So you’ve finally decided to take the leap and join the growing freelance work force. Congrats! It’s thrilling and terrifying all wrapped up into one job.
But before you ditch the desk job to be your own boss, take your final months with a steady paycheck to prepare for life as a solopreneur with these seven steps.
Step 1: Simulate your freelance life.
Odds are you’ve already started to freelance in addition to your full-time job, which is giving you the motivation to ditch the 9-to-5 and strike out on your own. One of the best moves you can make before leaving your steady paycheck is to use your current freelance income as a way to simulate living on an inconsistent income.
Take the three to four months before you quit to tuck away all the money from your day job into savings. Then use your freelance income to set your monthly budget. This gives you a chance to experience some of the highs-and-lows of budgeting with sporadic paychecks, missed payments or projects that never come to fruition. It also is an easy way to get into step number 2.
Step 2: Build a runway.
You may have heard the old adage that it’s important to have six months’ worth of income stashed away in an emergency savings. Well, try nine months for freelancers.
You need a more comfortable cushion now because you never can tell when times may get lean and how long they’ll stay that way. Before you quit your job, strive to have at least six months’ worth of income set aside to give yourself a buffer. You can then work towards building out nine months.
Step 3: Taxes are due three times a year now.
Ah, the simplicity of only filing taxes once a year. Now that you’re a full-time freelancer, you owe Uncle Sam estimated quarterly taxes! That’s right – you now need to pay taxes four times a year.
Generally, quarterly estimated taxes are due: April 15, June 15, September 15 and January 15. You can handle this on your own, but just be sure you’re keeping track of filing deadlines, expenses and know your deductions. You may also want to invest in some book-keeping software, like FreshBooks.
Step 4: You are HR, IT and the Office Manager.
Being your own boss comes with some killer perks – like getting to take spontaneous trips without a 10-day vacation limit or having a boozy lunch when a friend comes to town. But there’s also a chance you may end up missing the support of corporate life. That’s because you’ve suddenly gone from being a cog in a machine to needing to provide your own human resource, technology and office manager support.
You have to set up your own retirement plan, figure out your healthcare, handle that virus you somehow downloaded on your computer and remember to order more ink for the printer. But, the good news is – it doesn’t have to stay this way.
Step 5: Learn to outsource.
A growing pain of life as the boss is learning when and how to outsource tasks. You can’t handle every little thing, and frankly, you shouldn’t. Sooner or later, you will need to start outsourcing certain tasks.
This may be hiring an assistant to help you sort through emails, orders and deadlines. Or it could be freeing up time in your personal life by having someone come clean your house or do the laundry. Your time is valuable, and you can’t handle every little task while building your business. Plus, you can look to deduct some of these expenses – as long as they relate to your business – on your tax return.
Step 6: You’re going to panic.
This might happen on day one or it might not be for three months after you quit – but you’re eventually going to panic.
It’ll probably happen around the time a big project falls through that you were counting on to cover your bills. It’ll happen at the point you realize you’ve slowly skimmed a good two months of living expenses out of your savings account since you started.
It’s okay to have a good freak out. Just remember that part of being a freelancer is dealing with the ebbs-and-flows in income. Fortunately, your diligent saving is putting you in a position to be okay in the long-run.
Step 7: Join mastermind groups and other social circles.
One of the toughest parts about transiting from a traditional job to a freelance role is the solitude. It’s empowering at first, but you may soon find yourself missing regular human interaction. That’s when it’s time to make some moves.
Look in your area for regular mastermind group meetups with freelancers who get together to talk business or find support groups online. You should also indulge in some classes or hobbies that involve in-person interaction. Maybe try improv at a local theatre or sign up for that hip-hop dance class you wanted to take while you worked in an office. It’s okay to spend some money to keep yourself sane!