Am I making a mistake by going down this freelance route?

January 13, 2014 11:37 AM

I'm 25. I studied design in school and realized I don't want to practice it and I don't fit in to typical office environments. I started freelancing and I'm thrilled by the amount of freedom it offers but I'm also worried about how sustainable this lifestyle is.

Background Info: Right now I work about three different freelance jobs in writing/communications. Together, they pull in about $2,590 per month after taxes which is pretty good for now. The highest paying one will end in May and I'll make $1,750 per month post-tax when it ends (though I can't be a 100% sure that the other two will still have work for me to do.)

I don't have any debt, though my family has financial problems. I haven't purchased health insurance yet (I've filed an appeal with my state's healthcare center because they won't give me any tax credit though my expected salary for 2014 is around ~$28,000) and I keep my cost of living pretty low since I haven't stopped living like a college student. I have some savings and I've just started to fund my solo 401k and Roth IRA. After May though, I know I'll need to try and pick up some more work to avoid living paycheck to paycheck.

I'm a planner, so I like to think about things in the long term which can be a problem because too much uncertainty gives me anxiety. Right now, making $21,000 to $28,000 a year (after taxes, no benefits) is OK because I'm young. But what happens when I get older? Have any of you found that you've made major sacrifices because you lack the financial stability from a regular job? Many of my friends think that anything below $50k is too low. I think I'm OK with being a renter the rest of my life though...

I'm attracted to the idea of working freelance because I don't fit in to the regular office environment, I don't have a car (hard to commute), and I really like my freedom. I really like the idea of moving around the world and working remotely from a different city every five months. Is that crazy? Am I being too naive?

Are you a freelancer? Did you turn to self employment because you had no other choice or was that something you knew you wanted? And for those who are older and have been doing this for a while (and maybe without a large amount of take-home pay), do you have regrets? Is there anything I should prepare myself for if I go into freelancing for the long haul?

posted by anonymous to Work & Money (12 answers total)

If you can sustain it, being a freelancer may be the perfect gig for you. How hard are you willing to work to drum up business? What if one of your three customers goes out of business, do you have a line to more jobs? Do you enjoy networking and working with other folks in your industry to get consistant work?

It's as sustainable as your next job.

You sound like you have your shit pretty reasonably together, and if you can live off of what you're pulling in then more power to you.

I'd say, since you know you have a job ending in May, that you start looking for a new job to replace it before then. The ease with which you're able to do this, should be an indication of how well you'll do at this.

There are lots of folks who never drive and who are life-long renters. There's nothing wrong with that.

You can make the situation work, if you can work the situation.
posted by Ruthless Bunny at 11:43 AM on January 13, 2014 [4 favorites]

I know plenty of people who make their living off freelance work, and others who have a part-time or low-paying primary job but do substantial amounts of freelancing as well. If you can work it, it's fine - the primary downside is that uncertainty, which if you can handle and get some solid savings under your feet to weather the slow periods, you'll be fine. Risk aversion is a personal thing.

Just a couple of things to point out:

* Usually when people talk about income of, say, 50K, they're talking about gross income. Your 21-28K a year post-tax probably represents something closer to 40K if it were derived from a W-2 full-time job, so you're not making that much less than what your friends "think" is appropriate.
* You don't have to make this much money forever. As you get more experienced, build new skills and contacts, etc, you can command higher rates for your work. If you're genuinely good at what you're doing, freelancing can actually mean a higher income level than your full-time salaried counterparts, because making more money "just" means accepting more work. Obviously that means you have to be so in-demand you always have more work available, which is... not always going to be the case. But "freelancing means less money" simply isn't true, if you're very good at what you do, develop the right contacts, have some good luck, etc.
posted by Tomorrowful at 11:50 AM on January 13, 2014 [2 favorites]

You should be billing out at a rate 2-3 times higher than your equivalent hourly rate from a regular w-2 job. Maybe that is not feasible right now, but it should be.

Typically the best advice for someone freelancing is to have had a track record as an employed professional and 1 year of living expenses saved up before striking out on your own.
posted by deanc at 11:56 AM on January 13, 2014 [1 favorite]

Are you a freelancer? Did you turn to self employment because you had no other choice or was that something you knew you wanted? And for those who are older and have been doing this for a while (and maybe without a large amount of take-home pay), do you have regrets? Is there anything I should prepare myself for if I go into freelancing for the long haul?

I'm a planner, so I like to think about things in the long term which can be a problem because too much uncertainty gives me anxiety.

I'm having a hard time with what the real question is, but I will take a stab.

For reference, I have been freelancing for 5 yrs, and would define myself as middle old (aka 40s). I did it because I decided that this is what I wanted. When I changed careers, I asked if freelancers were used in my industry. For me two previous full-time jobs, the sole reason that I took them was to get experience to go independent (and samples). After doing this for several years, I don't think I can go back because I had a hard time in cube world/monotony before, but that's me.

Money has been the greatest anxiety for me. It isn't because of the pay, but sometimes you may bill and then you need to wait a few months/or remind a client (you never had to remind an employer to give you a paycheck, did you? No).

What I have done to reduce this anxiety is a combination of 3 things, which are: 1) always have several months buffer in the business account, 2) always have buffer in savings ( 6 months, but that's me, everyone has their own amt of anxiety) and 3) select your clients.They can't figure out how to pay on time? For several months after a reminder? Don't work with them again. But if they pay your rate, on time, give you the projects that you want - keep them.

One thing that I would consider if I were you: Get more work. If you have enough in savings and work coming in, you won't take the poorly planned project or client that doesn't pay on time and you can pick and chose. Things that may not have occurred to you since you are new:

!) You can reach out to potential clients (email , call) = companies usually appreciate it and get back to you quickly/Google for lists, or look in linkedin, or even look in other countries.

2) LinkedIn, LinkedIn, LinkedIn - it is better than a web page IMO. Be detailed (don't just say freelancer), list special skill sets because people search for those. It is a passive and easy way to get work,but you have to take the time to fill it out.

Also, make sure you are charging enough.If you are working like a dog all the time, increase your rates (I wish I would have known this in the beginning, 2 to 3 X what you earned per hour doing what you did for that skill set at a company).

The other challenge that may happen for you that I don't see you mention: How are you paying yourself? I use payroll services to take out the correct amt of taxes because knock on wood, I want social security in my later years, etc (but part of it is based on what you put in).

A concern that I have that may also apply to you: You get to define how much you want to earn, so it is easy to get lazy (or maybe I do). I usually aim for a certain amt of income and then take it easy, and I don't know how to overcome that. So aim for what you think is reasonable, not "what's the minimum you need to survive" unless there is some reason for doing that.

I don't have regrets- for me, it is a better fit and I can decide what I want to learn/do. I can't speak to how it is for other people, though, this is just my experience.
posted by Wolfster at 12:06 PM on January 13, 2014 [2 favorites]

You're someone who likes to plan long-term and is uncomfortable with uncertainty, and freelancing is less of a fit for that than a regular job would be. (Though be aware, these days there is no absolute certainty in so-called permanent jobs either.)

Over time one of two things will happen....

a) You become established enough and have a long enough track record of steady earnings behind you plus money saved up that you will feel life is not so uncertain as it now seems. Therefore you will be ok with continuing freelancing long term.

Alternately... or as well...

b) Most people want more certainty as they get older, not less. Things like being ok with renting for life may not seem as ok when you're 35 and maybe married with kids as they do at 25. If your family finances are precarious, things may get more worrisome as your parents age.

The good news is you don't have to make an immediate choice one way or the other. You can freelance for a couple of years and see how it feels after that, and in the meantime you can also keep your eyes open for places where you could feel comfortable working permanently. Not all "regular office environments" are the same, and while most might not suit you at all, there will be some out there that do. Freelancing is also probably a good way of finding those places.

You're in a strong position that you are doing something you like and putting food on the table, so unlike many people you can take your time looking for that just-right permanent job if you want to.
posted by philipy at 12:26 PM on January 13, 2014

I don't know about the US, but in Canada when you register as a business (i.e. You Incorporated) then you can start to claim business expenses and get tax breaks. It makes tax filing more of a hassle but could be worth it.

I've known people who made freelancing (in their case, consulting) lucrative enough that they could work 10 months out of the year and earn the same. They weren't earning tons of money but they were definitely earning enough and then some for savings. They started consulting by accident (fired from their steady job 7 years prior) but realized they loved consulting and never wanted to work for a boss other than themselves.

But as mentioned above, you need to plan for the in between jobs, and build your clientele / business contacts.
posted by St. Peepsburg at 12:31 PM on January 13, 2014 [1 favorite]

Can you elaborate on what "my family has financial problems" means? My feeling is sort of that if you feel anything mentioned in this question is a financial problem, the life of freelancing is not for you. If there's something else you're not mentioning, I might be totally wrong, but...

I freelance. My partner freelanced for a while, and then went back to an office job. We've found that we really need one of us to be full-time employed to have a steady enough cash flow that we can, you know, live off of it. If the idea of living month to month freaks you out, this is probably not the life for you--not because it's always hand to mouth, but because it can be feast or famine, and looking at your bank account and realising that you've got $600 coming in this month and $1200 going out...well.
posted by MeghanC at 12:42 PM on January 13, 2014

I don't see a reason why you cannot continue to work freelance on a provisional basis with the option of switching to a more traditional full-time gig in the future if you decide you want to make more money or have more stability. Freelancers have it tough, but it's good experience if you like what you do. Whether you do it for the rest of your life is irrelevant. You're only twenty five.
posted by deathpanels at 12:50 PM on January 13, 2014

(My background: years of freelance programming, several full-time jobs, East Coast and Midwest).

From what you described, you will do just fine. A few thoughts and practical tips.

1. Freelancing is not inherently less stable than full-timing. Job security has been non-existent for at least a couple decades, and the last several years in particular have seen a huge cultural/economic shift, with jobs going to freelancers more and more. In fact, you could argue that freelancing is more stable given today's economy; by 2020, freelancers are expected to make up 50% of the work force.

2. In general, freelancing vs. full-timing are more similar than different. There are differences, yes, but when you examine them more closely, these differences start to blur. Real job security vs. perceived job security as mentioned above, for example; hustling for good clients vs. hustling for good projects; keeping your client happy vs. keeping your boss happy; and so on.

3. Have you checked out the Freelancers Union for insurance, marketing, etc?

4. Have you considered specializing into the more "technical" areas? For example, I had a friend who made really good money writing and interviewing for legal publications (up to $200k/year).

5. Do you set aside 30% of each paycheck for taxes? You probably need to send in your estimated taxes quarterly, check with your accountant.
posted by rada at 1:36 PM on January 13, 2014 [2 favorites]

It's as sustainable as you make it. You're 25, have no debt, are making it work, and you enjoy it. See what happens.

I'll say that I'm in my early 30's and just got a "real" job after 5 or 6 years of freelancing. I don't like the constant hustle and thus was making JUST enough to get by, which was pretty miserable.

Working for yourself will make it HARDER to go back to being a worker bee later if you choose that, btw. On the other hand, knowing that ultimately you're responsible for yourself and your future, and having been free of the enticing lure of steady paycheck and benefits and knowing you're just fine without it, is an invaluable lesson to learn.
posted by jeweled accumulation at 3:36 PM on January 13, 2014

As someone who's fallen into freelancing faute de mieux – regular day jobs aren't as easy to get as they used to be – I'd say the best thing you can do is take up with a partner who has a steady job.
posted by zadcat at 6:14 PM on January 13, 2014 [1 favorite]

i'm 33 and have been freelancing since 2005. i started doing it part time as a side thing, and then went into it full time when i was laid off in 2009. i do not fit into office culture and hate The Man, so freelancing works well for me. you have to work HARD to stay on top of everything: the work of course, plus billing and taxes, and making sure you have work coming in. in 2012 i made X. in 2013 i made 1/2 of X. luckily, i have a partner who is employed full time and whose job provides us both with health insurance. if i was on my own 2013 would have been an even shittier year than it was. you have to be good with money and planning and saving. you have to be a self motivated self starter who can work with no supervision. a day of netflix binging and buzzfeed can kill you. i was thinking of applying for a part time job at a cookie shop down the street, but realized that i don't even want that level of The Man in my life. freelancing is REALLY for me. the only way to find out if it is for you is to do it. and you have to do it for AT LEAST a year. it can be amazing and really fulfilling.
posted by misanthropicsarah at 1:07 PM on January 14, 2014 [1 favorite]