Does the idea of being your own boss excite you? Perhaps you know a friend or two who works from home and makes an income in today's world of freelancing and short-term gig opportunities. If you're working a full-time nine-to-five job and making anywhere from $25 to $40 an hour, why not ditch your job and make that same amount as a freelancer? Today, people are doing just that using websites like Upwork and Lyft. Freelancer sectors range from
According to PayPal, a 2017 report states that the average income for freelancers is $30,000 a year. Are you surprised? If so, don't quit your job just yet. Here are some more surprises to consider before going solo.
No More Vacation or Sick Time
However, you still need time off as a freelancer and need to make a certain amount of money per billable hour to stay afloat. This means you need to set an hourly rate based on 40 hours a week and 52 weeks out of the year, according to the author, Dorie Clark, of Entrepreneurial You: Monetize Your Expertise, Create Multiple Income Streams, and Thrive. However, again, remember you're not exactly working 40 hours a week, even if you plan on it. You'll need time to eat lunch which amounts to about 260 hours of lost time over the year. You'll want to take at least a one week vacation which amounts to about 35 hours sliced off your yearly hours. You're bound to get sick at some point, subtracting an average of 21 hours per year. Then there are the holidays: New Year’s Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and the following day, and Christmas, which amounts to five days or 35 hours. When you add these all together, you lose about 351 billable hours each year.
This is not including other reasons to take time off, such as:
- doctor visits
- administrative tasks
- time off to attend a wedding, conference, or an
The above listed time off is not billable. In fact, you will find yourself busy finding clients, invoicing, answering phone calls and emails, running your kids to the doctors, and attending to other matters that take time out of your 40 hour work week. Suddenly, you find that you are billing a lot less than the roughly 2,000 hours you were expecting to
According to Clark, she kept track of her time using
Don't Forget about Taxes
When you're self-employed, the government still takes a piece of the pie, which can really hurt freelancers who work so hard to find clients and work for billable hours. When employed, however, your employer helps pick up some of the tax
No More Benefits
When you work for someone else, you typically receive benefits such as health insurance and a 401(k) retirement plan, both of which the employer helps pay for or matches. When you're working for yourself, however, you have to pay for health insurance out of your own pocket, which can run into thousands per month if you have a family, and you no longer have an employer to match your retirement fund. Employers also typically offer disability and life insurance programs as well, both of which they tend to help out with financially. Again, as a self-employed person, you need to pay for all of this out of your own pocket. Suddenly, the hourly rate you charge has shrunk considerably.
Using a platform like Upwork or Fiverr to find clients is easier than doing all the marketing yourself. However, there is a trade-off. For example, the platform you work with may charge a fee to use their platform, which takes away from your hourly rate. What you're paying for is the platform's marketing, legal contracts, money collection, and more. On the other hand, when you secure a client on your own, you don't have to worry about any additional fees. However, is it worth putting in the time and expense to market yourself when other platforms can do it for you? That answer depends on how much money you are willing to dish out to get more clients and how much you charge per hour.
Other Costs of Being Self-Employed
As a business owner, it is up to you to provide whatever is needed to complete the job. This can be equipment, transportation, supplies, sub-contractors, and more. So whether you're writing a white paper for a client or driving them to their next destination with Uber, there are going to be hidden costs. While many of these costs, like a new printer or gas for your car, are tax-
Another cost of being self-employed is paying yourself a salary after you cover taxes, business expenses, and other needs. If you're not making enough to pay yourself a livable salary and save a bit on the side, then you are not making enough to sustain your business. You should have more money coming in than going out. This is what makes a business healthy and sustainable.
Beat the Competition
According to Clark, you should do some market research to find out what your competitors are charging for the same service you offer and bill accordingly. What you need to look at are the highest earners in your field and find out what they're getting paid. This will help you create a reasonable hourly rate to earn a good living. After you've determined what your hourly rate should be, you need to set yourself apart from the competition to get the
Being your own boss may sound like a dream come true, and for