Freelancers won’t have the same safety nets as salaried employees working at a corporate office. They need to have the foresight to set up safety nets for themselves for long-term freelancing success.
If you are a freelancer, here are 5 smart safety nets you should set up for yourself:
1. A Strong Contract
The first safety net you can set up for yourself is a strong contract. Why is this a safety net? First, it gives your client clear documentation about what you’re agreeing to do. If they ever try to push your boundaries or ask you to do more than what was agreed, you can direct them back to the contract.
Second, it can help you get paid what you deserve. An all-too-common problem for freelance workers is having a client miss the payment deadline, forcing them to send reminders over and over again. With your contract, you can make it harder for clients to ignore your payments. These are some things that you can do:
● Ask for a down payment before starting on the project.
● Instead of getting paid in a lump sum, organize your payment in multiple installments.
● Include late fees for missing your payment deadlines.
● Include a kill fee if they decide to pull out of the project.
Third, a strong contract will hold up as evidence if you ever need to bring a troublesome client to court. You may never encounter this legal situation, but it’s always wise to be prepared for the worst-case scenario.
2. Adequate Emergency Fund
An emergency fund can help you cover all sorts of urgent expenses that will put your work-life on pause. You can use your collection of savings to handle problems like computer repairs, car repairs and home repairs immediately.
It is always a smart idea to have six months of savings if possible for expenses in case of a health issue, broken equipment, downturn in business, lawsuits are filed, debts are called in, or various other problems that could arise.
Every freelancer, entrepreneur, and business owner knows from experience that there will be issues that arise, no matter how successful your venture may be. Many freelancers went out of business, into debt, or declared bankruptcy in the past couple of years due to being financially unprepared for the events that transpired.
3. Access To Credit And A Good Credit Score
Whenever you don’t have enough emergency savings, you can turn to a credit tool as a backup plan. You can use your credit card to cover an urgent expense and then pay down the balance later. Or you can look into some personal loans available in your home state. If you are qualified to apply for a personal loan, you can send in an application.
And if you get approved, you can use the borrowed funds to cover the expense quickly. Then, much like a credit card, you can focus on your repayments. Make more than your minimum payments and don't miss any for fear of added fees.
4. Healthcare Coverage
Plenty of Americans get their health insurance through an employer-sponsored plan. Freelancers and gig-workers can’t access this arrangement, which is why far too many of them go uninsured. This can be a major risk to your physical health and your financial health. You need to have some type of health insurance as a safety net.
What can you do? These are some methods of getting healthcare coverage as a freelancer:
● Find a budget-friendly option through the Health Insurance Marketplace.
● Go onto your spouse’s insurance plan.
● Look into the plan offered by the Freelancers Union — this is a non-profit for freelancers, not a trade union.
● See whether you’re qualified for COBRA coverage.
5. A Growing Client List
You will want to set up a list of previous and potential clients that you can turn to whenever a project falls through or work dries up. You can contact them and see whether they have any job opportunities you can hop onto.
This will stop you from floundering when you don’t have anything lined up. Keep your client list updated and growing by marketing yourself and asking for referrals from existing customers.
Final Thoughts On Freelancing
Being a freelancer is not always easy or risk-free. But with a smart strategy you can protect yourself from some of the stresses of freelancing.
Get these safety nets set up frugal freelancers! Chances are in this volatile new economy that you will need them.
