15 Finance Experts Share Smart Strategies For Aspiring Full-Time Freelancers

From filing specific paperwork to paying quarterly taxes, freelancing comes with its own set of unique rules that must be followed.

As part of the “Great Recession,” some professionals are opting for the flexibility that comes with freelancing. Freelancing comes with great benefits, like being able to choose your own projects and pay rate and working from anywhere, anytime. But as with any other job, freelancing comes with challenges, and it’s important that aspiring freelancers are aware of these challenges before going full-time as an independent contractor.

From filing specific paperwork to paying quarterly taxes, freelancing comes with its own set of unique rules that must be followed. To help the growing freelance workforce, below 15 members of Forbes Finance Council share their top financial tips for those looking to make a full-time living in the gig economy.

1. Understand All The Risks And Benefits

Treat your job like a business. Make sure you understand all the risks and benefits of this new position. For example, what do your retirement savings look like? Do you have health insurance? How much should you have saved for your own paid leave? Family planning, vacations and more can all be impacted by a freelance lifestyle and career. – Karim Nurani, Linqto

2. Create A Business Identity

I would recommend creating a business plan with some flexibility built in for opportunistic inspiration. Create a business identity for tax and business purposes that allows you to formalize your freelance efforts. There are many financial exemptions and saving opportunities that it’s important to be aware of as a self-employed person. Plan for the best, but prepare for the worst. – Cynthia Dalagelis, Amalgamated Bank

3. Ensure You Have Access To Capital

Having a line of credit to access (or just access to capital in general) can offer flexibility for a new freelancer. This can help you grow your business in terms of purchasing power, and it can also help sustain you through the lean times—when you’re waiting for payments, aren’t finding enough new clients and so on. It’s a double-edged sword, of course, so it’s best to tread lightly when possible. – David Van Horn, PPR Note Co.

4. Start With Gig Websites

As with any business, it’s best to know there’s a market for your services. One of the easiest ways to test the market is by joining a gig website such as Fiver or Upwork. Post a few of your skills/offers, hunt for gigs and see if people will pay you for your services. If so, parlay that into additional products and services, and then start spending money on your own infrastructure if needed. – Randal McLeaird, Ridgeline Investment Group

5. Keep A Close Eye On Your Cash Flow

Leverage your network and word-of-mouth as much as possible. Keep your burn rate low, and keep track of your expenses. Plan and budget for emergencies and times of hardship. It is important to budget for projects to fall behind for one reason or another. Make sure you have enough cash flow to sustain yourself and your freelance business. – Ben Jen, Ben Jen Holdings SLLC

6. Know What You Don’t Know

Have a clear picture of the differences you should expect between a full-time job and freelancing. Often, work flexibility and hourly pay are well understood. Yet important details regarding benefits (such as healthcare, paid vacations and 401(k) plans), business insurance requirements, the effort required to win new accounts, and tax implications are often not well understood. – Sean Brown, YCharts

7. Speak With A Financial Advisor About Your Retirement

Full-time freelancing means you’re no longer working for an employer; you’re working for yourself. Consider speaking to a financial advisor about your retirement account(s) and your options when you’re self-employed versus contributing to a company 401(k). It’s essential to consider the benefits and the risks associated with changing how you’re saving for your golden years. – Charlene Wehring, Wehring Wealth Management

8. Set Reasonable Expectations

Before becoming a freelancing professional, an individual needs to own the uncertainty that comes with it. Yes, you are finally your own boss, but it requires an aptitude for the often-unstructured work life it brings. Does the person have reasonable expectations about the work involved and the drive to meet their goals? If not, they should think some more. – Dr. Philip Fischer, Micro Macro Infinity

9. Use Finance Apps To Support Your Work

Learn to leverage software apps that exist to help people in your position. Try to automate your financial reporting and bookkeeping as much as is realistic. As a one-person show, a freelancer only has so much time and resources. The last thing you want to do is be stuck constantly doing mundane but necessary work that takes away the flexibility of why you went for freelancing in the first place. – Nick Chandi, ForwardAI

10. Understand The Effort It Takes To Land Clients

Freelancing is a wheel within a wheel. It’s not as promising as it appears at first. Finding a client is difficult. You must know the projects and services to prevent drifting off track. To stay afloat, you’ll need to discover high-paying projects or gigs, because landing the first client doesn’t ensure you’ll acquire the next one quickly. Once you’re in it, you’ll be proud you made the best choice. – Neil Anders, Trusted Rate, Inc.

11. Build A High Credit Score

Never underestimate the power of a strong credit score. One of the essentials of being a freelancer is the ability to have high-limit credit cards and lines of credit to grow your business and trustworthiness. – Antoine Sallis, Rapid Credit Boosters

12. Be Ready To Manage Lapsing Benefits

You still need key essentials such as health insurance. Before going full-time into freelancing, make a list of the benefits you have today and which you will want to maintain going forward. Know the timeframes for when benefits from your previous employment end, put dates on the calendar and give yourself plenty of time to prepare to replace those. Unexpected costs can kill a new venture before it ever gets started. – Renee Fry, Gentreo, Inc.

13. Ensure You’re Charging Enough

Make sure you charge enough to make your target income. Charging for your work requires different math than receiving a full-time salary. It’s easy to forget that you have to pay differently for insurance and taxes as a freelancer than you did as an employee. Also, you’ll need to allocate nonbillable hours to business development and administration, which translates to a higher price for your billable hours. – Aaron Spool, Eventus Advisory Group, LLC

14. Set Aside Money For Taxes

As a freelancer, you’re a business owner. That means you’re responsible for the self-employment tax and other small-business taxes. For many new business owners, that’s a hit they’re not used to once April 15 arrives. You should estimate a 25% to 28% tax bracket and devote that amount of your paycheck to a dedicated savings account for Uncle Sam. – Jared Weitz, United Capital Source Inc.

15. Track Every Single Expense

Without proper discipline and focus, it is easy to conflate personal and business expenses. Even if you are launching as a sole proprietor or a single-member LLC, it is a good idea to set up a separate bank account and keep books for your freelance work just as you would any other business. – Glenn Hopper, Sandline Global

Originally published by Forbes.com: https://www.forbes.com/sites/forbesfinancecouncil/2022/07/28/15-finance-experts-share-smart-strategies-for-aspiring-full-time-freelancers/?sh=405a08264a68