Although things can be challenging at times, becoming a freelancer is one of the most exciting things. You get to earn some extra money on the side, which could help with your monthly expenses, and it could eventually lead you to a full-time career as a freelancer, if that’s what you want.
While the idea of being your own boss and setting your own hours is appealing, the reality is that freelancing isn’t for everyone. There’s a lot of work that needs to be done, so you need to be prepared if you want to be successful. Here are 5 things freelancers need to consider when they get started.
Your marketing strategy
Marketing yourself is one of the hardest things to do since it doesn’t come naturally to everyone. Fortunately, sometimes work can find you without you even knowing it.
Let’s say you’re a graphic designer or accountant. You could casually let your network of friends know that you are accepting clients. As an added incentive, you could offer friends and family a discount (or not). The idea here is to get a few clients that are easily within reach. Hopefully, they’ll refer you to people they know who may be interested in your services.
Another obvious way to market yourself is by creating a webpage that focuses on what you’re offering. Think of it as an online portfolio where people can quickly learn more about who you are and what you do.
Figure out your workload
Many people start freelancing because they want the extra income, but they can quickly burn out if they work too much. For example, if you have a regular 9-5 job and then do food delivery at night and on weekends, you won’t be getting a break at all.
It’s best to try and decide how much work you want to take on in advance. An extra 8-10 hours a week is a reasonable amount, but it obviously depends on what kind of work you’re doing and how stressful it is for you.
Some freelancers are fortunate, and they get a lot of work right away. While this is great, freelance work comes and goes. It’s the nature of being a freelancer. It might be tempting to quit your day job so you can freelance full-time, but you may want to feel things out a bit longer before you make such a big decision.
Decide how you’re going to manage your finances
Many people who start freelancing don’t think much about the financial side of things. Making some extra money is great, but that income needs to be reported to the Canadian Revenue Agency, and you need to pay your fair share of taxes.
All you really need to do is track your income and expenses. With your income, you can just create a spreadsheet that lists when you’ve been paid. Alternatively, you could use small business software that can track the invoices you send.
As for your expenses, you need to hang onto all of your receipts and claim them come tax season. You’ll also want to have a spreadsheet going, so you don’t just have a ton of receipts hanging around. Another solution is to get one of the best business credit cards in Canada such as the American Express Business Platinum Card. If you only charge your business expenses to your business credit card, then you’ll have everything in one spot when it’s time to file your taxes.
What many freelancers may not realize is that they may need insurance. The type of insurance you need and how much you need depends on things such as the type of business you’re in, if you work from home, what your revenue is, and more.
For example, someone who works in public relations or marketing will likely want to get professional liability insurance. This is often known as E&O insurance and would protect you in the event of negligence related to your services.
Business insurance is reasonably priced, but someone who’s only making a few thousand dollars a year may not want to spend anything. Since you still want to make sure you’re protected, you’ll want to at least get an online quote to see what it’ll cost you.
Your tax situation
Since any income made from freelancing gets added to your taxable income, you’ll want to ensure you’re setting aside some money whenever you get paid. Generally speaking, you’ll want to save at least 25% of your income for any tax payments later.
As soon as you earn $30,000 in freelance income in a given year, you need to register for an HST/GST number within 30 days. Once you have that number, you have to charge taxes moving forward when applicable.
Freelance taxes for Canadians is relatively easy if you’ve tracked your income and expenses. Any tax software program will walk you through the process as there are dedicated sections for self-employment income. Alternatively, you could hire an accountant to help you with your taxes.
Freelancing is an excellent way to bring in some additional income, but there are many things to consider. By preparing yourself and staying focused, you can hopefully feel less stressed.