The Financial Side of Working as a Freelancer: 5 Common Myths

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Whether you’re just starting out in your professional career or sitting at a desk dreaming about ditching your dead-end job, you’ve probably fantasized about what it’s like to be your own boss and make your own hours.

Do you envision working only when you please, being in constant demand, and retiring at 40 to your own private island? If so, dream on.

Your future is in your own, capable hands. But, there are certain myths about freelancing and finance that need to be dispelled before they land you in hot water and a fair amount of debt. We’ll dig into some of these myths and explore how freelancers can avoid falling victim to these financial traps. 

Finances for Freelancers

Freelancers and Finance

Freelancers now comprise one of the fastest-growing segments of the workforce, with more than 12% of all freelancers having joined the ranks of about 12 million independent workers in the last year alone. Even though the economy is opening back up, many workers are choosing the freelance route rather than returning to their former jobs.

Most freelancers prefer not to put all of their eggs in one basket. Seventy percent of freelancers work on multiple projects at the same time, and the average freelancer has at least two or three regular clients.

Unfortunately, the biggest challenge facing freelancers is finding enough work. It can also be a hard business to break into, particularly for women, persons of color, and other minorities. This makes it more essential to enter the workforce as a solo professional with realistic expectations about money.

Debunking the Money Myths

No one knows the struggles of being a freelancer until they’ve experienced the thrill of making a living with no safety net. It can be a lucrative, rewarding endeavor. But, it takes dedication and a realistic attitude to make the gamble pay off.

Myths are often rooted in reality, but that doesn’t mean you have to fall victim to these mistakes. To that end, here are the top five myths about freelancing and finance and how to overcome them.

1. Freelance Rates Are Negotiable

There is sometimes an assumption that because you’re a freelancer, you must be desperate and your rates are negotiable. Even worse are the people who assume that you need less money because you don’t commute, or expect you to provide services for free to “gain exposure”. Exposure is great, but it doesn’t directly pay the bills, and no one in their right mind would suggest this to any other professional.

You can get around this one by being confident and professional in what you charge and how. Set a fair rate that matches your skills and industry, and always generate written contracts and professional invoices for your clients. You should look for invoicing software that comes with crucial features like customizable invoice templates and time tracking to give your freelance business a boost.  

2. Freelancers Are Independently Wealthy

Whenever I tell someone that I’m a freelance writer, they often visualize someone with high levels of renown and financial freedom. While it can be quite lucrative and financially rewarding, few of us ever become independently wealthy – and certainly not famous. 

The issue is that all of the stability and financial security is in your hands. That means learning how to build a stable client base, leverage partners for marketing and promotion, managing revenue and expenses, and save for retirement. Freelancing can be quite lucrative, but there are no guarantees. 

3. Freelancers Are Always Struggling

The flip side of the previous myth is that all freelancers are struggling and constantly on the brink of financial ruin. While few of us will ever achieve fame and fortune, we do manage to live secure, financially stable lives.

This is because we realize we have marketable skills that are in demand, and we approach our work like professionals. That often means working long hours, becoming marketing experts, and outsourcing business processes like accounting so that we can focus on completing projects and nurturing client relationships.

Freelancing is challenging and stressful. But when you’re working for yourself, it’s a different kind of stress with much sweeter rewards.

Freelancing Money Myths

4. Freelancing Isn’t a “Real” Job

If, like me, you freelance from home, you’re probably familiar with this one. Friends, relatives, and neighbors assume that being at home means being available to babysit, chit-chat, or drop everything to cater to their needs during the workday.

That’s no way to run a business, especially when you have to wear multiple hats while remaining productive. You have to treat your freelancing career like a viable, professional business and others will do the same. This means thinking long-term and reflecting on what you want to get out of your freelance career – then planning accordingly. 

Rather than making good on my threat to rent an office just so I could be taken seriously by my family, I had to lay down some ground rules. I have a dedicated home office, and my family knows that once I go behind those doors, I’m unavailable for anything but an emergency. I also set regular work hours and turn off my personal phone during those hours.

It’s also important to have a professional online presence separate from your personal accounts. To build a legitimate freelance business, you will want to promote yourself online, including having your own website

As with any legitimate career, freelancers need to have the right tools to succeed. And in some cases, freelancers have an even greater challenge in this respect than traditional workers. 

5. Freelancers Don’t Need Contracts

This is a dangerous myth that leaves many freelancers chasing clients for payment. It’s also one of the biggest mistakes new freelancers make when starting out. 

It doesn’t matter if you’re designing a website for your friend or a book cover for your former boss. Always get a signed contract that clearly spells out terms, expectations, payments, and deadlines. People may balk or get offended, but no one should be an exception to this rule if you want to have a legitimate freelance business. 

Contract

Final Thoughts

Becoming a successful freelancer means more than just having creative freedom. Don’t be fooled into thinking that not having a boss is going to be easy. Many people choose to freelance for the opportunity to live and work on their own terms, but with freedom comes responsibility. 

Everything from staying focused and motivated to managing revenue and expenses is all on you. In addition to your actual work, you have to keep on top of the business end of doing business. That means being as competent with finance, marketing, and time management as you are with your professional skills.

Whether you’ve entered the gig economy due to circumstances or you’re building a successful, long-term freelance career, having realistic expectations is essential to your success and sanity. Sure, you’ll have more freedom and flexibility. However, if you want to earn enough to live comfortably, you need to be realistic about the amount of hard work you’ll need to put into the process.

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