Becoming a full-time freelancer without financial preparation is like driving while blindfolded—it's risky, unpredictable, and nerve-racking. While you may manage to survive even if you haven't saved up for it, you'll always get stressed and worried about money. Over time, you'll be drained not just financially but emotionally as well.
It's tough to be a freelancer in the Philippines. There's no law yet protecting the rights of freelance workers. No regular paychecks, no paid leaves, no benefits, and even no free coffee. Your income will only be as steady as you make it.
Here's how to make your transition to freelancing a successful one.
1. Weigh the Pros and Cons of Freelancing
Is freelancing for you? Think about its possible impact on your finances before you start sending out your resume and portfolio to prospective clients.
Although living the freelancer life is exciting and rewarding, it also comes with certain financial risks. Know what to expect to decide if freelancing is really worth pursuing.
2. Assess Your Financial Status
Knowing where you stand financially can be painful, but it's extremely crucial to preparing for your freelancer life. Track your expenses for at least a month to know how much money you'll have to save to cover all your needs, what expenses you can cut down, and how much you'll have to save. This will also help you figure out how much your freelancer salary should be and when the best time is to quit your 9-5 job, among other important freelancing considerations[1].
Read more: Want to Join the Gig Economy? These Side Hustles Will Get You Started
3. Save At Least 3-6 Months' Worth of Living Expenses
The hard truth about freelancing is that income is extremely unpredictable, yet expenses are constant. No matter if you're a freelancer or employee, there will always be bills to pay and mouths to feed, especially if you're the breadwinner in the family.
Freelancers need a cash buffer to fall back on during weeks and months when no money is coming in, like when you are sick or have no client. Ideally, have an emergency fund that's worth at least three to six months of your living costs. This should include food, rent, bills, and other essentials. Much better if you can save a year's worth or higher.
While you're still earning a stable income, set aside money regularly for starting a freelancer life. You can start small, like 5% of your monthly salary, until you're comfortable to save as much as 30%. Open a bank account just for that purpose.
If you're considering quitting your office-based job, put it off until you're sure you have enough savings to start freelancing. Otherwise, it's easy to get yourself in debt while scrambling to find freelance projects just to get by.
4. Get Yourself Insured
When you shift to a freelancing career, you'll be letting go of standard employee benefits such as health insurance and life insurance. What if you suddenly get ill while working as a freelancer? Your savings will get easily wiped out if you aren't insured. So before you go freelancing, set up your own health insurance. Prepaid health cards are a popular insurance option among Filipino freelancers nowadays because they're affordable and accessible.
Once you've begun working as a full-time freelancer, don't forget to update your PhilHealth membership records[2] to ensure that you and your dependents will continue to receive hospitalization and health care benefits.
Do you have children, parents, or siblings who rely on your income? Make sure to get life insurance that will protect your loved ones financially should something bad happen to you.
5. Create a Budget for Your Startup Costs
Freelancing is no different from running a business—it requires certain investments to get your job done. You need to plan for startup costs of doing business as a freelancer.
Consider the following critical expenses as you create a budget for starting a freelancer life:
- Home office equipment and supplies such as an office chair, desk, computer or laptop, printer, headset, etc.
- High-speed broadband internet connection
- Software subscriptions and upgrades such as web hosting services and other paid tools
- More expensive utility bills, groceries, and other household expenses
Aside from your emergency fund, allocate a certain amount in your budget as a backup for when your first freelancer salary is delayed. Late payments are a reality for any freelancer in the Philippines, so make sure to be financially ready.
6. Have a Backup for Your Freelancer Life
The uncertainties that come along with freelancing makes earning income from other sources necessary. Check and list down other freelance job opportunities[3] for backup. You can also take a look at your assets (properties, skills, and knowledge) and think about how you can make money from them.
For instance, you may consider putting up your idle condo unit or a vacant room in your home for rent. Or complement your freelancing income by using your car as a ride-hailing service.
If you're into baking, cooking, arts and crafts, fashion, or photography, you can start a small business or raket out of your hobby.
7. Build and Maintain Your Professional Network
Your financial success as a freelancer depends not just on what you can do but also who you know. “Freelancers who are connected to others tend to do best economically,” said Sara Horowitz, founder of the US-based Freelancers Union, in a Harvard Business Review article[4].
Before you leave your office job, build a solid network of people who can help you find clients or freelance projects. They can be your former and present bosses, colleagues, clients, suppliers, and peers within your industry. Also, attend seminars, conferences, and other events that provide networking opportunities.
When you've turned in your resignation, you can even tell your superiors that you're open to accepting freelance projects from them. This is why it's important to never burn bridges in the workplace.
Expand your professional network online, too. Build your own blog or website with your work portfolio. Create a great LinkedIn profile[5] and join Facebook groups of freelancers in the Philippines. This way, potential clients can easily find you.
8. Start Saving Up For Retirement
When preparing financially for the freelancer life, retirement would probably be left out on anyone's to-do list. Many people don't realize that they can't be freelancers forever.
As a would-be freelancer, look for ways to make money work for you when you reach your retirement years. Now is the best time to start making long-term investments in the real estate and stock markets.
Opening a Personal Equity and Retirement Account (PERA)[6] is also a great option for Filipino freelancers who want to save up for retirement.
Final Thoughts
Do all these things seem daunting? It's because freelancing is a serious endeavor. You need hard work and patience to prepare financially for your freelancer life. You don't have to rush into quitting your day job yet. It takes time to get your finances in order before you go freelancing, but it will definitely be worth it.
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