Freelance Financials: How To Protect Your Wealth While Moving To Contract Work – Forbes
Man using computer in home office
Those turning to freelancing or contract work have driven one of the fastest growing and robust areas of the labor market. In the past few years, with the labor movement in flux due to COVID-19 and the so-called Great Resignation, the number of people who performed contract or freelance work in the US reached 59 million, 2 million more than what was tracked in 2019.
But for those new to freelancing, it’s vital to secure your finances to make it a long-term career or simply use the work while you discover your next gig.
Of course, the numbers around freelancers are skewed. While 36% Americans reportedly work as full-time freelancers, the percentage of people that truly view it as a career choice will vary from those that plan to work in this capacity for the foreseeable future all the way to those that only plan to do so while they look for a full-time job.
How you view your freelancing career will certainly impact the way you plan your finances. The longer you expect to go it alone, the more of these steps you should take. Having the right approach, depending on why you became a freelancer and what your long-term goals are, will help protect your financial picture.
Viewing it as a short-term gig
For many, the route to freelancing is one of last resort. Instead of seeing it as a lifestyle pursuit, it actually serves as a way to protect the finances until the first or next job opportunity arises. It’s the fourth most cited reason for turning to freelancing. For those over 55, it’s a particularly important side hustle during the job search, since the average length of time to find the right gig can last weeks longer than those of younger workers.
If you’re in this situation, then you need to find a way to cover your expenses while giving you enough free time to search for a full-time role. This requires you understanding how much you need monthly. By looking at your spending, you can determine the amount of funds that you require to live your life – accounting for food, fixed costs, and other needs. These should include the costs that you cannot live without or have little flexibility in reducing. For example, your rent or mortgage costs won’t change simply because of your shift to freelancing – you need to account for that in your budget. Same with food, utilities and other needs.
Also look for ways to cut back spending, whether it’s reducing the number of streaming channels you have …….