With the COVID-19 global pandemic causing many companies to shut down, many companies have been hard hit and were forced to let go of their employees. It is expected that many people would turn to the “gig economy” or self-employment to stay afloat. These workers who are no longer tied to the traditional corporate work route are commonly known as freelancers.
The word “freelancer” can be traced to the 19th century, mercenary warriors or knights whose lance were not sworn to any lord’s service. Today’s freelancers range from independent contractors to workers who are geo-flexible that they depend primarily on online platforms. They offer their time and services on a set contract or per-project basis. They are labor on demand. They have no bosses and no prescribed work hours.
Freelance workers enjoy the freedom to choose their clients and control the way they use their time. But this freedom and flexibility have significant trade-offs. Freelancers and side-hustlers who rely on the gig economy are among the most precarious of workers. They cannot rely on the security of a regular paycheck or job tenure.
Despite its risks, freelance work can be a path to success. Take a look at the necessary skills that one must have to ensure growth and security as a self-employed individual.
1. Learn to negotiate your fee
As a freelancer, every project starts at the negotiating table. One thing to remember is this: no one will have your back, except yourself. So do your research about the industry and the service you are offering to clients. Set a fair but competitive price – and stand by it. If you are flexible with your fee or you really want to get the job, make sure you are never low-balling your worth. One way to still offer an attractive proposition without lowering one’s charges is to throw in freebies or perks for your service.
2. Agile to change and adapt
Every project and client that you engage with builds your reputation and portfolio. Your work ethic, professionalism, and quality of output are factors in determining your project fee. The same applies to the education, experiences, and networking that you build as a self-employed professional. You are a business – and clients will be paying for your brand of service. So always stay updated with industry news, emerging trends, and future skills that will keep you relevant and in-demand.
3. Mindfully save 30% to 40% of every project fee
Perhaps you have heard of this adage taught to salaried employees – to save 20% from their paycheck. The number may be small but significant enough to help build a savings habit. This works because regular employees can usually depend on a paycheck every 15 days.
On the other hand, freelancers can earn twice or even quadruple in one project, but only get paid a handful of times a year. Even if a freelancer closes a six-figure contract, they will have to stretch that money over the course of several months. So the formula for saving money among freelancers has to change.
Try to put away 30-40% of your project fees into a savings account. This way, you are assured a safe amount of fallback money no matter when the next project will be. It is also good to have separate funds for emergencies, business expenses, and for life goals such as your retirement.
4. Master your budget
Budgeting is a key skill for everyone, but it is doubly important for freelancers with fluctuating incomes.
Try to write down your budget to see an itemized list of your expenses and earnings. At a glance, you will be able to see which expenses are necessary, dispensable, and can be delayed. A written budget helps you balance your finances and plan how to stretch your money until the next project.
A budget can also help set financial goals. By seeing how much money you have now and how much you need to reach your goals, you can make strategic decisions on which projects to accept, and set schedules for when these projects should be accomplished.
5. Actively expand your network
As a freelancer, you need to secure multiple projects in the pipeline. This is the way to grow your income as a self-employed worker. Allow yourself to be discoverable with a great website. Attend industry events to plant seeds of future business relationships. Collaborate with fellow freelancers. Tap your natural market by asking to be referred to by friends, families, and clients. You’ll have more apples if you go out and harvest them than if you sit and wait for them to fall on your lap.
Oftentimes, you’re only as good as your last project. If your last project was a year and a half ago, there would be less people talking about you and your services. Go out there and show people that you’re ready to work.
6. Ability to secure an emergency fund
An emergency fund will help prepare freelance workers face even the most unexpected scenarios. No one could have guessed that a widespread pandemic would happen in 2020, crippling a large chunk of the global workforce. Most freelancers have lost a lot of business, as companies focus more on staying afloat than outsourcing their needs.
However, those who have prepared an ample emergency fund has more freedom. They could choose to hunker down and wait for all this to blow over, while working on smaller gigs to keep the cash flow going.
7. Foresight to insure and invest for the future
When you have sufficient emergency fund and ample savings to keep you comfortable, it’s time to think of ways to multiply your earning power. The freelance life is hardly the most stable. There will always be new players, hungry to prove themselves, who will offer the same service even at a fraction of the cost. Ask yourself: how long can I keep chasing projects? There has to be a point in the future when you would like to slow down a bit, or even be more selective on the assignments you will take on.
To reach that point, you have to let your money work harder for you. How? Look into financial products like life insurance and mutual funds. A life insurance secures the future of your loved ones in case something happens. Some policies have benefits that you can use, such as funds to replace lost income in case of hospitalization. On the other hand, investing in mutual funds puts your money under the care of a professional fund manager. This puts your money in the best possible place to grow instead of just sitting idly by.
If you feel overwhelmed, reach out to a financial advisor. Consultation is free and some companies can even help you find one from the comforts of your own home. Because like a good client base, freelancers can thrive in the gig economy with the right partner on their team.