There are so many reasons why being a freelancer is fantastic. Great flexibility, income and avoiding the 9 to 5 are hard to beat but there are some financial difficulties that most freelancers face. If you are thinking about getting involved in freelance writing, here are six things to take into consideration.
1. INCOME VARIABILITY
The nature of being a freelancer has the potential for extreme variations in income. Rather than the traditional biweekly constant paycheck, a freelancer only gets paid after they finish a job. It is important that writers have a cash cushion to pay for expenses when the income is not coming in. A freelancer should have the discipline to save significant portions of their earnings during their productive times in order to build up this cash reserve.
Under many tax codes being a freelancer is essentially similar to being self-employed which entails significant responsibilities to satisfy the authorities. These responsibilities can be a huge shock to someone who is used to having an employer handle the tax calculations and withholding for them. It is vital that freelance writers maintain accurate and detailed income records and it may be a good idea to engage an accountant to help handle tax issues.
3. SETTING PAYMENT RATES
Deciding how much to charge for writing may be one of the trickiest parts of being a freelancer. Finding the ideal rate may take time and patience. New freelancers who do not have extensive bodies of work generally must settle for a lower price in order to get jobs. Once a freelancer has relationships with clients and a reputation they gain pricing power and are able to charge higher rates and be more selective of particular jobs.
Once a job is agreed upon or completed it is important that the freelancer receives payment. Common payment methods are online services (such as PayPal) but these often charge fees for each transaction. It is important that the freelancer and client both know the terms of the job and it is often incumbent upon the freelancer to keep records of work completed and to send invoices to the client for payment.
5. HEALTH INSURANCE
Self-employed freelancers may also on their own when it comes to procuring health insurance if they are not covered by a spouse/partner or other group plan. With the rising cost of health insurance it can be a major hurdle to find affordable yet adequate coverage. There are many options available depending on an individual’s health or financial status and there are also numerous organizations or industry groups dedicated to helping self-employed persons sift through the choices.
6. RETIREMENT SAVINGS
Self-employed freelancers are responsible for their own retirement savings and do not have the benefit of company 401(k)s and automatic paycheck deductions. Common tax-advantaged accounts include Individual Retirement Accounts (IRA). If a successful freelancer earns more than the income limits for an IRA there are other accounts (such as SEP Accounts) that may be established with the help of an accountant or financial advisor.