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Many people have seen their job schedules become more flexible in 2020 as remote work has increasingly become the norm. Many companies are making plans to keep things that way even after the pandemic. But working remotely still means answering to a boss, being available at predetermined times, and, in some cases, getting little say over the tasks you do. Going freelance could be a more flexible -- and potentially rewarding -- arrangement. That way, you can not only work remotely, but work the hours that best suit you, and become your own boss.

These are just some of the benefits of self-employment. There are also tax benefits (the option to write off certain business expenses) and you may, depending on your circumstances, even earn more as a freelancer than as a salaried employee. But self-employment has its drawbacks, too. Given the state of the economy, you should consider them before going freelance in 2021.

The downside of self-employment

When you work for yourself, you lose some benefits salaried workers receive, like subsidized health insurance, paid time off, and the stability of a regular paycheck. And while there are always risks involved in freelancing, right now, those risks are a bit elevated. 

Though it's never a good idea to go without health insurance, right now, that would be particularly dangerous, given the pandemic. But the cost of paying for health insurance on your own could really eat into your budget -- definitely something worth considering. 

Not having paid time off could also hurt if you fall ill during the pandemic, or have to care for a sick family member. Given the state of the economy, your freelance business may not boom, and you may find that your earnings take a hit initially.

There are also unemployment benefits to consider. As a salaried worker, you're entitled to them if you lose your job through no fault of your own. During the pandemic, self-employed workers have been entitled to unemployment benefits as well, thanks to the CARES Act, passed in late March to provide coronavirus relief. But once the CARES Act expires at the end of the year, we don't know if freelancer workers will remain eligible for unemployment benefits. For that to happen, we'd need an extension or a new aid package. It's another important factor if you're thinking of becoming self-employed next year. 

Steps to take before going freelance

If, despite the risks, you're still thinking of freelancing in the coming year, there are a few moves to make before leaving your current job:

  • Make sure you have a solid emergency fund. Your earnings may take a hit or be unsteady when you leave your job, so it's important to have a minimum of three months' worth of living expenses in your savings account
  • Figure out what you'll do for health insurance. You may be able to retain your existing coverage for a bit through COBRA, but in that case, you'll pay the full cost of your insurance premiums, not what you paid after your employer's subsidy. Explore your options so you're not caught off-guard or tempted to forgo insurance. 
  • Line up some work. Test the waters while you still have a steady paycheck. If you don't line up some work ahead of time, you may find yourself bored and under-employed when you dive into the freelance world. Respond to job listings and see how well they pay. Also, reach out to your contacts and see who's interested in hiring you once your schedule frees up. Take on a few side projects while still fully employed to see what it'll be like to work independently, manage your time, and deal with the administrative pieces, like invoicing. It may be tricky to arrange some projects while you work for another company, and if you're going freelance in the same industry you now work in, find out if your employer has non-compete rules and avoid conflicts of interest.

While going freelance in 2021 could work out well for you, be careful when you go this route, and think things through carefully. If you decide to stick with your salaried job a while longer, there's nothing wrong with that. When the economy is in shambles and there's a major health crisis plaguing the country, retaining any degree of stability could be a smart move.