Freelancers are often told to diversify their income streams. You can’t just rely on one or two big clients. What if they don’t need you anymore? What if the business fails? This is good advice if you are running your own freelance business. It’s also a risk factor that traditionally employed people face every day.
The majority of American workers are limited to a single income stream. If their employer lays them off, they may be out of work for months before they find a comparable job.
Freelancers are more vulnerable but they are also more flexible. If one job falls through they move on to the next one.
Most people in the world of freelance view all of their contracts as temporary. The key is to keep yourself busy enough to always have something to do. That way you don’t have to worry about how stable one client is compared to the next.
Of course, there are downsides as well. In this article, we take a robust look at job security in the world of freelance employment. Read on to find out more about the pros and cons of working as a freelance professional.
Can Anyone Freelance?
Maybe not everyone, but more people than you might first assume. Take nurses as an example. Registered nurses have the option to work for agencies that place them in high-need hospitals on a part-time basis.
Nurse Practitioners, on the other hand, can open their own practices, effectively becoming sole proprietors—the same tax status as most freelancers. There are loads of ways to earn money independently.
Pro: You Determine Your Own Income
Granted you can’t exactly say “I think I’m going to pay myself $250,000 this year.” You can develop a business plan that allows you to accelerate your income each year. Traditionally employed professionals are completely dependent on what their employer is willing to pay them. Freelancers on the other hand are limited only by their earning potential.
If you are good enough and you know how to run your business you can continue increasing your salary every year. Freelancers can even scale their operations and hire subcontractors to increase their capacity.
The traditionally employed on the other hand were only about their employer’s scalability. Their personal capacity remains the same regardless of how long they stay on the job.
Con: It’s Competitive
Traditional employment is competitive as well, but it isn’t constantly competitive. Once you have your job, you don’t necessarily need to worry about someone coming along to swoop it up. Freelancers do. They do not usually have long-term contracts. This means that their relationships can end with a simple email.
They can insulate themselves from this risk by diversifying their client load, but it takes skill to juggle accounts and actually do the work that pays the bills. Most freelancers develop a talent for this over time, but when they are just starting out, it can result in financial hardship.
Pro: Freelancers have an Increasingly Large Presence in the Workplace
Many businesses appreciate the opportunity to avoid paying a salary and benefits when they could instead higher a freelancer. Freelancers, of course, are making a compromise. They are choosing personal autonomy over the stability of guaranteed health insurance and deferred retirement income.
Con: Feast or famine
Here’s a story every freelancer knows: You’re busy. So busy you can hardly sit down to eat lunch. You have three big accounts. Each is scheduled for around six weeks. Great right? This is what every freelancer wants. To stay busy.
But what happens at the end of six weeks? The booked-out freelancer is too busy to set up contracts for when these big jobs end. To make matters worse while they are working on these busy projects they are probably turning down new assignments. Jobs they will wish they had in a month or so.
The feast or famine cycle is real, but it is something that experienced freelancers become better at navigating.
Start sending out cold calls within a few weeks of your expected project completion date. Consider hiring subcontractors so you can nurture accounts that you don’t quite have time to handle yourself.
Is it stressful? To an extent. However, once you learn how to manage your time effectively, it becomes like second nature.
Pro: Complete Freedom
Freelancers are beholden to no one but themselves. If someone who is self-employed wishes to go on vacation, they don’t need to ask permission. They simply pause their contracts and go on the trip.
This level of freedom can be pretty sweet. At the same time, it does have a downside. They can leave whenever they want, but no one will pay them for their time off. Most successful freelancers become very good at managing this balancing act. Work hard when you are busy. Take time off during your slower months.
Con: No Benefits
Freelancers have to obtain their own health insurance. They also need to figure out how they will prepare for retirement.
Good financial advisors can help with this. Note, however, that it isn’t rocket science. Roth IRA accounts, for example, are available for (almost) everyone, and serve as a great way to grow your wealth in a tax-free account.
Some freelancers also diversify their investment portfolio with passive income, streams, like rental properties storage lockers, or even other small businesses.
Is One Option Really Better than the Other?
Better? It’s hard to say. It depends on what you value. If you want to maximize your freedom and are comfortable with a degree of risk or inconsistency freelancing is a great option for you. If on the other hand, you feel more comfortable with guaranteed benefits, traditional employment might be the best route for you to take
Interested in dipping your toes into the world of freelance? Give it a shot. As long as starting a freelance side business does not conflict with your terms of employment agreement, you should be able to earn a side income and find out if you have what it takes to branch out on your own. It’s a risk-free way to get the best of both worlds.
Photo Credit
Image by Carla Bosteder from Pixabay
Guest Author Bio
Sarah Daren
With a Bachelor’s in Health Science along with an MBA, Sarah Daren has a wealth of knowledge within both the health and business sectors. Her expertise in scaling and identifying ways tech can improve the lives of others has led Sarah to be a consultant for a number of startup businesses, most prominently in the wellness industry, wearable technology and health education. She implements her health knowledge into every aspect of her life with a focus on making America a healthier and safer place for future generations to come.
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