Freelancers Don’t Get Employee Benefits
Freelancing comes with many advantages, such as planning your own schedule, working for yourself, and choosing your clients. However, it lacks the common benefits that employees receive, such as paid time off, insurance coverage, and a 401(k) account. If you want any of those perks, you’ll have to provide them yourself.
Self-Employment Income Can Be Inconsistent
Commonly known as the “feast or famine” effect, self-employment income often ebbs and flows. One month you could be drowning in work and the next, you’re wondering where all your clients went. Unlike the consistent paycheck you get every two weeks as an employee, your income can dip below what you need to cover your expenses. This can be difficult, especially if you don’t have much of a financial cushion. If you can, build an emergency business fund as soon as possible so you aren’t suffering financially due to slow spells, a client paying late, or clients not paying at all. Also consider payment structures that prevent financial shortfalls, such as 50/50 payment splits (50% upfront, 50% paid when the work is complete) or asking for full payment before you do the work.
You Have To Build Name Recognition and Experience
Freelancing can feel like an uphill battle when you first start. Nobody knows who you are, what you do, or if they can trust you. To break through, you’ll need to dust off your sales and marketing skills and search for someone to give you a chance. It could be a friend, a family member, or an open-minded business owner you offer a good deal. You may even want to offer work for free for your first client just to get some experience under your belt.
You Pay for Equipment and Repairs
When you’re self-employed, you’re responsible for all of your business expenses. There’s no employer to help cover the costs. If you need equipment, software, tools, repairs, certifications, or anything else, you pay for it. If you spill coffee on your keyboard and fry your computer, you have to pay for a new one. As a freelancer, this means a large unexpected expense. If you’re not able to cover these costs when they come up, it could cause your business to suffer or fail. You can prepare with an emergency fund and by factoring these costs into your overall pricing. While it can be hard to estimate in the first year, you’ll have a better idea in the years following.
Freelancing Takes Up Living Space
In many cases, being self-employed requires you to create your own workspace. That can mean designating part of your home as your office or finding a workspace outside of your home. Both can come with costs such as rent, furnishings, supplies, and internet service. Fortunately, you can deduct many office expenses on your taxes (even for a home office as long as it’s used exclusively for business).
You Lose the Social Aspect of Work
While the idea of working without office politics or a required dress code can sound appealing, in time, you may miss some aspects of having coworkers. When you become self-employed, it’s just you. Your successes and failures are yours to experience alone, and you have to keep yourself motivated and productive. While this can work well for some, those who thrive in a social environment may struggle. However, with a bit of effort, you can build social ties as a freelancer. There are many online groups on LinkedIn and Facebook, and Slack, where you can network with other freelancers to find a sense of community. You can also reach out to other business owners in your community to build relationships offline through local events, chamber of commerce meetings, and professional organizations related to your field.
