Here’s what recent grads should know about freelance or contract work was originally published on College Recruiter.
Are you looking to pursue a career path that allows you to have more professional independence and flexibility in your schedule? Consider joining the 58 million Americans who are currently doing just that though freelance and contract work. Here are some answers to common questions recent graduates have about freelance and contract work from Sara DeSantis, a freelance worker:
1. What would you say are the benefits of seeking freelance or contract work as a recent college graduate?
There is so much freedom when it comes to working as a freelancer or contractor. You can decide what projects you accept and how many projects you accept. You can decide to work a few hours every day or a full day for 3 days a week. Most freelance and contractor work can be done online which gives you the ability to live and travel anywhere as long as you have the internet.
Freelance or contract work is also so diverse. You can really do whatever you are interested in. You can work on excel projects and write blogs if those are your skills and passion areas. Finding work that fits your skills, passions, and hobbies will make the work you do more interesting and keep you motivated.
Finally, freelancing and contract work does not cap your earnings. You can earn as much as you want. There is no limit. With a traditional job, you have a salary and if you work harder, you aren’t earning more money. With freelancing and contracting, this is the opposite. You have no set salary, but you can land very large deals and do as many as you can.
2. What steps should a recent graduate take to set themselves up for financial security when taking on freelance or contract work?
Prepare for paying your taxes. Most freelance or contract work do not take out taxes. This is your responsibility. Try to save at least 25% of the income you’ve earned in a savings account so you can pay your taxes. Eventually, you will want to pay your taxes quarterly.
Document and keep track of all of your expenses. You need a way that is organized and works for you to write down any purchases you have had to make for your work. These can be used
Have a 6-month emergency fund. If you are doing freelance or contract work, you may find yourself very busy some weeks and other weeks are not busy at all. To account for times when you might not be paid as much, have an emergency fund so you can still pay your bills.
Start a retirement account. A traditional employer will typically have a 401(k) for you to set up and they will contribute a match. This is something you have to do on your own. Starting a retirement account at a young age will allow compound interest to work in your favor. There are a few different accounts that freelancers and contract workers can open up.
3. Tips on setting up a budget when your income fluctuates?
A budget is so important, but it can be hard to budget when your income fluctuates. There are a few strategies for budgeting with an income that fluctuates.
One method of budgeting is to focus on percentages rather than dollar amounts. A traditional budget will have $100/month for dining for example. If you have an income that fluctuates, you can still go out to eat, but how much you spend will depend. Figured out how much you usually spend on dining out and find out what percentage that is of your budget. Do this for all of your areas of spending. You will have certain categories like rent, utilities, and transportation that will need to be a specific dollar amount. Your “needs” will most likely be a fixed dollar amount and your “wants” will be a percentage of your income for that month.
Another strategy to have is to use two checking accounts. One account will be for your bills like rent, electricity, and so on. You should know how much that is every month and make sure to have that amount in one checking account. The other account is where the rest of your money goes and can be used for anything else. Once that money is gone, it is gone. This ensures that you are covering your basic costs in life, but gives you the flexibility to budget the rest of your money however you would like.
Finally, another budgeting strategy is to have a three months emergency fund that you use for your monthly bills. You can build up this account and use the money when you are having slower months. This strategy will take some dedication and willpower to not use the money for an extra cost you have. It needs to be treated as an emergency fund and you need to put the money you spend back into that account.
4. Anything else to add?
While freelancing and contract work is a great option for someone to do as their full-time job, it can be for anyone. If you have a traditional job, you can also do freelance and contract work on the side. Use your evenings and weekends to do some small projects.
If you are afraid to leave a traditional job to do full-time freelancing or contract work, doing it part-time can help you build a portfolio until you feel ready to officially leave your job. You will need to pay your own taxes on this income so make sure to save up for that!
There are a lot of jobs that can be done as a freelancer or contractor. Many I didn’t officially have the schooling for. I’ve taught English as a Second Language to Chinese children and tutored k-12 and college students. I didn’t have an educational degree, but I wanted to challenge myself and learn new skills. I’ve always loved to write and am now working on freelance ghostwriting and blogging! I choose topics that I am either passionate about or have knowledge in. There is work for graphic designers, engineers, excel experts, and so much more. You are more than likely to find something that fits exactly what you are looking for.