Are you financially ready to freelance?

November 28, 2013

Here’s our checklist on getting financially ready to freelance.

 

By Diana Chai
Many of us have at some point thought of leaving our fulltime job and working freelance instead.

Who doesn’t want to have such freedom at work? Freelancers definitely have more say on workload and working conditions, however they also tend to have a very unstable income. Unless a person is already established and well-known in their industry; it is not uncommon for freelancers to go weeks, sometimes months, without paid work.

Because of the instability of it, you will have to prepare yourself financially before going ahead. Here’s our checklist on getting financially ready to freelance.

1. You have enough requisite experience
Though this may look unlike a ‘financial’ preparation measure; it will decide how successful your freelancing endevour is and if you will make any money from it. Many young people come out into the world thinking they can build a career at the beginning by freelancing but employers would rather bank on someone with experience. After all, they are paying you for output and will not want to waste resources ‘training’ you to do a job only to have you use those skills to aid other companies. It doesn’t make financial sense to an employer and hence will not get you jobs.

Collect work experience which will make you not only look reliable and accomplished to hirers but also to bolster your freelance fee.

2. You can balance accounts
As master of your own business and livelihood: financial management skills are a must. You don’t want to end up spending more on your freelance business than you are making from it or leaving little money leaks unplugged. Managing money is a little trickier when you are planning to eke a possible living from selling a service, talent or product but you don’t need to have financial and accounting background. Just know the basics and your way about a balance sheet.

3. You have enough savings
Because a freelancer does not have a fixed income, it is important to have good savings to ensure you are able to pay the bills in the leaner months. Even if you do complete a project; freelancer payments from companies aren’t always paid on time. Some can take weeks. In the meantime, you will still need to eat!

Calculate how much your bills and necessary expenses will cost you in a month. Once you have this number, ensure you have a minimum of six times this amount so you will be covered for at least six months should the projects not come in.

4. You have a back-up plan
Experienced freelancers will agree that aside from networking, a lot of freelancing opportunities are also seasonal. There will be specific periods in a year when assignments decrease, so having a second income will come in handy. It doesn’t even have to be related to your field. You could try your hand at blogging for instance and make some extra cash from advertising or try part-time tutoring.

5. You know how to live lean
Tapering your spending in the ‘leaner’ months will definitely come in handy. If you are the kind of person who doesn’t seem to be able to save money and are living paycheque to paycheque; freelancing may not be for you just yet! Not being on a fixed income will mean having to adopt a frugal lifestyle at times, at least until you have established yourself with long-term clients or have already made oodles of money.

Freelancing certainly has its perks. You get to be your own boss and steer your career according to your needs. However, it can also be a very uncertain path as you can’t be sure of when the next pay cheque will come in. Being financially ready is as important as having the talent and expertise.

This was brought you by Diana Chai from RinggitPlus.com. RinggitPlus compares credit cards, personal loans and home loans to help Malaysians get more for their money.