Full-time freelancing is a perfect storm of independence, excitement, adventure, hard work, responsibilities, and challenges. If you’re considering taking the full-time freelancing leap, here are a few essential questions, both of a financial and personal nature, that you should ask yourself before you become fully airborne.
What Are You Trying to Accomplish?
First and foremost, what is your goal by going full-time into freelancing?
Are you entrepreneurial at heart and you want to forge your own path? Are you feeling bored at your current job? Are you simply sick and tired of the rat race? While these last two are reasonable motivators, if they’re your primary objective in going into freelancing, you may run into trouble before long. There’s a good chance you’re going to find that the grass isn’t necessarily greener on the other side of the fence — it’s just another shade of the same verdant foliage you’re used to.
If true financial and professional independence is your goal, by all means, take the leap. If you’re simply looking to get out of an unpleasant current work situation, though, don’t make the mistake of seeing freelance as a “land flowing with milk and honey” solution, or you’ll be severely disappointed.
Are You Ready to Separate Your Personal and Business Lives?
Freelancing requires a lot of work on the administrative side of things — a fact that many overlook in the name of pursuing their passions. However, unless your passions consist of filling out forms and paying taxes, it’s important to understand what business responsibilities come with being self-employed, such as:
● Choosing a business structure: Will you be a sole proprietorship, an LLC, an S-Corp?
● Setting up a bank account: You need to keep your business income and expenses separate from your personal life.
● Paying yourself: Payroll is both a tax concern and a business expense, and as such, it’s something that should be handled carefully.
● Tracking expenses: Mileage, work equipment, training — make sure you’re ready to keep track of expenses that can be a tax write-off.
● Business insurance: Do you need legal protection while you work on each gig?
● Paying taxes: Are you ready to pay quarterly estimated taxes and file returns? As with unemployment benefits, are you prepared to track taxes on federal, state, and local levels? Do you need an accountant lined up to help you? Can you afford one?
Remember, most of these are unglamorous, unpaid activities that come along with the money-making stuff. Make sure you’re ready to put in the administrative grunt work before you sign up for the freelancing lifestyle.
Do You Have a Short- and Long-Term Financial Plan?
Freelancing income can often take time to become well-established. Do you have solid short- and long-term plans in place while you find your financial footing?
For instance, have you created a freelancing budget? Do you have an emergency fund to help with any unexpected expenses while you get started? How do you plan on replacing common workplace perks like healthcare, retirement savings, or even a company phone?
If you have pre-existing financial concerns, how are you going to address them? For instance, you do have student loans that have defaulted during the pandemic? If so, do you have a plan to get out of default or will the situation drag down your new freelancing career?
Or, consider the state of your credit. Is your credit score low? As a business owner, you may need to borrow money at times, which requires a good score. Can you increase your score quickly by setting up autopay, asking for late-fee forgiveness, or paying down existing debt?
All of these considerations — along with actually knowing how you’ll get steady work in the months and years ahead — should be carefully considered.
Are You Emotionally Prepared?
Finally, consider your emotional state as you prepare to dive into starting your own business.
Start with your personality. Are you the kind of person who can thrive in a work-from-home or independent workplace environment? Have you considered ways that you can improve your remote work situation, such as building new work routines, setting up a dedicated workspace in your home, or utilizing productivity techniques to help you stay motivated?
What about the emotional stress of running your own business? Are you ready to be rejected by potential clients or confronted by upset ones? Do you feel prepared for the responsibility of running your own business and always being “on call?” Can you maintain a sense of work-life balance when your work is such an integral part of your lifestyle?
Preparing to Freelance Full-Time
All of the above considerations aren’t meant to dissuade you from freelancing full-time. On the contrary, they’re meant to put you in a healthy, realistic mindset as you consider making one of the most exciting, fulfilling, and challenging decisions of your life.
Freelancing is a rewarding lifestyle, but it is by no means an easy one. If you decide to go full-time, it’s crucial that you consider everything that the decision entails and then go into the career pivot with both eyes wide open. Only then will you have a genuine shot at success.