5 New Year Resolutions for the Aspiring Freelancer

With the new year, lots of folks cast their minds to a life change. For many, that change involves leaving the 9-to-5 working world and becoming a freelancer.

A while back, I was supervising my son at a birthday party for one of his elementary school classmates. The birthday boy’s father and I got to chatting about work, as dads often do in social situations, and he revealed that he was an engineer. He asked what I did, and I told him I was a freelance writer. When he probed for details, I shared my relatively flexible, work-from-home lifestyle as his eyes widened in awe.

“Oh, man! You’re living the dream!”

I demurred, as I often do when confronted with others’ disbelief, because I know in my heart that as good as freelancing sounds to people who don’t do it, it can have some pretty big ups and downs for those of us who make a living without being tethered to a single employer.

Sometimes I’m asked what the “secret” to a freelance career is. Truth: There is no secret. But there are a few commonsense steps you can take to prepare yourself if you’re seriously considering breaking free of the corporate cubical farm and going out on your own. Here, then, are my five things to do before you become a freelancer.

Step 1, Part 1: Have a Chat With Yourself

Deciding to go out on your own requires a certain level of introspection on your part, because it’s not a tiny step. It’s a huge leap of faith, and despite however you might feel about the more metaphysical types of faith, much of that faith needs to rest with the person you see in the mirror each morning.

Does uncertainty – particularly regarding money – freak you out? Do you have a low tolerance for failure and rejection? Are you financially out of sorts? Are you an impulse spender? Do you require constant structure and oversight to do a job well? If the answer to any of these questions is “yes,” then by all means keep your day job, because you’ll soon be miserable and broke in the freelance life and begging to get back to a guaranteed paycheck landing in your bank account every two weeks.

One comment I hear a lot is, “I could never have the self-discipline to work from home.” I rarely believe this. If you’re responsible enough to get up five days a week and go to a different place to work, that doesn’t mean you’re less likely to do the work at home. You just might do it while in your jammies, sweats or – for all your clients care – naked. You might do it from 10 p.m. to 4 a.m. rather than 9 to 5. You might do it while watching Netflix marathons or while camped out at a neighborhood coffee shop or pub. As long as you know what needs to get done and actually put a priority on doing it, you are displaying all the self discipline necessary to be a freelancer.

Step 1, Part 2: (If Applicable) Have a Chat with Your Family

Naturally, if there’s a domestic partner in the mix (spouse, live-in, co-parenter … whatever), this person needs to be in on the discussion. How will the change in finances and the domestic dynamic affect things? Is there enough money coming in from other sources to support the household during down periods? How will they deal with you always being around? What are the home front expectations now that you’re not out of the house 8 to 10 hours a day? Will you combine child care with your work time or will you hire help/use daycare?

Before you make a move, have this conversation. It’s important, because there are a number of ways the freelance life can strain a relationship and turn around to bite everyone in the ass. Talk about the risks with your partner ahead of time and decide if you both have the tolerance to work through them.

Step 2: (Legally and Ethically) Exploit Your Current Job to the Fullest

I’ve repeated over and over again to lots of people looking for freelancing advice that the best time to plan to become a freelancer is a year or two ago. Once people get it, they understand that it’s not a career decision one should make in a rash manner. It’s something you methodically plan for.

That said, you need to plot and scheme to make sure you can get the utmost from your straight job to help support you once you go solo. Just make sure you keep said planning and scheming within the bounds of professional ethics and the law.

Do you get the opportunity to work overtime or take on more work for extra pay? If so, do it. Take every opportunity you can manage to maximize your earning from your current, reliable source of income. Foster good relationships with people you like and who have supported you along the way. Solicit them for endorsements through LinkedIn. Take advantage of training programs and certifications that your job will pay for. If you are a creative worker, gather and archive examples of your best work to add to a professional portfolio.

Don’t: Piss people off by announcing you’ll be eventually ditching the joint for greener pastures, badmouth your employer, actively poach clients behind the backs of your employers, or reveal information covered by a non-disclosure agreement with your employer. Also, don’t steal office supplies. This is exceptionally bad form, and Post-It notes aren’t that expensive.

A former employer – if parted with graciously – can potentially become one of your first and best clients. A very successful client of mine gently went freelance from a major company in the senior care industry and turned his final straight job employer into his biggest client and one that has formed the foundation of his business ever since. THAT’s leaving on good terms.

Step 3: Pay off consumer debt and save, save, save!

All that extra money you’re earning by exploiting your final straight job has a job of its own – helping you pay off credit cards now and keeping you afloat later when finances get tight.

I’m not going to detail the ways in which credit cards are evil – you probably know all of them by heart. But when you’re a freelancer they are the glowing red jewel on the crown of Satan. They enable you to spend money on things that you don’t really have the money for, then pay outrageous interest rates for the privilege. They must be destroyed, and quickly.

Stare down your credit card balance hard, then resolve to use whatever resources available to pay it off and keep it at zero. Do you use your credit card to accumulate travel or rewards points? If so, keep the balance low enough to pay off each month then pay it. You want to avoid accumulating finance charges like they were alien anthrax.

Would it be extra helpful to eliminate other debt like your mortgage or car payment? Not really. First off, both are likely too much for you to knock out with reasonable speed. Plus, the tax deduction on mortgage interest will be more of a help in the long run. Unless you already own your home or car, just consider these expenses costs of doing business and build them into your budget.

Oh, did I mention a budget? If you don’t have one, make one. Honestly, it doesn’t have to be a detailed accounting of every cent spent each month, but it should be enough to allow you to get and idea of what you spend and where. Nail down how much money you spend each month on the things you have to pay for (car, home, food, clothes, basic utilities like electric, gas, phone and internet) then the things you sort of need (premium cable, another pair of shoes, etc.), and finally the things you want (takeout coffee, expensive dinners out, movies, etc.).

Once you understand the cruel reality of what your Starbucks habit is costing you (a $4 coffee every workday for a year totals up to $1040 – that’s more than four $250 car payments), resolve to cut back on everything in the “want” category. You don’t need to eliminate them completely – just make them treats rather than daily habits. Rationalize your new austere lifestyle by reminding yourself that the money you save will help you toward your goal of freelance liberation.

A budget will also help you establish what your freelance rate should be. Knowing how much you spend each month will let you know how much you need to earn to cover those expenses. Break that number down by the number of hours you plan to work on paying assignments, and voila – there’s your hourly rate.

(As an aside, 30 hours a week is a reasonable estimation for a relatively busy freelancer. Think about how much you probably have to pad time at your current job, then cut the fat of things like useless meetings, office birthday parties and water-cooler time. If you’re focused, a six-hour day is plenty of time to get work done and have time left for the rest of your life.)

So now that you’re living leaner, let’s get back to those credit cards. Once you’ve busted your ass and paid them off, try this sneaky trick: continue to pay into an interest-bearing savings account the exact same amount you were paying on credit cards every month. When doing this, it’s best to use an automatic deduction that funnels the money from your checking account to your savings account without you lifting a finger. The logic here is that since you were paying out the money already to cover credit card debt, you probably won’t miss it as it’s heading out the door to a savings account.

For this example, imagine you’re sitting on $4,000 in credit card debt – which you wisely transferred to a zero-interest credit card – and would like to pay it off over six months. That means you’ll pay (speaking of Satan) $666 a month over half a year. Now, once you reach a credit card balance of zero, saving that same amount each month – even at the piss-poor current interest rates of 1 percent – will get you a little over $16,000 in liquid cash at the end of two years.

That saved money now allows you to perform a neat fiduciary trick.

When emergencies arise, clients are slow to pay or you hit a slow patch, you can effectively borrow from yourself via a quick electronic bank transfer rather than resorting to credit card purchases, losing only 1 percent interest earned in your savings account, as opposed to incurring up to 20 percent in interest charges every month should you pay for said expenses with a credit card. When things begin looking up again, repay yourself by transferring the “borrowed” amount back into savings.

And here’s some financial extra credit: If things are really flush, calculate how much credit card interest you would have paid on a balance of the same amount and pay that back to yourself, too. For example, if you have to borrow $3,000 from yourself and pay it back over four months, by pretending you borrowed from a 20 percent APR credit card, adding about $50 to each repayment would cover the interest the credit card would have charged.

Step 4: Begin Building a Client Base

This is another one of those “you need to start two years ago” steps. When you make the decision to work towards a freelance career, it’s imperative that you start cultivating clients as early as possible. Since you’ll be doing this while you still hold your full-time job, shoot for things that won’t overtax you and that don’t give the impression that you’re trying to poach clients.

Most of all, shoot for jobs that pay. I can’t stress this enough, because lots of freelancers starting out are willing to do anything for free just as long as it will get them work they can show future paying clients.

These days, that isn’t really necessary. There are at least half a dozen freelance “bidding” sites – Thumbtack and Guru are two – that will allow you to get work that A) will help you build a portfolio, and B) pays. Getting paid is important because it’s what separates an amateur from a professional. Your goal is to be a professional. Take it seriously.

Please know that you won’t get rich from these sites, because you’ll have to bid low to win gigs. But if you’ve got money coming in from other sources, this isn’t a huge concern yet. Even if you’re only getting paid a few bucks, the important thing is to get the paying work so you can build your portfolio. Once you’ve pulled together a reliable base of clients who pay your desired hourly rate, you can dispense with the bidding sites altogether.

On this note, please don’t be lured by those “we can’t pay you, but it’s great exposure” offers. You can’t eat great exposure, usually the prestige these clients offer is questionable at best, and doing work for free drags down the amount that clients are willing to pay those of us who do this for a living (which presumably will include you one day). If someone pitches the “we can’t pay you” appeal, counter with, “Can you pay me a dollar?” If they say yes, it’ll be true that you haven’t made much, but at least you will have made something, and that client will understand that good work doesn’t come for free.

Step 5: Create a dedicated office space

Lastly, you’re going to need a place to work. Sometimes this is the hardest step for the aspiring freelancer, because home is full of distractions and excuses not to work. But the best thing about being a freelancer is your dedicated work space doesn’t necessarily have to be at home.

Whether you’re single or part of a larger household, having a dedicated space where you can close a door or otherwise seclude yourself and focus is a big part of being a productive freelancer. If you’re fortunate enough to have an office in your home or a spare bedroom, either one is a natural choice. If not, create a space that you’ll use only for working and that you can close off at the end of your “work day.” This can be a room, a corner of a room or basement with a curtain or folding screen, or a closet rehabbed to serve as a computer desk.

Your office space can evolve along with your freelance life. As you begin the process, a desk in the corner of a bedroom might be sufficient. Later, as things get rolling, it might be time to move to that spare room or part of the basement. Regardless, there should be a spot in your home dedicated to work and which makes that work as easy as possible. Remember that you’ll be speaking to clients via phone or video chat, so the area should be mostly quiet and feature a background that isn’t weird (a spouse’s chicken art or roommate’s pin-ups) or dungeon-like (if your basement office backs up the water heater, get an attractive folding screen).

That said, part of the beauty of freelancing is not having to do work in one place. I’m a fan of the Cosi cafe near my home. It’s busy, noisy and the chairs are uncomfortable – the perfect combination to keep me on task. You might prefer the quiet of a study carol at the local library or a table at your local bookstore cafe.

However you choose to work, it’s important to remember that freelancing is still a job. But with the right amount of advance planning, dedication and discipline, it can be one of the most freeing and empowering decisions you’ll ever make.