Personal Finance

The Cold Hard Truths of Freelancing And Some Serious Money Lessons

You’re living your dream as a solopreneur. But don’t ignore essential money lessons that can financially derail you.

I left a high-paying corporate job as a financial advisor in 2018 to pursue what I believed was my dream — to beat to my drum as a writer and money coach.

After twenty years as an advisor, I thought I knew everything there was to know about money. But nothing could have prepared me for the money lessons I have had to learn as a freelancer.

Here are five money lessons specifically for freelancers and solopreneurs:

1. Revenue is not equal to income.

Suppose you’re one of the lucky few freelancers to make that much; your six-figure income is not what lands in your pocket. So, it’s not disposable income.

Consider paying yourself a regular salary to support your lifestyle. To do that accurately, you will need to look at your expenses.

2. Don’t forget taxes.

When you work for an employer, a portion of your income is deducted for taxes. If you’re working for yourself, you will need to set aside a percentage of all your earnings to an account specifically to pay your taxes.

Because your income is inconsistent, you may not know precisely what you may end up owing in taxes. To begin with, put aside more than you think you will need. After a few years of becoming familiar with your revenue, you will be able to set aside a more accurate amount.

3. Do not ignore your financial future.

If you are working for an employer, they may have a pension program when you retire. You won’t have that as a freelancer unless you create one for yourself. Make it a habit to transfer a portion of all your income into a long-term investment account for your retirement.

4. Build an emergency fund for your business.

Set aside three to six months’ worth of living expenses for unexpected financial emergencies — moving costs, car repairs, sickness. Your business needs an emergency buffer as well. In case client payments take longer than expected.

5. Diversify your sources of revenue.

Always look for ways to increase your sources of passive income. Don’t just keep to one source of income. If you’re a writer, create an evergreen writing course or publish an ebook, receiving revenue even while you sleep.

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