Four Financial Lessons I’ve Learned as a Freelancer


Have a safety net. This is so important if you’re a freelancer. I was without a safety net two times in my career and the stress was so not worth it. The first time, I took the freelance plunge too soon. After graduating, I was still working the part-time job I had all through college and university while I was looking around for clients. One of my colleagues innocently asked why I was still working there and not in my field. I didn’t have a good answer back then, so I decided to quit my job and become a full-time freelancer. With no clients. And not much money put aside. Bad idea. I ended up not having much work, taking things I was not qualified for and having to be supported by my then-husband. Not a nice feeling. Out of desperation, I ended up working for a subcontractor for peanuts. Had I still had my job or a nice cushion in the bank, I would have had time to look for better jobs and be in a better position to turn down insanely low rates. Moral? If you’re making the transition from salaried worker to freelancer, have money aside. Even if you do have a few clients, work might not be steady for a while, or ever. Also, have a plan. Ideally, keep your job for a while as you begin to advertise and make contacts. Get somewhat established, then strike out on your own.

The second time I leaped before I looked was two years ago. I had moved back in with my parents after my divorce and after eight months, I was eager to have my own place. I was debt-free, but I didn’t have a lot set aside besides closing costs. My parents said I could stay with them as long as I liked (rent-free!) and encouraged me to save my money. While somewhat wiser than I used to be, when I found the perfect house, desire overrode logic. I decided to buy, confident I would be able to comfortably pay my mortgage and utilities given that my salary had been constant for the past five years. Well, not long after I moved in, work went dead. Zero money was coming in. At one point, I had to buy groceries with my credit cards. It was a very scary feeling. I kicked myself a lot during those frightening weeks and months, as I lay awake staring at the ceiling, my mind turning and turning, looking for solutions. Work eventually picked back up again as it always has. But I’m still paying back that debt and I still remember that worry. A hard lesson learned. Moral? Freelancers can buy houses on their own, but they need a cushion. Ideally, you should have at least three months of living expenses put aside. That’s not easy, but it’s worth some sacrifices. This way, when it does inevitably get a little quiet, you’ll know you can weather the storm.

Put your taxes aside every time you get paid. This is the best way to make sure you always have the money for your quarterly taxes and income tax. Determine the percentages you need to set aside and every time you get paid, put that percentage in a dedicated tax account. It will quickly become a habit and you’ll be a lot less stressed come tax time!

Budget for your variable income. I’ve tried budgets before, but given my variable income, I never found them to be very helpful. Unfortunately, most financial advice is geared toward people who get regular paychecks. That’s why I was so glad to find The Money Book for Freelancers, Part-Timers, and the Self-Employed: The Only Personal Finance System for People with Not-So-Regular Jobs – Josepth D’Agnese and Denise Kierman. There’s a whole system, which basically boils down to setting money aside in percentages and paying yourself first. As you would for your taxes and income tax, you put aside a certain percentage for savings, retirement, etc. ever time you get paid. Why percentages? Because it’s easier to calculate on a variable income. If you had a regular paycheck of a few hundred dollars, you could put aside $50 per week. If you sometimes receive $75 and sometimes $8,000, a given amount is not as practical. A percentage better reflects what you’re earning, especially since you can’t know at the beginning of the year what you will have made by the end.

Start at industry standard rates. If you start at the bottom, it will take a long time to make it to the top. Not only that, you’ll be dragging down the industry by accepting low rates. A big no-no. Most clients aren’t crazy about rate increases, so as you gain experience and confidence, you’ll only be able to charge your new, higher rate to new clients. That means finding new clients, gradually phasing out old, low-paying ones and keeping track of different rates for different clients. Bypass this headache by researching and charging standard rates from the get-go. You might think it best to charge less because you’re new to the game, but why not use that “extra” money to get an established professional to go over your work and guide you in the right direction. This will help you gain confidence and make sure your work is of good quality.