As the recession forces businesses across the country to trim their labor force and cut expenses, many will undoubtedly turn to freelancers and independent contractors to accomplish those tasks formerly completed by full time employees. If you’re interested in learning how to make extra money or even in replacing your income, freelancing may be the way to go for you, but it is a different world in many different areas.
Taxes
Freelancers and independent contractors are generally responsible for their own taxes. Once you take the plunge into freelancing, you’re now responsible to pay both your portion and the employer’s portion of all taxes, including Social Security and Medicare.
Time
When it comes to time management, your time is your own. As an independent contractor, you and you alone dictate when and where you perform the work you’ve been contracted to perform. The IRS calls this the “right of control over contractors.” As a freelancer or independent contractor, the business cannot demand that you work certain hours, in certain places, under supervision, or with certain tools or equipment. Certain exclusions may apply under some conditions (it’s hard to evaluate accounts receivable if they won’t email their data to you or allow you to remove their files from the office), so it’s best to be flexible where it’s prudent.
Total Amount of Work
The beauty of using an independent contractor or freelance worker for the business reaches far beyond not having to worry about taxes. When the work is done, the work is DONE. A business doesn’t have to continue to pay you like they would a regular employee. No work means no pay, so you’ll spend a significant amount of time finding clients. Plan to reduce this time by securing referrals from existing or former clients and NEVER be afraid to ask for a good reference. If you can get this reference in writing, ask if you can post it on your website so potential clients can see what a great job you’ve done for others.
Temperamental Finances
Working as an independent contractor or freelancer can cause you to experience large swings in income, depending on how well you prospect for new clients. It’s important to set a realistic budget and to have a very well funded emergency fund.
What’s your experience?
Have you ever performed any freelance or independent contracting work before? What happened? What lessons did you learn?
Would you like to start doing some freelance work? Why? What are your aspirations?
About the author
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I’ve done 1099 Independent Contractor work. What I’ve learned is to make sure and get paid in advance!
I have a unique freelance experience in that I have a major, primary client for whom I do paralegal work. He’s pays me a lot in order to always be first in line for my time. If I had to, I could live on what he pays me. It makes me nervous to have all my eggs in one basket so I also have several smaller network/data support clients (I was a government network admin in my former life). My biggest freelance issue is that I frequently go for days without leaving my house or speaking to another person. I have to work to overcome my tendency to be a hermit!
I’m a freelance translator (anyone in need of a Spanish translation?) and I have a few (sad) things to say. I’ll speak from my experience in Spain, so don’t jump at me if I’m saying something that couldn’t happen where you live.
Time – You choose your hours, yes. You’re not forced by a superior to work extra hours, yes. BUT if you want to keep a client and the client wants the job done tomorrow, you stay up until 2AM tonight. If you’ve had a rough month and then suddenly two or three clients call, you’ll want to take all the jobs even if it means that you’ll have to be working all 7 days of the week 16 hours a day. Once you have a few clients you can start rejecting jobs if they don’t suit your schedules but at the beggining, at least for me, you have to accept whatever. And this also includes salary matters. I may know how much I need to bill for a project to make it fair both for me and the client. But I’m finding every day that in this business is the client who dictates how much he’s willing to pay, so I have to accept lower rates in order to keep a job, there’s always some college student living with his parents and with no expenses at all willing to do it for half my price. (because I don’t get to negotiate my rent or electricity bill!) Having to pay your own taxes means that, even if you don’t make a single dollar in a given month, you have to pay. And that money will have to come out of your savings. Also, if you’re sick, you can’t work so, no money.
It’s great being a freelancer, but it’s not always so nice. And in these times where some jobs (like mine) are not 100% necessary (well, if they don’t dub another national geographic documentary they’ll just put an old one on and save money on translators, etc) it’s even harder.
I’ve had both really good and really bad experiences freelancing. I’ve worked with some people who are great: they respect my time, my abilities, and the value I provide. In other cases, I’ve been left unpaid for thousands of dollars worth of work. It’s a nice option to have, especially in combination with a more regular income stream, just treat the good clients like gold!
My experiences in the past has been pretty good, but it’s difficult sometimes to have your clients agree to pay what you’re worth.
The one thing that you left out was health insurance. I am not insurable outside of a group (employer) plan so I’m pretty much SOL without a job unless go for the super expensive COBRA option.
I do independent contracting and the biggest lesson I was forced to learn was with respect to taxes. Quarterly tax estimates are a pain and you have to pay even more taxes when you’re self-employed.
I suppose my best piece of advice is to start out by moonlighting. Do it part-time to start getting your references and contacts and to start honing your skills as a freelancer/contractor.
Hmm, very cognitive post.
Is this theme good unough for the Digg?