With the COVID-19 outbreak, freelancing has gained a lot of popularity as employment became more remote-focused. More people now consider adopting part-time hustles or freelance gigs to fit their post-covid lifestyles.
In fact, in a 2020 study, Upwork found that 1 in 3 Americans now have some sort of freelance job. The study revealed that around 59 million Americans completed freelance work that year, accounting for 36% of the U.S. Workforce. According to Statista, this number is expected to increase considerably by the year 2027; 86.5 million people will be freelancing in the United States and will make up 50.9% of the total U.S. workforce.
Although a freelancing lifestyle allows you to become your own boss, choose the projects that suit you, and manage your time as you see fit, individuals who work on a contract basis know that their income can fluctuate depending on the amount of work taken in each month. As a result, the self-employed are often worried about surviving the present and might feel less secure in their ability to save money for the long future
If you’re thinking of entering the gig economy, financial management becomes even more challenging to handle. You're forced to wear the accountant, tax manager, and financial advisor hat in order to cut costs, save money, and achieve long-term security. To help you achieve that, we’ve compiled a list of suggestions you could do on your own to take control of your financial wellbeing. Let’s get started!
Set Up An Emergency Fund
It’s important to build a comprehensive budget, whether you’re a full-time employee or a freelancer. However, the income irregularities for freelancers puts them in a riskier situation of someday not being able to pay their bills due to a slow few weeks or months.
Life is unexpected and having an emergency fund greatly helps you to keep paying the bills. You never know when your car might break down, or when your pet needs an emergency vet visit.
Most financial experts advise setting aside at least $1,000 for an emergency. Don't fret if you don't have $1,000 in your savings account right now. Simply continue to prioritize the growth of your emergency fund. Even if you just contribute $10, $50, or $100 every month, it's better than nothing.
Keep that emergency fund running in the background until the day you REALLY might need it. And make sure that emergency fund has at least enough for 3 months’ worth of expenses.
Create Separate Accounts for Your Money
It’s recommended that freelancers create four separate bank accounts in order to help manage their money better:
You can also have an additional business savings account for the money you dedicate as an emergency fund for your business, as well as a “fun” account where you allocate a portion of your income for just living your life.
This method allows you to better track your expenses and helps you to build a comprehensive budget. At the end of each month, you’ll know exactly where you need to put your money and how to divide it as you see fit for each account.
Build Up Your Profile & Learn New Skills
When you’re a freelancer, you and you alone are responsible for growing your career and moving up the ladder. Many people stop looking for education when they receive their bachelor’s degree, thinking that they can rely on that degree for the rest of their freelance careers. And in some cases, that’s true. But why not up your qualifications?
Your freelancing power comes from your skills and you get compensated for these skills. But because the economy is constantly evolving with new technologies being introduced, some of these skills can become outdated.
It’s in your best interest to always keep up with what your industry is looking for. Make sure to get in those workshops, learn new skills, or even better your existing ones. Take classes, read new books, work with mentors, and experiment with new platforms and technologies!
When you upgrade your freelance profile, recruiters are more likely to trust in your work as they see the dedication, even if you have just started on your own.
Try to Live Below Your Means
We’re not saying you need to live your entire life only working and sleeping; that’s depressing! But most people don’t realize that a lot of money is unnecessarily spent on things that could be dispensable.
“In my case, I had to trade in my expensive car for something less sexy but reliable with a lower payment. I sold most of my designer clothes online and embraced a minimalist wardrobe. I downgraded to an apartment outside the city that was half the price I was paying previously.” Kristen Walters, a previous full-time attorney, now a successful freelancer, shares her own experience of what she had to let go of in order to achieve financial wellness.
Changing the way you live your life and letting go of a few luxuries is hard and painful but it’s easier to navigate than having to run around securing scraps for this month’s expenses. If you’re struggling to know how to live below your means, check out this article to help you figure out where to start and what to cut.
Look for Individual Insurance Policies
A career as a freelancer puts you in a position of having to look for your own insurance policies, study what’s best for your lifestyle, and how much you can actually afford.
First things first, you have to think about Medical Aid, even if it’s just a hospital plan, because the younger you are the cheaper it is.
Additional to Medical Aid, disability insurance is also important. At Asteya, we realize that Millennials and Gen Zs often rely on freelancing, and we want to stand by you. We’ve built a fast and 100% digital disability income insurance, whose goal is to secure your income in case you find yourself unable to work for a period of time due to an injury or accident.
At first, you might think, “I don’t need that type of insurance, I’ll always be able to work!”. And we hate to be the bearer of bad news, but unfortunately, that’s not always the case. The reality is life happens and securing your income can be a real lifeline in times of need (and it starts at $6/month!).
The Bottom Line
Life as a freelancer is very freeing and offers a great sense of accomplishment, but it comes with a set of challenges of its own that are hard to navigate alone. So, if you’re willing to delve into the gig economy and become a successful freelancer, commit to yourself, invest in your skills, build a comprehensive budget, and keep money aside for emergencies. Understanding the risks and setting proactive measures will surely help you reach financial wellness.