It’s a growing trend: An increasing number of us want to become freelance consultants. LinkedIn has predicted that 43% of the workforce will be freelance by 2020. Have you considered it too? Maybe, it’s because you want to be your own boss. Or, maybe it’s because you want greater freedom and flexibility. Or perhaps, you think you can earn more as a freelance consultant. Whatever the reason, most people are greatly concerned when taking the leap from full-time to freelance consultant.
Some of these concerns are: What if I can’t make it financially? Does anyone want to hire me? Do I have the required skills? There’s a ton of unknowns here. But not to worry. A life as a freelance consultant can be just as stable as having a full-time job. The scariest part is taking the leap.
If you’re preparing to become a freelance consultant and want to make sure you’ve thought everything through before following the dream, check out these steps to make sure you’re financially equipped for the transition:
1. Start saving up
You want to make sure that you have some padding for the hard times. Usually, it can be a bit tougher to get freelance jobs in the beginning, when you don’t have much experience as a freelance consultant on your resume. You should ideally make sure you have savings that can cover your expenses for three to six months, until your up and running. Ask yourself: How much do I need to cover my rent, mortgage, monthly payments, food and other supplies? Your job situation can be more precarious as a freelancer. But most people on Worksome earn as much or more as a freelancer, as they did when having a full-time job. It’ll come – but be your own safety net in the beginning.
2. Start being a freelance consultant as a side-hustle
Becoming a successful freelance consultant (unfortunately) doesn’t happen over night. You have to start with developing relationships to potential client. That easy (and free) to do here, because all available jobs are gathered in one place. If you start having a side hustle on a freelance platform like Worksome, you’ll also build up positive ratings early, which will make you even more attractive to companies once you become a freelance consultant full time.
Do you want to know how to make a great freelance profile? Check out our 8 best tips for freelancers.
3. Budget for insurances and retirement
Becoming a freelance consultant means that you have to pay for your own insurances and save for your own retirement. If you’re getting a health insurance through your current full time job, you’d have to set up your own insurance before your benefits end. You’d also have to figure out how much you have to put aside for your retirement in order to ensure that you won’t fall behind on your savings. Most freelance consultants on Worksome add these expenses to their market price in order not to take a hit, and that is for sure the best way to do it, if you want your career to be sustainable.
4. Plan for high income months and low income months
When working as a freelance consultant, you’ll find that your salary fluctuates a lot. In some months you’ll have very high income, in other months (typically during the summer when people are vacationing), you’ll have lower income. Prepare yourself for saving for those low income months. Create an Excel sheet and ask yourself: What is my hourly rate? What do I earn if I work 37 hours per week? What if there’s a month where I work only 15 hours per week? Sketch out the different scenarios.
5. Know the tax rules
You probably have a pretty clear overview of how much you’re being taxed at your current level of income. But do you know how you’ll become taxed when working as a freelancer? You have to know the rules before you take the leap. Check out this website: Freelance on the side: What tax do I pay? For a good guide. It’s not difficult once you get started.
6. Start thinking about giving yourself a pay raise
As a freelance consultant, you won’t have a manager who you can sit down with once a year to discuss your performance and ask for a raise. So ask yourself these questions: In a year from now, what would I like to earn as a freelance consultant? How much do I have to charge clients? Remember that being a freelance consultant means advocating for yourself and your skills. You’re worth it! Ask for more if you think the scope of work is more demanding, is further away from where you live or demands more hours. And if you’re in doubt as to whether you want to do the freelancing job or not, read this blogpost When to say no to a freelancing job.