Increases in technology, individuals’ desire for more freedom, and the high cost of hiring employees has led to an increase in the number of self-employed workers in the United States. The job market for freelancers is expected to rise to $40 million by 2019.
Ready to join the freelance revolution? Don’t dive in headfirst.
Freelancers and self-employed individuals trade financial security for increased freedom. While 42% of freelancers reported they earned more than they did as traditional employees, freelance success is based on locating a steady stream of short and long-term freelance gigs. The situation can become a little trickier when you consider that you no longer have an employer to cover part of your income tax and health insurance premium.
While money is sometimes an issue for self-employed individuals, there are strategies that current and future freelancers can implement to make freelancing more sustainable.
4 Smart Money Tips for Self-Employed Individuals
1. Use Free Tools and Web Apps
Don’t use paid tools when there is a perfectly good free substitute. While I love Microsoft Word, it’s a spendy word processing tool. Google Docs, while not as fancy, is free. Rather than diving into purchasing a dozen or so different paid tools, you should research if there is a free alternative you can use. Here is a list of 15 free tools to get you started.
2. Pay Taxes On Time
Taxes are an on-going obligation for full-time freelancers. In the US, full-time self-employed individuals (and some part-time) have four different tax due dates they need to meet. It’s in your best interest to meet those deadlines.
Missing one of the deadlines can be a costly mistake. The penalty for late tax payments to the IRS is 5% for every month that the payment is late. If you can’t file or pay your taxes on time, you can file for an extension. This will reduce the potential late fee from 5% to either .5% or 1%.
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3. Take Advantage of Tax Deductions
US based freelancers and self-employed individuals can increase their disposable income with a variety of business tax write-offs. You can write off far more than you think. Self-employed individuals can write off a percentage of:
Rent or mortgage payments (based on the area your home office is located in).
The phone bill for business calls.
Utility bills that are work related.
Meals eaten at business meetings.
Travel expenses (gas, airplane tickets, hotels).
The expense of hiring an accountant to help with taxes.