No, this post isn’t for everyone. You must be far enough along in your freelance writing career before you even consider a full break from your daytime job.
It’s one of the most frightening moves you’ll ever make. A day job is your stable income, your floor. Even if you earn nothing from freelancing in a month, you can always count on “x” salary.
But you may eventually lack the time and energy for both full-time and freelance work. If you choose freelancing on the side and the assignments pile up, your 9-to-5 reputation could tank. You might risk getting fired before you are ready to quit, or you may be super-exhausted.
If you lack time for family, friends, work-outs, recreational reading, meditation, prayer, or whatever spiritual activity you prefer, you are too busy.
This is fine when you are first building a business, but it does not work long term. A busy month or two, even six, is endurable, although you still need to take time during those months for breaks and self-care as well, but a year? Two? Your body and your mind will not hold up. Trust me. I know. I am a recovering workaholic.
I glorified in working 70+ hour weeks for months on end, neglecting my health, my family, and my spirit. Then my life turned upside down, I lost some freelance clients, and I once again took a day job. But finally my freelance work reached the point where I could not do everything. It’s not that people with day jobs or freelancers shouldn’t have something on the side from time to time; part-time work offers you a social outlet along with a small illusion of security. But full-time employment and a demanding freelance career, when mixed, are not sustainable.
If you go the freelance route full time, you must be prepared. This journey is fraught with risk. Your family must be prepared as well. Here are some things to consider before you take the leap:
Your financial needs: Track, track, track!
You remember the accounting class you had to take in college, the one you hated. It is time to put that to work, although I recommend you use an accounting software to track your expenses and income. The new Quickbooks Self-Employed app makes things much simpler.
The key is evaluating your finances before you quit your day job. You need to know where your money is coming from, where it is going, and if your freelance income is enough to meet both your business and personal needs. Note that I used the word “needs” here. Your first few months of freelance will be one of transition: you will no longer have the “floor” of your day job income to count on. So go out to eat less, cut out expenses you can do without, even if it is only temporary. As long as you can meet your minimum obligations, you are ready to make the transition. If you cannot, you may want to wait until you have more clients.
Also, realize when you make the leap that you will have more time to go find new clients, do more outreach, and therefore make more money. If you are close to meeting your expenses, you may want to leap anyway, or at least cut down the hours you are working for your day job if you can. Financial security is hard for freelancers to achieve, and working on side projects is often the answer. Stability is the ideal, so a variety of clients and streams of income is essential.
Health insurance: Keep it
With the federal mandates in the U.S. in place unless or until Washington ends them, keeping yourself insured is critical so that you avoid heavy tax penalties. Not only that, but you need self-care as well.
You need to compare the pros and cons of different health care plans and determine which one is right for you. You can choose to keep your employer plan via Cobra options, choose your own term insurance plan at market rates, or get Affordable Care Act insurance as long as it is still available.
If you are young, and rarely have health issues, a high-deductible plan with a health savings account (HSA) may be the right solution. If you are older and require more extensive healthcare, a plan with a lower deductible and copays may be best for you.
If you have questions, you can always do research on your own or contact a health insurance specialist. In many states, these services are a free due to the Affordable Care Act (ACA) and are not trying to sell you on a particular provider.
However you choose to go about it, keeping health insurance is an important component to your decision to leave your day job and go freelance.
Taxes: Put aside 20 percent, typically
As a self-employed freelancer, it is important that you save for your taxes, as you will be paying for many things your employer covered before. Depending on how much money you are making, this can turn into a costly situation.
First, you should open a tax savings account, and then make estimated tax payments quarterly. Typically, around 20 percent is enough to save, though you should consult your CPA about what exact amounts you should pay.
Secondly, you need to track your expenses and tax deductions. This can reduce your overall tax liability at the end of the year. It gets complicated, because you are actually a business. Tax reasons are another argument for the LLC: paying taxes as a company simplifies things and keeps your personal and business finances and taxes separate.
If you are going to write full time, whether as a freelancer or an author, you are effectively starting your own business, and you need to carefully weigh your options before you leave your day job. Budgeting, determining your health insurance needs, and navigating taxes are only a few of the challenges.
In the end, working for yourself is worth the effort. Just be sure you are counting the costs so that you can genuinely reap the benefits of self-employment without looking back.
Image credit: Here.
Reblogged this on Chris The Story Reading Ape's Blog and commented:
Great information and advice, in case you’re thinking of going freelance 😎
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