Tag: Freelance

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5 Things to Consider Before Starting That Side Gig

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Finances

These days, it’s not uncommon for people to try to make a little extra cash outside of their regular 9 to 5. While it’s not necessarily a bad idea, there are definitely some things you should consider before hopping into a side gig if your goal is to make sure it really is profitable. Here are a couple things to keep in mind that will help you ensure you’re getting the most you can out of your part-time job.

Consideration 1: Will this side gig improve or enhance your current work skills?

Why you should consider it: It’s not completely necessary that your side job further your current career goals (after all, passion projects don’t have to have anything to do with our day-to-day jobs … sometimes that’s what makes them more fun!). However, if there is some way to parlay the skills or talents that you’ll be using in your time away from work into attributes that will help you get ahead in your job, as well, then that’s all the more reason to start up that gig ASAP and add it to your resume.

Consideration 2: Will your hours be flexible?

Why you should consider it: It goes without saying that, even if you hope to some day turn your side gig into a full-time career, it’s important to protect the job that you currently have for as long as you have it. That means that any projects you take up on the side shouldn’t cause you to miss work or to be distracted from work while you’re in the office (sorry, no booking gigs on company time!). A perfect side gig will provide you with flexible days and hours so that you can fit everything in in your own free time.

Consideration 3: Do you need to invest a lot of money to get started?

Why you should consider it: You’ll need to really think about your motives behind your side gig before you can determine how important this consideration is to you. For example, if all you really care about is earning a little extra cash after work or on the weekends so you can afford the occasional getaway with friends, then you probably don’t want to start something up that requires a lot of investment capital up front. On the other hand, if your main goal with your side gig is to some day parlay it into your full-time job, then investing a couple hundred for fancy new camera equipment now so that you can become the next big wedding photographer in your town by next year might just be worth it. (This is assuming you can afford it, of course. If you’ll need to go into debt to fund your side gig, it might be worth waiting a little while longer before you start so that you can save up and start when you’re on better financial ground.)

Before you do jump ship at your current job to take up your side gig full-time, though, you might also want to check out this piece about five important things companies do for you that freelancers have to do for themselves.

Consideration 4: Have you thought about taxes?

Why you should consider it: You might be surprised how quickly a small side gig can snowball, and if you don’t consider saving for taxes on your new income as soon as possible, you could be stuck with a shocking IRS bill come tax season. Chat with your accountant ahead of time to discuss how much you estimate you’ll be bringing in, how much you should save up for taxes based on that number and whether or not you should consider making quarterly payments on your earnings.

Consideration 5: How much is your free time worth?

Why you should consider it: While it can be tempting to make some extra cash, or it might seem fun to finally do something about that hobby you’re passionate about, you might want to also consider how much free time taking on a side gig will leave you with. If you’re interested in a side job that allows you to pick and chose what projects you take on, that’s one thing, but keep in mind that if you’re building your own side business, that takes time and a whole heck of a lot of effort, which might not leave you with a lot of hours (or energy) for anything else. Before taking on an additional job, determine how much of your free time you’re willing to devote to it, and see if you can figure out a job that’s right for you based on that.

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Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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5 Important Things Companies Do For You That Freelancers Have to Do for Themselves

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Pretty Young Multiethnic Woman Holding Phone and Credit Card Using Laptop.

There’s a whole lot to love about being a freelance employee. From the flexible schedule to working in your PJs, being a contract worker is not only more cozy, but studies have actually shown that performance is higher in people who work from home, with home-workers clocking in more productivity per minute than those who work in an office environment.

So that’s the positive. The downside, of course, is that there are oh-so-many benefits that companies tend to set up on behalf of their employees — meaning that when you’re all on your own, toiling away on your home office computer, you have to think about these things all by yourself.

Here are five common ones that any would-be freelance or contract worker should consider before cutting the corporate cord.

1.Research your retirement options


Once you become a freelance worker you can say buh-bye to that cushy employer-sponsored 401(k) with the match and hello to a whole new world of retirement options. Retirement can become slightly more intimidating when you’re forced to plan for it completely on your own — or it’s more exciting, depending on how you chose to look at it. When you are self-employed, the following are some of the more common retirement plan options that you should look into:

  • A Simplified Employee Pension Individual Retirement Arrangement (or SEP-IRA): If your business includes you and you alone (and not employees), then a SEP may be your best bet. Sole proprietors, S and C Corporations, and partnerships and LLCs all qualify for this type of plan, which allows you to contribute 25% (up to $53,000 for 2016) of your net earnings, based on certain stipulations. These contributions are tax-deductible, and investment earnings grow tax-deferred.
  • Savings Incentive Match Plan for Employees (or SIMPLE IRA): Business owners may put all their net earnings from self-employment up to $12,500 into the plan, along with either a 2% fixed contribution or a 3% matching contribution option. Find out more about the SIMPLE IRA here.
  • Solo 401(k): With a Solo 401(k), the business owner has the option of contributing to their retirement plan as both an employee and an employer, optimizing the amount of money he or she can sock away each year. For example, as a self-employed 401(k) holder, for 2016 a person could contribute 100% of earned income compensation up to $18,000 ($24,000 for those 50 and over), as well as 25% of compensation as the employer non-elective contributions, up to a certain amount. Total contributions for 2016 to a Solo 401(k) cannot exceed $53,000. Click here for more on the Solo 401(k) plan.

Whichever plan you decide to go with, retirement doesn’t go away just because you’ve gone into business for yourself — if anything, planning for it may have just become a bit trickier.

2. Save for taxes


Remember how awful it was to get that paycheck at work and come face-to-face with how much money was being deducted for taxes? Well, when you’re self-employed, that whole “tax” issue becomes even harder. The amount of taxes that you’ll owe as a self-employed person will vary greatly by income (which means this could change each year as well, depending on the type of work you do) and state, and it’s one of the most important things you’ll need to consider — and plan for — as a freelance worker. It’s probably best to chat with an accountant ahead of time about what your expectations should be come tax time based on how much you plan to earn (plus the fact that you’ll most likely be expected to pay quarterly taxes, as opposed to yearly, if you don’t want to incur added fees) — that way, you can start setting money aside from that very first (well deserved!) freelance check.

3. Get a health care plan


Health care is, for some reason, the Great American Debate. No matter what side of the political coin you fall on, if you’re self-employed, finding a health care plan that works for your income and needs is entirely up to you. You can get started at healthcare.gov to shop around for affordable options based on where you live and your answers to certain lifestyle questions, and remember that if you can afford health care and decide not to get some, you’ll be charged what’s called the “individual shared responsibility payment” fee, which will be charged when you file your federal tax return for the year you didn’t have coverage. (Find out more about the fee here.) While open enrollment for 2016 closed on January 31, certain lifestyle factors (such as a change in employment) may qualify you to enroll outside of the normal period. Click here to find out more.

4. Determine whether you’ll need to set up a corporation or an LLC


Once you’ve decided to take the plunge into self-employment, you should consider yourself a full-fledged business entity, and with that comes some hard questions, such as whether to incorporate, what type of corporation to become, or whether to just leave well enough alone as the sole proprietor of your business. Incorporating can help your business in many ways, not the least of which is the appearance of legitimacy (you take your business seriously enough to actually file it as a true business with the government), and it may even help reduce certain personal liabilities or alleviate income taxes. Of course there are downsides (such as added fees) as well. For the ins and outs of each type of option, read this.

5. Figure out your system for tracking invoices and payments


Last but not least on our list, becoming a sole business owner means that it’ll be up to you to track the growth of your business from month to month and year to year, including things such as invoices and payments, due dates, and tax deadlines. Take some time at the beginning to do a little research on the different software and servicing options available to freelancers (such as Freshbooks to track time spent and invoicing, and Dropbox to keep files safe), and ask around to see what other self-employed gurus have used. Developing a successful freelance business will require more than just the creativity and ingenuity that drew you to the idea in the first place — the best freelancers are also wizards at keeping up with the mundane details of day-to-day business, such as tracking expenses and write-offs, and following up on missing or late payments.

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Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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Life Events

Why Entrepreneurship Is Not for You

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Millennials - large

Gen Y has earned a reputation for being entrepreneurial. Those in their 20s and 30s are likely to want to break free of the confines of the traditional career roles and find ownership in their work by freelancing or starting businesses.

People like Tim Ferriss and the idea of lifestyle design have helped popularize the concept of being an entrepreneur and running your own show. Creating your own business can help you, on a larger scale, create your ideal life, in which you can do work you love, when you want, and where you want.

But entrepreneurship isn’t all rainbows and butterflies, and wanting to start your own virtual, lifestyle, or any other kind of business in order to do what you want with your time isn’t enough to guarantee success. While full-time freelancing or running a company brings many people happiness, satisfaction, and success, it’s important to remember this path isn’t the only one for all of us.

Trying Entrepreneurship for Myself — and Finding What Worked Better

I can relate: after three years of working a dead-end, low-paying day job that left me feeling unfulfilled, I quit to work for myself. I started and ran a marketing company that focused on helping financial advisors, and I did freelance writing on the side.

Although I ended up making more money through my own business and work than I ever came close to working for someone else, entrepreneurship — even my scaled down, “one-person shop” style many refer to as solopreneurship — was demanding and stressful for me. Work-life balance went out the window. I could never turn a paying client down, because I was so focused on taking advantage of every opportunity to make more.

I wasn’t good at setting up a structure for myself, and the end result was a boatload of clients in my business that weren’t a good fit for me and the opposite of the freedom and flexibility that you expect when you run your own show.

Eventually I accepted a full-time position with one of my marketing clients, XY Planning Network. I came aboard as their marketing manager and reduced the work I did for other clients. Today, I still maintain my own work and brand on the side — but I’ve shifted away from marketing and I focus on writing because it’s what I’m passionate about.

Don’t be fooled into thinking full-blown, full-time entrepreneurship is the only way to be successful, financially and personally.

What To Do Instead of Defaulting to Entrepreneurship

When people excitedly talk about entrepreneurship as the new job security, or owning your own business as the sure path to real wealth, they’re likely to talk up the benefits and positive aspects. But there are downsides.

Entrepreneurship is not for you if you’re not excellent at managing your own time and energy levels. You need to know how to delegate tasks and manage other people (even if you’re a solopreneur, you’ll likely subcontract work out).

Before you start assuming starting your own business and being an entrepreneur is the only way you’ll find success, understand that there is no one right or wrong path in general. It’s more important to find the right path for you.

You need to evaluate your own skill set, goals, and what you value. Don’t focus on what others say is the “only” way to financial freedom or career happiness, because entrepreneurship is not for everyone.

Here’s what may work for you instead:

  • Running a side business or picking up part-time or seasonal work as an independent contractor
  • Freelancing or consulting when you want to — and focusing on your day job when you don’t
  • Working at a company with a mission you believe in and feel passionately about
  • Stringing together a number of part-time gigs for 6 months to pay your living expenses, before spending the next 6 months volunteering abroad (or at home)

It could even be working a 9-to-5 desk job that so many Millennials seem to shun. Entrepreneurship may get more play because it’s exciting, it’s flashy, and it’s trendy right now — but there is absolutely nothing wrong in working a traditional job where you go to the office Monday through Friday and take home a steady paycheck that helps you meet your big financial goals.

Yes, there are benefits to entrepreneurship and from experience, I believe it’s a great way to better your circumstances when it comes to both your finances and your career. But nothing says this is the only path to success. And you certainly don’t have to stay on the path if you try and it realize it’s not for you.

There’s nothing more admirable than being able to own who you are, what you’re good at, and what you want to achieve – even if that’s against what happens to be popular and in the press right now.

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Kali Hawlk
Kali Hawlk |

Kali Hawlk is a writer at MagnifyMoney. You can email Kali at Kali@magnifymoney.com

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Strategies to Save

How I Plan to Triple My Income in 2015

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Stefanie_freelance_lg

I have a tendency to go for big goals. In 2013 it was running the New York City Marathon. In 2014 it was writing a book. In 2015 it’s tripling my income.

Despite the fact that I’m no stranger to intimidating goals, this new one has me a bit unnerved. You see my passion for conquering bucket list challenges was initially born out of immense frustration- the frustration of having so much of my life seemingly dictated by factors outside of my own control, particularly in respect to my career and income.

By using tangible goals like the marathon to rediscover my own power, I was able to overcome a lot of that frustration and create a great deal of success and forward momentum in my life. While my capacity for earning and career success is certainly within my control to a degree, it’s still the largest goal with the most external factors influencing my ability to conquer it that I’ve set out to achieve.

By previously practicing with more tangible goals however, I’ve developed a strategy for achieving this year’s resolution of tripling my income without letting doubt or defeat take over. I know it’s only January, but the progress has already proven measurable and every day is a step closer to increased wealth.

Here’s how I’m tripling my income in 2015.

Taking Inventory

 A map isn’t particularly helpful without points of reference. In addition to my end objective- increased wealth- I have to know exactly what my “you are here” location is to successfully carve the path from A to B.

I’ve remained vigilant about tracking my income to account for every penny that flows through my fingers. With the sum of my current income streams subtracted from my goal, I can clearly measure the distance between where I am and where I need to be. From there, I’m breaking down that distance even further with concrete interim income objectives.

Re-Evaluating

Tracking my income also allows me to clearly weigh my current earnings against my current value. As a freelancer, I find it frighteningly easy to get so caught up in the day to day chaos of managing my own business and meeting deadlines, that I fail to take the time to reflect on whether I’m really charging what I’m worth.

In late 2013 I was writing articles for as little as $30, as of the end of 2014, I’ve been paid as much as $370 for one post. While that may have been an extreme case, it was also a wake up call to re-evaluate and realize my worth. It was not just a matter of undervaluing my work, but also one of failing to keep the price of my work current with its’ value.

Re-Negotiating

This gross undervaluation of my work has meant a lot of renegotiation in the last few weeks. In many cases I was asking for more than a 100% raise to bring my prices in line with my current value and build bridges toward my new income goal. While admittedly a daunting request, I was not met with any hostility or surprise in response to my carefully crafted raise pitch. In fact, I was able to secure every pay raise I requested.

Using this tactic of re-negotiation rather than starting from scratch with brand new projects and simply adding to my already overwhelming workload, allowed me to leverage my time for increased earnings to work smarter rather than harder.

Saying No

In addition to freelancing, I generate revenue from advertising on my own website. Every day my inbox is inundated with requests. If any seem relevant and align with the message of my work, I’ll respond with my respective prices. More often than not I receive some form of the following response, “That’s too high, can you do… instead?”

As someone seeking to triple her income you may call me crazy for turning down easy earnings, but I’ve found that knowing when to say “no” is just as much a part of my future prosperity as saying “yes”. I’m not looking to attract every customer, I’m looking to attract the right customer, and the right customer is happy to pay what I know my platform is worth.

Pitching

While holding out for the right price and renegotiating past contracts has helped bridge some of the deficit between my current and desired income, there’s admittedly a lot more ground I have to cover to reach my new goal. As such, I am pitching like crazy. As much as meeting my current commitments is part of my daily routine, so is seeking out and pitching new possibilities.

Thankfully, I’m not easily deterred by silence or rejection. I consider every pitch, regardless of the response, or lack thereof, the planting of a seed that will eventually yield wealth- if not today, then tomorrow, and if not then, maybe several years down the line. With constant groundwork being laid, I know my success is simply a numbers game. I’m willing to face as many rejections as necessary to get the right amount of yeses.

Diversifying

I read recently that the average millionaire has an average of seven streams of income. I may be looking to triple my income today, but I’m certainly not limiting myself to that amount, nor will I limit my potential sources of earnings. As I look ahead to build a solid and sustainable financial future I know never to become too reliant on one stream of income. After experiencing first hand how quickly things change, I’m preparing for such future instances by increasing my income through continually evolving and innovative means, today and in the future.

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Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at stefani@magnifymoney.com

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Strategies to Save

Retirement Planning on an Inconsistent Income

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Man Paying Bills With Laptop

As a freelance writer and professional theatre actress, I often find myself getting caught up in the financial stress of paycheck-to-paycheck living. Money revolves far more around remaining fiscally solvent until the next gig or contract than it does around long-term goals like savings and retirement.

Unfortunately, much of the financial planning advice and literature doled out by top money pros rests on the assumption that everyone is operating on traditional, reliable, and consistent sources of income- often overlooking the needs and realities of freelance and gig-to-gig workers like myself, an increasingly growing sector of the workforce.

According to the Freelancers Union, one-third of US workers are now in non-traditional, impermanent jobs. The independent labor force is projected to continue growing 6 percent annually over the next five years, which means the old retirement plan of social security, pension, and employer sponsored 401(k) no longer serves as a one-size-fits-all strategy.

While freelancers and gig-to-gigers earn money differently from traditional employees, their retirement goals are similar. But without employer sponsored retirement resources or a steady and predictable paycheck, the formula for effective retirement planning requires a new approach.

Get grounded in expenses

Those with unpredictable incomes may have trouble estimating their monthly earnings, but they should have a clear idea of their monthly cost of living. While income fluctuates, expenses (for the most part) are fixed.

Inconsistent income earners need to remain grounded in their monthly living costs and incorporate retirement savings into that number. If funding retirement is not made a priority, as non-negotiable as housing and food expenses, surplus money will likely go toward other discretionary expenses, bringing available funds to zero before retirement savings get funded.

Commit to earning enough

Setting aside ten percent of each paycheck for retirement is a fairly standard recommendation among personal finance experts. To ensure that a ten percent retirement contribution won’t create a situation in which basic needs cannot afford to be met, variable income earners must commit to a threshold level of earnings that covers both the cost of basic monthly expenses and long-term retirement savings.

For example, if you calculate that your monthly cost of living is $2,000, add an additional ten percent to that number- in this case, $200+$2,000= $2,200- and commit to earning at least that much money per month.

In particularly challenging circumstances or tough financial times, that percentage can be temporarily scaled back. The key is to develop and commit to a habit of consistent retirement contributions in spite of inconsistent income. Even small and seemingly negligible savings can reap large rewards through the powerful combination of compound interest and time.

Know your resources

To make the most of their retirement savings those with fluctuating income should be well versed in retirement account options. Many will not have access to traditional, employer sponsored 401(k) plans, but there are plenty of excellent alternatives.

  • Individual 401(k): An individual 401(k) allows the self-employed to contribute up to $17,500 in pretax dollars in addition to 25 percent of their annual earnings (up to $52,000). Contributions can also help reduce current tax liabilities for freelancers who have the added responsibility of setting aside their own tax payments. 
  • SEP-IRA: The simplified employee pension allows the self-employed to contribute 25% of their net earnings to retirement, with a cap of $52,000. This plan is beneficial for those with unpredictable income as there is no minimal annual contribution and it allows users the flexibility to change their contribution amounts each year.
  • ROTH IRA: Anyone with an adjusted gross income below $114,000 can contribute up to $5,500 to a ROTH IRA annually. For variable income earners hesitant to part with their potentially necessary cash, the ROTH IRA allows for tax and penalty free withdrawals from the principal- though dipping into retirement savings should be avoided if at all possible.

Plan for retirement, regardless of income

According to a report from the Employee Benefit Research Institute and Greenwald and Associates, 60 percent of workers have less than $25,000 in savings and investments that could be used for their retirement and 36 percent of workers have less than $1,000 stashed away! That means the majority of Americans have just enough money to sustain through one year of retirement before running out of money, if that.

The two most important reasons people give for not contributing more to their retirement savings are cost of living and day-to-day expenses. Add to that the challenge of unpredictable and inconsistent income and retirement planning goes from challenging to seemingly impossible.

As an actress and freelance writer I have taken on this seemingly impossible challenge by prioritizing my retirement contributions, building those contributions into my budget, and diversifying my income streams so that I can always be earning enough to fund both my necessary life expenses and my future financial goals.

Without a steady paycheck or employer contributions to rely on, freelancers, independent contractors, and other variable income earners need to take it upon themselves to remain proactive in planning and prioritizing their retirement- be they artists, architects, or entrepreneurs.

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Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Stefanie O
Stefanie O'Connell |

Stefanie O'Connell is a writer at MagnifyMoney. You can email Stefanie at stefani@magnifymoney.com

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