Sometimes we like to scare ourselves. Sometimes we carve scary faces on pumpkins or attach very large spiders to our window sills. And that’s all fine as long as it doesn’t stop us from going outside or letting some fresh air in! Starting your freelancer’s life is kind of the same thing – be aware of the challenges, but don’t let the scary things stop you, because with just one little extra slice of your knife that pumpkin can go from an angry face to a really happy one.
So, just so you’re not totally taken by surprise here are a few things you need to be aware of about your first few months as a freelancer.
1. You won’t receive paystubs
Except if you’re hired as a temp, your clients won’t send you paystubs. You send them an invoice, they send you the money and that’s it. At the end of the year, all the clients you’ve worked for throughout the year will send you a form, called a 1099. They also sent it to the IRS, so everyone is on the same page as far as how much money you made this year as a freelancer.
2. You should save about 30% of all income for your taxes
Your client doesn’t withhold your taxes on your behalf. You’re entirely responsible for calculating and paying your taxes. Does that sound intimidating? Yes. Should you be scared? No. First because Lili’s got your back: with our Tax Bucket, you can automatically set aside some money all year long for your taxes and protect it from your late night shopping spree. And second, because if you read this article, you will understand how it all works. Once we understand how something works, the fear goes away.
3. You need to keep a precise log of what you spend for your business
It can literally save you thousands of dollars when tax season comes around. As a freelancer, you’re running your own business. So everything you spend to run that business is a tax write-off, meaning you can deduct those costs from your total income to determine your income tax. You shouldn’t pay taxes on money you spend to work, because this is not personal profit which is what the income tax is based upon. This is more important than you think – a recent study showed that more than 70% of freelancers don’t deduct a single business expense, therefore overpay their taxes. Within the Lili app you can keep track of your work expenses, separate them from your life expenses and download your quarterly and yearly reports in just a few clicks.
4. You’re constantly going to be negotiating your salary
This is one of the most painful things about starting as a freelancer – it’s a constant negotiation with all new clients. If you felt nervous about negotiating your salary during the interview process at your last corporate job, well you’re about to do that every other week (but remember, if you’re doing it that often, it means you’re getting a lot of work and that’s a positive thing!) One of the best tips to prepare for this is to create a rate sheet: per week/day/type of project… This way when you’re on the phone with your client you have the numbers already decided and right in front of you.
5. It’s lonelier
Freelancers have a special position in the workplace dynamic – they’re key to making things happen, but they’re not REALLY a part of the team. Oftentimes you’re not in the room or the building, you don’t go to team outings, once your work is done you disappear from your clients’ radar (that is until the next one.) If you’re used to a corporate environment, simply be aware that your relationship with your coworkers, for better or worse, will be different. But you will save time (no commute), money (no commute) and energy (no commute)! So always keep an eye on the bright side. 🌞
Want more pro tips and advice to up your freelance game?
Download Lili’s ultimate guide to freelancing right here, right now (it’s free) and get ready for some knowledge! 🤓