Freelance tradesmen or working for yourself full-time is becoming an increasingly popular career move. Studies and a number of sites have suggest half of the American workforce will be freelancers by 2027. Crazy hey?
Naturally, there are important points to consider before you decide to take the tradesmen’s leap of faith.
Normally the first point we all ask, how would you leverage your skill set and network to win business and make month end?. However it’s also important to factor in your future.
Freelance tradesmen or anyone going into business for themselves naturally are prone to think about immediate needs and cash flow. “What’s my next big project or deadline?” “How will I pay my bond, mortgage or rent?” “Do I have the additional money for that new, Dewalt power tool or new pair of shoes?” However, freelance tradesmen don’t have the luxury of an employer-funded or healthcare, so it’s always a good idea to think ahead and plan your future.
“There’s typically no unemployment, retirement, or paid-time-off benefits, This means that freelancer tradesmen need to take it upon themselves to prepare for retirement, time off, or emergencies.”
Having Second thoughts? Don’t worry we’ve highlighted four ways to prep your budget for full-time freelancing.
1. Run the numbers.
So how do you know how much you should save for future expenses like taxes? You’ve got to do the math. “Just because a client pays you $3,000 doesn’t mean you made $3,000,” “What is your profit margin on that $3,000?” Get closer to the truth by asking yourself some big and real questions. How much should you set aside for taxes? A good business guide is anywhere from 25 to 30%. Are you saving for retirement? How long do you spend looking for clients? Because every good freelancer tradesmen knows that nobody pays you to mine for new work . Having a better sense of your needs will give you a better understanding of your ideal rate.
2. Increase your rate.
Is it just us, or is negotiating your rate one of the most complicated parts of freelancing? Charge too much, and you may not get the Job. But charge too little? Well, it may not be worth it. Sure, a lot goes into figuring out your rate – and your future should be one of them. “Just because you made $20 per hour at your full-time job, doesn’t mean you should price your service at $20 per hour,” “You need to factor in components like payment-processing fees, materials, and taxes.” We recommend making a list of all the overhead costs you foresee coming down the pipeline, including your savings goals. From there, you’ll be able to determine how much you need to cover your expenses, short and long-term.
3. Have a health check.
One of the biggest questions most people have about freelancing is healthcare – and for good reason. Even if you’re not booking a series of annual checkups or experiencing a medical emergency, having a solid healthcare plan will give you some much-needed peace of mind. These days freelance tradesmen are able to get their own healthcare. You can sign up for insurance through your state or federal exchange. And, depending on your income and size of your family, you can also apply for a subsidy through the government.
4. Grow a rainy day fund.
Dreaming of backpacking through Europe or travelling Africa for six months straight? Cant stop thinking of starting your own website or company? Looking to start a family? Well, you’re going to need money and cash flow. That’s what’s so great about a rainy day fund –you can do whatever you want with the money you set aside.
“You should have enough in a savings account that you can say ‘no’ or refund a client for any reason, whether you have a family emergency or want to look for new clients, Money should never keep you tied to a bad situation.
We recommends having six months of living expenses in your bank account, but you can’t acquire that much overnight. Start by setting aside $25 to $50 each week. It doesn’t seem like a lot, but, trust us, it adds up.