Mort, an accountant, stomps the snow off his boots after a day of skiing in Colorado, stokes the fire, pours a cup of coffee and settles down at the kitchen table to work on tax returns for his clients back on Long Island.
John, a business writer living in the Caribbean, punches a button and sends an article to a newspaper back in Wisconsin. His dog, leash in mouth, is waiting impatiently; it’s beach time.
The freelance, self-employed lifestyle, once reserved for those with either lots of money or a willingness to live a hand-to-mouth Bohemian existence, is now almost commonplace. Whether you want to do business from St. Maarten in the Netherlands Antilles or work for yourself from the spare bedroom in your Connecticut home, the fantasy is no longer as farfetched as in the past.
The ranks of the self-employed number 20 million, according the National Association for the Self-Employed (www.nase.org). These are men and women without regular paychecks, who live by their individual skills, not by invested capital or the labor of employees.
Thanks to email and the internet, communication has become piece-of-pie easy from anywhere in the world. The advantages are many, but most of all, it is the independence.
The disadvantages include hard work and no safety net. According to one popular business saying: “Self-employed men and women are free to set their own hours. Many are free to work any 80 hours a week they choose.A
There’s also financial insecurity. Explains Dr. Dennis E. Hensley, author of 50 books, “When you work full-time at freelancing, you have no one paying your retirement, no one paying your hospitalization, no one paying you for sick days or holidays or vacation times. If you don’t work, you are unemployed those days.”
What steps can you take to become successfully self-employed? Consider the following, from the author’s 25 years’ experience as a freelancer:
- Plan. Take no flying leaps. Work up a strategy and put it on paper. Then review and revise it as circumstances change. You must become a business person. Pay attention to goals and to financial matters.
- Organize. All the talent in the world matters little if you cannot decide whether to work your business or work in the garden. Most freelancers adhere to strict hours “on the job.” Those who work when they feel like it end up working for someone else.
- Find your niche. Don’t become a “business consultant.” Become “the most respected marine generator consultant on the Gulf coast” or “the primary dental practice broker in New England.”
- Keep good financial records. “Life is one big deduction,” any self-employed person will tell you. Track expenses and pay quarterly estimated tax payments. Many novice freelancers go out of business right after April 15, surprised that they owe thousands of dollars to Uncle Sam (having no employer to make deductions from their paycheck). Also, you will be paying double Social Security payments — those for both employer and employee!
- Get good insurance, and don’t be surprised at the cost. Health insurance can cost well as much as $10,000 a year for a family…with huge deductibles. Still, without it, you can be wiped out in days with an illness. The same goes for life insurance and disability insurance. These are essential. Without them, you are courting disaster for yourself and your family.
- Provide for your future. If you expect to be on your own for more than a year or so, start salting money away for your retirement …because no one else will. There will be no pension awaiting you at age 65. Nor will Social Security keep you in the lap of luxury. The average monthly benefit for 2008 comes to just $1,079 per month. That means it is up to you to feather your own retirement nest. Specifically, put aside as much money as possible into your IRA each year up to the maximum limits. Also, look at SEPs (Simplified Employee Pensions) or SIMPLE plans to build assets even more quickly.
- Get good advice. Track down experts in your field who have already achieved a successful freelance lifestyle. Also, get financial advice. Start with your banker and your financial advisor. Their advantages are two-fold: First, helping you achieve your goals is also in their best self-interest. Second, there is no cost or obligation for their advice.
Most of all, have fun. Freestyling is challenging and stressful. But if you have the stomach and the grit, it can be a real hoot and a half. So, work hard. Make money. Have fun. — John R. Ingrisano