People are turning to the freelance and contract world during this pandemic and we completely get it. The world of freelancing is exciting and it is brimming with possibilities, not to mention the perks. Want to work at home? No problem. Fancy taking a 2-hour long lunch break? Sounds good!
While it all sounds great there are always a few common mistakes freelancers make when they start their freelance careers.
So we have compiled a list of the most common errors that freelance and contractors make.
Not Budgeting Your Personal Expenses
Budgeting is a skill that’s not developed by most employed folks. For freelancers, who have opted to forgo the fixed, steady paycheck of full-time employment, meticulous management of the cash you do earn can seem scary. But if you don’t budget it becomes all too easy to splurge your money on incidentals, then you have to scrimp on a slow month.
A helpful tip is to stick to the 50/20/30 budgeting rule for your after-tax dollars:
- 50% on needs
- 30% on wants
- 20% on savings
Needs include non-negotiable expenses like groceries, rent, utilities, and car payments. Wants are the extras that make you happy but which aren’t crucial to your survival, like dining out, clothes, vacations, and gadgets. And savings include retirement plans, emergency funds, savings accounts, and any investments you make.
Mixing Your Personal and Business Finances
Dividing your finances into personal and business may seem like an unnecessary addition to your already long to-do list, we get it. You are the business so why create a business bank account or even a business credit card?
Well, by not doing it you will end up complicating matters and the way to uncomplicate your business – and, by extension, your life – is to organise separate banking arrangements. So that when it comes to sorting out your taxes at the end of the tax year you’ll have a super organised statement to provide to the IRD if they require it. If they need more information on your income you can easily provide this.
Not Having an Emergency Fund
Changing workload is not something new to freelancers, in fact, it comes with the territory. Some months you will be flushed with cash from projects and other times, you will budget every dollar you’ve earned.
Life then throws a few curveballs at you that requires money, maybe your car broke down, or you managed to break your arm while playing a bit of ruby. Either way, you need to dip into your money jar, this is where an emergency fund comes in handy.
With an emergency fund to get you through the unexpected realities that life brings and you shouldn’t dip into it unless you have to (that means not getting that upgrade to business class flights is not an option on your next travel)
Don’t Overstretch Yourself
Sometimes you are going to have clients lining up to employ your expertise and you’ve been booked into three jobs already and you are considering taking on more. Don’t do it!
While you may disappoint you, clients, with your hectic schedule and declining to take on more work, it will still be better than the alternative of taking too many jobs, burning yourself out and producing shoddy work. Your client will appreciate you for taking on a few projects that you can give you 100% than taking on more than you can bite and producing subpar results.
Assuming work will find you
When things are busy after building a good reputation in the freelance world it is far too easy to relax and get into the mindset that work will always be there. You’re wrong, the hallmark of a good freelancer that they continually market themselves, network and essentially build their pipeline of projects even when they are busy. You essentially become your own salesperson, selling your brand and services.
Most freelancers use a recruiter as well to help them find future work opportunities, this way you have additional support to help you find other work when things start to dry up.