
These may seem like basic financial and health planning tips to some, but often we need to be reminded that, while much of our work is done with our minds, we need to care for our bodies as well.
Many writers tell me they will never stop writing, and that may be true, but how much and what you want to write may change, and that will definitely have an impact on your income. Here are some simple ways to invest, even if you start small.
- Pay yourself first. Start with a percentage of your income, even if it is small, and invest it in an IRA account.
Plan according to your age. Depending on how old you are, what age you want to retire at, and how much you want to have to fund your retirement, you should invest accordingly. A professional can help you decide what risk you can handle, and how aggressive you need to be with your money.
- Don’t Cash Out. You should have an emergency savings account in addition to all of the other accounts you need. Your IRA should never be cashed out except in the most dire of circumstances. Not only is there a huge tax penalty, but you will have negated your progress toward investing for your future.
Investing for your retirement is one of the most critical things you can do as a freelancer, and it should always be a part of your annual financial planning.
Stability is hard to come by in the freelance world. Even the best clients come and go. But you can be your own stability with some sound financial planning and following some simple, yet sometimes difficult steps.
By day Troy writes non-fiction. By night, he writes suspense novels. He lives, works, and plays in Boise, Idaho with his wife, son, and two dogs. He hikes, cycles, fishes, skies and golfs (horribly).
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