Smart investment tips for freelancers
Being a freelancer is both exciting and daunting. On the plus side you choose when and where you work – and you can work in your pyjamas if you want!
But it’s not long until the downsides of the risk-factors nip at your heels and your confidence. These can include finding and managing clients, and balancing your finances.
Freelancing doesn’t have to be tough. If you treat it like a business and make the right investments, you can enjoy a normal life with all the perks of freelancing freedom.
For instance, you may want to invest in something that’s up-and-coming with a good chance of growing. One area that’s popular is solar energy stocks.
What is freelancing?
The dictionary definition of freelancing is to work for different companies at different times rather than being employed by one.
That’s the accurate short answer, but let’s shine some light on it further. You can work for one or several companies. These are your clients and not your employers. That means you work out your own terms with each under the contract of your own business name. If it’s just you, it’s a sole proprietorship.
Steps to prosperous freelancing
Let’s look at the best practices to becoming and staying a prosperous freelancer.
Are you a good match for freelancing?
This is a question you have to ask yourself before you take on the responsibility of freelancing. It’s more than a job, it’s a lifestyle, and you are your own safety net. Sound scary? We don’t mean it that way, but it’s important that you’re ready and your personality is a match. You can check out your personality type here.
What is your lifestyle costing you?
When you come from working for any company, you can expect much the same income each month. When you freelance, your income fluctuates while your bills are static. It takes some financial planning. We don’t agree that a sole proprietor or freelancer making less than six figures per year needs an accountant. We do believe that you need a financial advisor.
In this step, you’ll secure a financial advisor and then together, you’ll create a new budget. This means taking a candid look at your lifestyle through the lens of a freelancer. A financial advisor can help you cut out the non-essentials which can be temporary.
Getting acquainted with your new salary, budget, and schedule discipline is the primary concern. You can revisit your financial situation after about 90 days and adjust with your financial professional.
How can you secure your future?
There’s a misconception that freelancers are poor, and will have to work until they can’t any longer. If this is true, it happens for two reasons that are preventable.
One: the lack of financial planning and smart investment, or two: the freelance work didn’t suit them but they feared trying something new. This is common, but success is just as common. A positive attitude, organization, and planning changes everything.
So how do you secure your future? By making sound long-term investments. The next two steps will explain the process. The thing to keep in mind is that it’s not hard at all. Investing doesn’t mean you have to spend big money right away on speculative risk. It means you need to put your money to work for you instead of letting it sit in the bank at a sorry interest rate.
Your financial advisor should be equipped with investment knowledge. Vet everyone and look at their portfolio and reviews. Then, ask them about the investments listed here and choose what’s best for your budget and income.
The safe route
The safe route means you’ll place your money in something that’s secure instead of speculative risks.
Individual Retirement Arrangement
This is a Roth IRA; Self Employed Pension IRA; SIMPLE IRA ( Savings Incentive Match Plan for Employees) and a Back Door IRA for those with incomes north of $100,000. These choices come with a variety of programs that are unique enough for all income points.
Solo 401K
this works the same as an employee 401K only you will contribute at a certain rate with a variety of programs to choose from.
Speculative and higher interest rates
Brokerage accounts are the investments you make with a higher risk but also higher return over time if done with scrutiny. With a financial advisor that’s certified in speculative investment and real estate investment, you could set yourself up for quite the nest egg for the future.
Photo by Hannah Olinger
