How to Survive the Freelance/Contractor Life

I’ve done a lot of things in my life, held a lot of jobs. But the most challenging life I lived was in my 20’s when I worked as a freelance contractor.

Living as a freelance worker has numerous challenges. Most of these challenges are in the financial realm, but it’s true that there are challenges in many different aspects of the life.

It’s feast of famine, most of the time. Jobs come and go, stay and leave quickly, so being prepared in all aspects of your life is more important than it ever will be in your entire life.

So here are a few things that I found during the six years I worked as a freelance contractor.

Watch your income… it won’t be steady — at all

Some people have great success at getting their bids accepted, but to be honest, it’s more of a strength for some than it is others. With this is in mind, you’re probably not going to be working all the time. On the flip side, you could be working extensively for a period of time. It’s about finding balance, professionally and personally, that will aid you in making the most out of your freelance situation.

Much of the problem comes from the actual bidding process. There will always be people out there that are willing to undercut your bid with a smaller bid, which puts you in a tough position. The key to surviving these situations is to NEVER underbid yourself and put yourself in a tough position. Sure, money is money, but you’ve got to think that you are spending valuable time on something you could have done for a lot more money. If you’re good at what you do, show people and they will reward you.

Clients can be bad

You’ll run into more than your fair share of clients that are tough. These are the ones that want changes, ask for updates, and generally, mine into your process. But, there are also clients that steal, drag their feet, or delay payments for no reason.

It’s the clients that don’t pay or delay your pay that can really put you in a tough situation. The better you prepare for this type of situation financially, the better. These types of situations will happen in your time freelancing, so you need to prepare.

You’ll need to set a schedule

One of the biggest appeals to freelancing is the fact that you get to set your own hours. But, this can also be a bad thing. Inconsistency can hurt anyone, but consistency is particularly helpful in the freelancer’s world.

It’s important to set a schedule and stick to it. It’s very easy to be unproductive when working from home, so think about setting up a home office or finding a schedule that can be easily followed on a regular basis. Not only does a schedule help you carve out times during the day to work (why not do a 9-5 schedule?), but it can also help you give specific allotted times for each client you are working for.

Financial Tips

If you want the whole freelance life to work, the most important thing you can do is to pay attention to your finances. This is important for anyone, but it is particularly important for freelancers.

Create separate bank accounts

Everyone fears the IRS and their ever-changing rules, but you can make them a little happier by creating separate bank accounts — one personal, one for your business (it is a business; after all, you are providing a service for a fee). Not having separate bank accounts can be a good way to get audited.

The business bank account will serve as the account that clients pay directly into. Even if you own the business or run your freelance gigs through your own name, having this extra bank account will clear up which money goes where and what it’s for. You’ll also want to make sure that all your online bill pay accounts are linked to this account. Whether you send invoices online or accept checks, you need consistency.

Organize your receipts

Oh, audits… they can be a real pain and set you back for a while. But, sometimes these audits happen, especially to freelancers. The best thing you can do for yourself is to save your receipts and keep everything else in order.

You can do this by saving them in simple manilla folders. It helps to organize them by date and type of receipt. This will absolutely help you when tax season rolls around and you are looking for those deductions.

But, not everyone holds onto things that long anymore. You can also use a PC-based or online accounting program to keep track of your receipts. It’s still a good idea to hold onto those receipts, though.

Pay your taxes

Yes. I said it. Pay your taxes. A lot of people, though, don’t remember to pay their taxes because they don’t get a form from their employer like people who work in offices.

The government allows people to pay their taxes quarterly. This is probably the best bet for freelancers. This allows you to set aside money from each “paycheck” that goes directly to an account that is sent to the IRS for tax purposes. You’ll have smaller bills to pay throughout the year, rather than having one lump sum to send to the government at the end of the year. This is where setting up separate accounts come in handy. You can take the money you’ve set aside for taxes and pay it directly from your account. The best thing that can happen is that you’ll get a refund at the end of the year. The worst thing that can happen is that you’ve lowered your bill at the end of the year. which isn’t a bad thing by any means.

When filling out your quarterly taxes, be sure to include any write-offs you may have incurred during that three-month period, just as you would at any other tax-paying time. Things that can be included as write-offs include computers, printers, or anything else that you purchased to help you with your job.

Put yourself on payroll

The benefits of this are numerous. Yes, you are getting paid directly by the client, but this goes back to why you created your separate accounts. You’ll have other needs for that money, too. It also serves other functions.

The first of these is that you will feel some semblance of normal. You’ll be getting paid on a regular basis, you’ll be able to save money for vacations and other things, you’ll be able to better prepare for bills.

The second is that you’ll get used to the money. Essentially, you’ll be getting paid on an hourly basis. This helps you prepare, work-wise, for “pay day” and you’ll want to make sure you’re getting paid what you need to get paid.

The third is kind of an umbrella, but it’s still important. This helps you feel more in control of your finances. By receiving a regular paycheck, you know what is coming in that month and you know what you can spend. It also helps you keep from sliding into your business account for personal reasons. You’ve got to find balance, and this method certainly aids in that.

Get healthcare

Being healthy is imperative to anyone. But for freelancers it can certainly feel like it is more imperative. Any time taken off is cutting into your “salary”.

Finding healthcare that is affordable and actionable can be a daunting task, but there are resources out there that help you find what you need.

Getting healthcare from a big corporation can be difficult, whether it be because of pre-existing health conditions or whatever — there are a ton of excuses they’ll use. Organizations like Freelancers Union offer healthcare options if you are personally employed. No matter where you go, you’ll need to ask questions and find answers that satisfy your needs.

Being a freelance worker can be really rewarding. The hours are great and the freedom afforded by it can give you opportunities to do things you’ve always wanted to do, but you need to do it right. You need to be prepared and make sure you make sound decisions.

When filling out your quarterly taxes, be sure to include any write-offs you may have incurred during that three-month period, just as you would at any other tax-paying time. Things that can be included as write-offs include computers, printers, or anything else that you purchased to help you with your job. Online tax tools are great aides in calculating deductions.

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