A New Freelancer's Guide to Funding & Retirement

May 30, 2022

(Art Credit: Andrea Hernandez)

Securing funding and prioritizing retirement should be parts of every freelancer’s business and life plans. But most of the time, they aren’t.

Freelancers struggle to pull in enough to pay the bills AND save. They’re funding everything out of their own pockets, which can be incredibly overwhelming.

But what if you could relieve some pressure financially and start on a path to early retirement? We’re happy to tell you that you can.

With a bit of creativity and a spotlight on good financial habits, a thriving business and retirement are within reach. Here’s your new freelancer’s guide to funding and retirement.

Explore All Funding Options

As stated above, freelancing is tough because most of us use our own money to keep our businesses afloat. It’s such a relief when you can get additional funding from other places to grow your operation. You can also use extra financial help for living expenses.

If you can get a traditional small business loan from a bank, do it. Work with your banker on suitable loan terms and the lowest interest rate you can get. When you receive your loan funds, use them wisely. It might be a good idea to draft a plan for the loan funds, whether you plan to use them to hire an employee or scale your marketing strategy.

If you have trouble landing a traditional business loan, consider creative alternatives. Personal loans and lines of credit are available to freelancers. So are alternative lenders like private online companies offering personal finance solutions. You could even get the funds you need for your business through crowdfunding or grants geared toward freelancers.

Ample research is the first step to getting any of these funding options. In addition, keep all your financial and other business documents organized and easily accessible should you need to provide information for one of these opportunities. Be sure that every application you put in fulfills every requirement. Finally, follow up until you get a final answer on each option you pursue.

When you get funding and start making money as a freelancer, it’s important to have a designated account for your retirement funds to stay on track.

Open an Individual Retirement Account

Start your retirement savings with a simple contribution each month to an individual retirement account (IRA). The most appropriate IRA for you depends on:

  • Your retirement savings goals
  • If you plan to withdraw money early
  • How much income you generate each month
  • How you want to diversify your investment portfolio
  • How much help you need to open and maintain your account

Whether you set up a Roth IRA, Traditional IRA, Solo 401(k), or SEP IRA, budget for the max contribution. Understand the tax benefits available to you with these accounts and how to take advantage of them. Be sure you’re aware of any penalties associated with early withdrawals. And dig into the rest of the details about your chosen account until you thoroughly understand everything about it.

When your retirement account is open, getting in the habit of saving is crucial.

Get in the Habit of Saving

When you find funding, you have to use the money responsibly. Also, you have to be diligent about saving for retirement once you get your accounts set up. Getting into the habit of saving and sticking to a budget will help.

Create a budget for your freelance business. Note all your income and add up all your fixed and variable expenses. Don’t forget to account for your salary. See what’s left over after all expenses and salary are paid. Allocate leftover money to your business savings accounts and investments.  

Repeat the budget process for your personal finances with the salary you pay yourself. You should have a line in your budget for money allocated to your retirement savings account. You should also get in the habit of setting aside money for healthcare expenses and emergency funds.

Being consistent with your budget and savings are key. Use a budgeting tool if you have to, but just stick with it.

If you aren’t totally comfortable with finances, look to a financial advisor for help.

Enlist the Help of a Financial Advisor

It’s a smart move to work with a financial advisor. Financial advisors can help you set up your retirement accounts correctly and maintain them. In addition, they can ensure you fully understand your benefits.

They’re also great people to have on your side to help you put your freelance income to work for you. Furthermore, financial advisors are great resources to tap into to learn about changes to IRS rules for retirement that affect freelancers.

Determine if you have money in your budget for a financial advisor. If you do, research potential fits in your area specializing in working with freelancers. Set up consultations with your top choices and go from there.

Conclusion

Navigating funding and retirement as a freelancer doesn’t have to be overwhelming. Having everything in your hands can be just as beautiful as it is scary. Use these tips to help you take charge of finding funding for your freelance business and achieve the retirement life you envision.

Noah Rue

Noah Rue is a journalist and a digital nomad fascinated with the intersection between global health and modern technology.