So You Want to Be a Freelancer?

Today’s guest post is by Emily from Maiden Voyage.  She’s a working freelancer and if anyone knows how to make it work, it’s someone who can stitch together a living on their own talents and network.  Freelancing definitely isn’t for the timid, but if you want to make it work, here are some tips.

Nearly every neophyte knows they need business cards and a website to launch their career, but there are plenty of other things to be aware of before diving head-first into the world of freelancing. Read on for some of the tips and tricks I have learned throughout years of freelancing and from countless other freelancers I have encountered.

Save Before You Quit

Most people start their freelance careers on the side of their day job with a few gigs here and there. Some of these folks venture out to become full-time freelancers, and while the freedom can be thrilling, it comes with much less certainty than a day job. Freelance work can fluctuate greatly month-to-month as clients come and go and projects ebb and flow. Some of us may be lucky enough to have a spouse with a very stable income that allows our earnings to vary, but not all of us have a fallback.

Before you quit your job to freelance, you should save up several thousand dollars –ideally, at least three full months of living expenses. This buffer will protect you should you have a bad month or if a client drops out. Additionally, you should never let one client be more than 30% of your income — if they end business with you for any reason, you want to still be able to afford your rent or mortgage!

Side note: Remember that most day jobs include health insurance, disability insurance, paid days off, and other benefits. When you’re freelancing, you won’t have these benefits, so you should factor this into your rates once you’re out on your own.

Hire an Accountant

Once you are making a certain amount of money (the number is based on a variety of factors), you need to start reporting your freelance earnings quarterly to the IRS. You will be filling out a 1040 ES form for your quarterly estimated taxes.

If you are just working several small gigs here and there, you won’t need to do this. But if you are earning a few hundred dollars a month or more, you should look into it. We all know the IRS doesn’t appreciate it when people don’t pay their taxes. Once I realized I was probably at a point where I needed to begin filing taxes, I tried to figure it out myself. After painstakingly reading books, websites, and doing complicated calculations, I decided it was easier to just meet with an accountant who knew what he was doing. Once you give your accountant the low-down on your finances and earnings, they will calculate how much you need to submit to the IRS each quarter. If your income changes greatly during certain months, you should let your accountant know so they can adjust this quarterly estimate so you don’t pay too much or too little. An accountant can also help you identify all of your deductible expenses, which decreases the amount of taxes you pay. This includes computers, website hosting, memberships, home office space, car mileage, conferences, and much more. Be sure to keep all of your receipts so you can actually enjoy these deductions!

You really don’t need to hire an attorney unless you have questions about copyright and trademark issues for your brand. You are automatically a sole proprietorship— you don’t have to do anything to get that title. You don’t need LLC or S-Corp legal status at the beginning of your freelance career—it costs extra money and changes the way you do your taxes.

Get a Business Credit Card

While you may think it will only complicate matters, having a business credit card can really simplify your finances. As mentioned before, most businesses expenses are tax deductible. To easily keep track of these expenses, you can charge them on your business credit card. At the end of each quarter, you can run reports and see how much you spent and in which categories. The former personal finance reporter in me wants to remind you that you should always pay your credit card balance in full when possible.

If you love to travel, business credit cards also come in handy—many coincide with frequent flyer programs. For example, I have the Continental Chase Business MasterCard. When I signed up, I received a 20,000 OnePass mile bonus. I receive one OnePass mile for each dollar I spend on the card, plus two times the miles for office supplies. I also receive two President’s Club passes each year, in addition to savings vouchers twice a year. I get email newsletters about other opportunities for earning miles. Best of all, if I purchase Continental airfare with my Continental credit card, I get double the amount of points (plus additional points for the miles I will fly!). If you use the card often enough, mundane business expenses can add up to free travel!

Use Contracts

Nobody likes contracts—they’re boring, confusing, and formal. But if you avoid them, you will likely find yourself in a position where you aren’t getting paid and you’ll wish you created one.

Some clients will proactively create a contract outlining your working terms and will send it to you. If this happens, review it carefully and ensure everything sounds favorable to you before signing it. If they give you nothing, put your own together and send it to them for signing.

You should ALWAYS ask your client to sign a contract that outlines:
1 ) What work you are performing
2 ) How much you being paid (by hourly or project fee)
3 ) Length of project, if applicable
4 ) How you will be paid (mailed check, PayPal, etc.)
5 ) When you will be paid (30 days is a common timeframe)

For large projects with new clients, it is not uncommon for freelancers to ask for a deposit or for a portion of the payment up-front. There have been several times in my career when I wished in retrospect that I had done that!

You should also never shy away from using a contract if you are working with a friend or acquaintance. While you may have a great working relationship, they also may be casual about things and not make it a priority to pay you on time (or at all). A contract is there to protect you and make sure you can hold your client accountable for paying you for your work. You can find numerous sample contacts online if you just start Googling! If you are already paying a lawyer for help, you may want to ask them to write one up for you.

Where to Find Work

So you feel prepared but don’t have contacts lined out the door? Along with others, I advise Elance.com and Guru.com as places to get started. Freelancers bid on gigs, and the businesses select the winner based on their credentials and bid amount. They have gigs for everything from graphic design to eBook writing to administrative assistance.

If writing is your specialty, Freelancewritinggigs.com is a valuable resource. Each day, they scour the web for freelance writing jobs and post them in an organized list. Craigslist can be difficult to weed through, but Freelancewritinggigs.com pulls together some of the best from it, plus those from a variety of other sites. They also dole out freelance writing tips, business tips, and insight into how much certain websites and publications pay.

Good luck!

About the Author

Emily Starbuck Gerson is based in Austin, Texas, but she has done freelance writing, editing, and social media for clients around the world. She currently works in marketing in the travel industry by day and runs her own travel blog, Maiden Voyage on the side. Emily’s background is in journalism, and she has been published in a variety of websites and publications, including About.com, TravelIntelligence.com, Tribeza Magazine, TexasMonthly.com, and more.

Pics: A National Acrobat and Annie Mole