With merely a laptop and reliable internet connection, people from all walks of life are finding massive freelance success in 2021. Writers, graphic designers, and web designers, just to name a few, are quitting their 9-to-5 in droves, all in favor of self-employment opportunities online.
It’s easy to see why the opportunity to freelance is too good to pass up. You determine your work schedule, have the ability to say “no” to low-quality clients, and live life on your own terms. But, with massive potential also comes uncharted territory and uncertainty. What many beginners don’t know are the key financial steps you should take before quitting your 9-to-5 to ensure you won’t be living off savings.
At this point, you may be asking yourself – How do I do it? How do I face the realistic fears and downsides while also setting myself up for success? Leave that to us. Here are our top 5 things to do before quitting your job for full-time freelancing.
1. Track Where Your Money Goes
First things first, create a starting point. For at least one month, track where your money is coming in and being spent. Some may call this a “budget”, or a plan for how your money is currently being used. Tally up your rent, your average grocery bill, and everything in between. The numbers may surprise you when you have gathered everything up.
Once you have an accurate picture of how you are spending your money, use this information to guide your decision-making. Here are some of the questions to ask yourself:
- How many orders will you have to fill each month to pay your expenses?
- Is your spending reasonable and realistic for your expected income? Do you see places where you can cut down on spending?
- What will your “tools of the trade” cost you? Will you need a software subscription to deliver your freelance work (like
- Adobe Photoshop or Canva)? Have you planned for these expenses in your freelance journey?
2. Save an Emergency Fund
Freelancing brings on risk. These risks can pay off ten times over, but they can also bring fear and scarcity to the forefront of your financial life. So, before taking this risk, we highly recommend an emergency savings fund to fall back on in a worst-case scenario.
The actual amount in this emergency fund looks different for everyone depending on your situation. A good place to start is saving 3 to 6 months of your living expenses in a bank savings account. Remember, this includes the must-haves (electricity bill and basic groceries), NOT the nice-to-haves (Netflix subscription and going out to eat).
In a true emergency, or if you hit a slow season with freelance work, this is your safety cushion. After all, 2020 has taught us to always prepare for the unthinkable. Not only is this important for freelancers, but for any individual building financial freedom. You will be glad you saved for a rainy day!
3. Don’t Forget Taxes (But Don’t Be Scared, Either!)
The government will want their share of your earnings! Whether we like it or not, we cannot escape paying our dues. Without an employer to handle this for you, the responsibility to pay taxes will fall on your shoulders. This may sound scary, as the tax system is anything but simple. Luckily, there are plenty of resources to assist freelancers just like you.
A common rule of thumb is for self-employed entrepreneurs to save 30% of their revenue for taxes. Since your nonexistent “boss” will not be taking out taxes beforehand, don’t be blindsided when the tax deadline rolls around.
For all things related to taxes and accounting, please do not be afraid to consult the experts!
4. Be Patient
There’s a reason that they say patience is a virtue – it can make or break your entrepreneurial success. Those who are willing to work from the ground up and spend the most time in their market are the ones whose struggle compounds into prosperity.
In other words, success finds those who can stay in the game the longest and not demand instant success. Don’t throw in the towel if you have found no clients in a mere 48 hours of opening your first freelance gig.
A little faith can go a long way. You are exactly where you need to be, and with hard work the timing will always fall into place. While it may not be easy, resistance is how the strongest of businesses are built.
5. Prioritize Quality Work
A common pitfall of new entrepreneurs is getting distracted. For example, we all know that we should eat more vegetables and go to the gym 5 times a week. Still, we procrastinate, create excuses, and find other tasks to fill our day. Doing what is most important is a lot easier said than done. The same thing happens with new business owners.
While you may know in theory which activities help your business get off the ground, you may still find yourself spending an entire day crafting an elaborate logo or re-designing your website. At the end of the day, the best way to scale your business as a freelancer is to (1) find more potential clients, and (2) focus on delivering a quality service. Doing anything else is building a house on a foundation made of sand.
Focus on the most important tasks and learn to eliminate what no longer is worthy of your time.
Being a self-starter is one of the most exciting journeys you can ever partake in. While some journeys are more treacherous than others, you can take pride in building something by yourself and for yourself, which can later provide for you year after year. Quitting your day job to pursue freelancing is a very noble career, with all the ups and downs that come with it. Best of luck on your entrepreneurial journey, and stay tuned for more self-help and financial wisdom for online entrepreneurs like you!
Like what we have to say? Sign up to subscribe to email alerts and you’ll never miss a post.
