In this article:
A record-breaking number of Americans quit their job last year, during what some economists are calling "the Great Resignation." Many who said goodbye to their cubicles and commutes plunged into freelancing with hopes of bringing their vision of greater flexibility, freedom and more fulfilling work to life.
But despite the allures of freelancing, going solo without a plan can lead to even more problems: The same poor work-life balance and low compensation you may have quit your 9 to 5 to escape, plus new obstacles like navigating self-employment tax.
Luckily, thriving as a freelancer doesn't require any secret knowledge or superpowers. You can make a good living as a freelancer with these six practical tips.
1. Create a Workspace
Whether it's a spare room converted into an office or a corner of your living room transformed into a distraction-free work zone, creating a workspace helps you thrive in multiple ways:
- A dedicated workspace helps you get down to business when it's time to work.
- Physically compartmentalizing work and home makes it easier to transition into relaxation time when the workday is over.
- Creating a separate space exclusively for work is necessary to claim the home office deduction on your taxes.
Splurging on your office setup can eat into your profits, however, so it's best to keep overhead low when you're a new freelancer and margins are thin. You can get by with the basics at first: a computer, internet connection, a desk and an office chair.
Then, as you grow your business, set money aside to upgrade your space down the line. You could invest in making your workstation more ergonomic, boost productivity with tech upgrades and furnish your space with storage solutions or plants and decor to make your office feel comfortable and inspiring.
2. Market Yourself
In addition to completing their work and administrative tasks, communicating with clients and bookkeeping, freelancers have to take time to market their services. While there's no one-size-fits-all approach to marketing, here are some basic ways to ways to reach more clients, grow your business and boost your income:
- Consider freelancing platforms. Third-party platforms such as Fiverr and Upwork have a massive selection of entry-level freelance work. Many of these jobs are low-paying gigs with lots of competition, however, so it isn't common to jump onto a freelance marketplace and immediately earn a full-time income. Still, many freelancers start on these platforms and branch out to higher-paying work after building experience and amassing portfolio samples.
- Don't overlook LinkedIn. You may have luck finding responsive clients with large freelance budgets on this work-focused social network. The key to success is creating a stellar LinkedIn profile, complete with a professional headshot, a complete profile and portfolio samples. You can pitch clients via the messaging feature or search for contract positions through the job search tool.
- Set aside time for marketing. Avoid gaps in income by committing time to building your brand and finding new prospects. Freelance work can be feast or famine, but finding new leads before work runs dry helps. Try scheduling time each week to brainstorm, adjust your marketing strategy, send pitches or schedule social media updates.
- Create inbound leads. A portfolio website can be your best tool for showcasing your work and funneling new clients into your network. Try reading up on search engine optimization (SEO) basics for freelancers and implement strategies for ranking on search engines, such as introducing a blog to your freelance site or using keywords and effective headings in your services to bring organic traffic to your site.
3. Plan Ahead for Taxes
Freelancing can be a balancing act, and it's easy to forget about taxes. But adequately accounting for taxes is crucial for keeping your cash flow positive, so it's important to understand how freelancer taxes work. Freelancers make quarterly tax payments to the IRS to cover their estimated income and self-employment taxes, and missing a payment due date can result in penalties and interest.
One big pitfall for new freelancers is forgetting to set aside enough money to cover taxes. If you're used to taxes being withheld from your paychecks by your employer, you could end up without enough money left over when tax deadlines arrive.
To avoid a tax surprise, consider automatically transferring a percentage of each paycheck into a separate bank account. You'll need to do the math to determine what rate you expect to pay in income taxes and self-employment taxes. As of 2022, the federal self-employment tax rate is 15.3%.
4. Try These Budgeting Tips
Savvy budgeting is key to financial health for everyone. Freelancers in particular have the unique challenge of budgeting with an irregular income.
Here are tips on how freelancers can budget to keep their cash flow positive and save for the future:
- Create a minimum earnings goal. Add up all your expenses to come up with your basic cost of living, and then use that figure to determine the absolute minimum you'll need to bring in, after taxes, to come out even each month and avoid going into debt.
- Keep meticulous books. You'll need a complete record of all your business income and expenses to estimate and file taxes accurately, and this information also helps you determine how profitable your business is. You can use a spreadsheet or tax software to keep track.
- Separate your business and personal income and expenses. Consider opening a special bank account for all your freelance income and expenses. Then, transfer money for personal use into your regular bank account. You can think of this as paying yourself a salary.
- Save automatically. Plan to funnel a portion of pay into savings. An adequate emergency fund is key to covering unexpected expenses or making it through periods of irregular income with less stress and risk. It's also wise to make sure your health insurance is covered and that you're making automatic contributions to a retirement account, such as a solo 401(k) or IRA.
5. Get More Done
There are two ways to earn more as a freelancer: charge more or get more work done. If you bill by the project (rather than by the hour), you can make a higher income by learning to produce the same quality results in less time.
Here are some productivity hacks freelancers can use to get more done:
- Niche down. It's easier to become highly adept at one thing than it is to do many different things at the same time. Freelance writers in particular often have better luck building up subject matter expertise rather than aiming to be a generalist. Developing expertise can shave hours off your research time and result in clear, authoritative writing. Whatever your field, finding a specialty niche that's in high demand and has a high compensation potential can boost your profitability.
- Eat the frog. This productivity hack aims to beat procrastination. To "eat your frog," start each day by identifying your most challenging and highest priority task. Then, do that task first. The idea is that quitting the bad habit of putting off daunting work makes your whole workload easier to manage.
- Batch tasks. Pivoting between tasks is an unfortunate part of the freelance job description, but switching tasks frequently can actually disrupt productivity. Stay in the zone by blocking your schedule off into sections committed to just one type of task. For example, you could dedicate mornings to ideation and creation, midday to emails and meetings and an hour at the end of each day to completing admin tasks such as scheduling and invoicing.
- Track your time. Time is money for freelancers, so knowing where your time is going is key to improving your business. You might be surprised how much time you spend on non-billable work, such as unpaid research or communicating with clients. Time-tracking programs can be a helpful way to track all your time, billable or otherwise. You can then use this information to focus your efforts on tailoring what you're spending the most time on to optimize profitability.
6. Don't Sacrifice Self-Care
The pressure to earn more money and the temptation to overbook yourself and sacrifice self-care make burnout an occupational hazard for freelancers. But taking care of yourself isn't just necessary for sustaining productivity; it's essential for living a happy, healthy life.
Prioritize your mental and physical health by setting good boundaries between work and personal life:
- Get enough sleep, eat balanced meals, stay hydrated and moderate your consumption of caffeine and alcohol.
- Take frequent breaks and aim to get outside, walk around, stretch, meditate or call a family member. Avoid spending breaks staring at a screen or scrolling online.
- Unplug when you're not working. It's wise to let clients know what hours of the day you're available to respond to emails and what times you'll have notifications turned off.
- Spend your free time practicing a creative hobby, spending quality time with loved ones, being in nature or whatever you love to do.
The Bottom Line
Leaving a full-time job for a freelance life is exciting, but it can also be stressful. Set yourself up for success by adding structure to your workspace, nailing your financial plan and prioritizing self-care.
When an onslaught of urgent tasks sends you into a tailspin, try grounding yourself in your motivations for going freelance in the first place. Was it the chance to set your own schedule? Pursue work that's meaningful to you? Grow your income? Remembering your "why" can help you refresh your drive and realign your projects and workload with your priorities.