I did everything backward when I started freelancing.
I was fresh out of journalism school. Instead of getting an entry-level job at a newspaper or magazine, I immediately started looking for online gigs.
My then-husband and I were up to our eyeballs in student loan debt. He still had years of schooling ahead of him. I decided to do what it took to make it work.
Looking back, that worked for us because we were young, not established in any sort of career, and poor students to begin with. Freelancing full-time wasn’t a huge financial stretch for us. Today, though, if you plan to break into freelancing and eventually quit your day job, you need to make sure you are properly prepared financially.
1. Emergency Savings
You don’t want to quit your day job without a safety net. Freelancing full-time comes with a degree of uncertainty. Save up for emergencies. Get a solid chunk of change set aside before you make the switch.
If you have a bad month with your freelancing, you want to make sure your bills are covered and that your family can eat. As you get going, a good emergency fund (no matter where you keep it) can be a good backstop.
Having the right insurance coverage can protect you as you transition to full-time freelancing. Make sure you have the right home, auto, and life coverage. That way, you pay less when disaster strikes.
Check your health coverage, too. You can get it on the exchange as a self-employed person. However, you might have better luck if you have a life partner with coverage. Run the numbers. There are few things as financially devastating as a major health event.
3. Retirement Investing
Once you move from working for the man to full-time freelancing, you don’t have someone else providing you with a retirement account. As a result, you could easily end up falling behind and short-changing your future.
As you set up your finances, make sure you are planning for retirement. This includes opening an account that allows you to make regular contributions. You can also invest in other ways. The important thing is that you have a long-term plan to build wealth.
4. Monthly Spending Plan
Do you know where your money is going? If not, you need a monthly spending plan. I hate the idea of budgeting every single dollar, but I do know that I need to have a general idea of where my money is going.
I like to direct my financial resources in a way that produces certain results. When you’re into full-time freelancing, you need to have an idea of what HAS to be covered first. Make sure the most important items are taken care of. If you have a really good month, put some of the excess aside so you can cover costs during a slow month.
5. Invest in Yourself
Once you start full-time freelancing, it’s easy to get consumed by working all the time. You worry about turning down work and soon things get out of hand. Part of staying on top of things is remaining healthy and investing in yourself.
When you take the time to invest in yourself, you’ll be more productive, healthier, happier — and make more money.