- New data reveals most freelancers make more now than they did at their previous jobs.
- Though you can do well as a freelancer, there are certain financial moves to make before taking that leap.
You may be surprised to learn how well freelance workers do for themselves.
When I first went from a salaried employee to a freelance writer, my biggest concern was money. While I knew I had the potential to replace my former paycheck by making that switch, I also knew it might take time to build up a decent client base and secure a steady stream of income.
Thankfully, I eventually reached a place where I was able to not only replace my former paycheck, but surpass it. If you're thinking of going freelance, you should know that's a distinct possibility.
A recent report by Don't Do It Yourself found 65% of freelancers make more money working for themselves than at their previous job. And an impressive 31% of freelancers earn more than $75,000 a year. If you're worried becoming a freelancer will mean sentencing yourself to a drop in income, that may not end up being the case.
That said, it is important to make sure you're on solid financial footing before taking the leap into freelance work. Here are some essential moves to make before going that route.
1. Make sure you're doing well on savings
It's important to have a healthy amount of money in your savings account before going freelance. That way, if business is slow to begin with, you'll have a means of paying your bills.
I made sure to have around a year's worth of living costs on hand before leaving my salaried job and diving into freelance work. I didn't have the biggest client base at that time, but having that much money in savings gave me the freedom to source quality clients with less stress.
2. Rework your budget
You may need to rethink your spending as you adjust to freelance life. Go through your budget and see if there are expenses you can, or should, cut back on temporarily, whether it's canceling cable or pausing a subscription box. Remember, you can always cut out some luxuries when you're first starting out and reintroduce them as your earnings pick up.
3. Figure out health insurance
Going freelance often means having to scramble for health insurance. Now if you happen to be married and can get on a spouse's health plan at an affordable price, great. Otherwise, you'll need to factor the cost of insurance into your budget, and it could be a large expense. You'll need to make sure you have enough money in savings in case you need to dip in for a while to cover your premiums.
But please don't make the mistake of going without health insurance. You might think you can get by without it for a few months, but you never know when you might get sick or hurt.
When I first started freelancing full-time, I wasn't married and had to pay for health insurance out of pocket. It cost me a good $500 a month since I chose to retain my old coverage for several months rather than find a new plan.
At several points, I considered dropping my coverage. But then one night, I wound up in the ER due to an unexpected issue. While I was only liable for a copay of a few hundred dollars, my total hospital bill was many thousands of dollars, so my insurance paid for itself.
There's no reason to assume going freelance will mean taking a step back financially. Just make sure you're prepared for a temporary decline in income while you work to build up your business and carve out an exciting new career.
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