Financially, self-employment can be hazardous. There is no safety net. No employer guarantees that you will receive a paycheck every week; no employer pays you for days you are on vacation or out sick; no employer contributes to your retirement, to your tax obligations, nor to your health insurance. You and you alone are responsible. So before jumping into the world of freelancing, be certain to have considered all these obstacles.
The irregularity of income makes budgeting a necessity. Be aware of your expected income, and especially be aware of your expenses for health insurance, tax obligations, living expenses, and create a plan that allows you to make ends meet (and hopefully still have some for vacation as well).
Qualifying for mortgages or other loans can be an issue as a freelancer as well. Until you can show a history of steady income, the banks are often wary of loaning you money.
Having a steady source of income in addition to the freelance income can certainly make a huge difference. Perhaps your spouse or partner brings home a regular paycheck. Or perhaps you decide to have a part-time job in addition to your freelance work. Either of these definitely helps to even out the irregularity of freelance cash flow.
There are some financial upsides to freelancing as well. Generally there are much fewer expenses for clothing, lunches out, and transportation. Tax deductions for use of your home (if you work out of your home) can be beneficial come April 15th as well.
There are so many benefits of freelancing, but finances can be a challenge. I would be interested to hear other’s experiences with financial management and any suggestions for making this aspect of freelancing successful for you.