When deciding to go freelance, you must be aware of some necessary expenses that will show their faces! A lot of this I had to learn on the fly which was a lot harder to prepare for. I hope this list helps you be aware before making the leap!
1. Tax professional!
Yes, you probably can figure it out yourself. But oh my goodness. Freelance taxes are so much more complicated than just putting in one W-2. It helps a tooooon having someone take that burden off of you. All you have to do is keep good records through something like Quickbooks Self-Employed —> If you use that link to sign up you’ll get 50% off for the first 6 months! Honestly Quickbooks has been a massive help with getting freelance started, I would HIGHLY recommend. It seriously helps have an accounting app/website that will allow you to write down your expenses, income, and figure out your estimated tax throughout the year. Figuring this all out at the end of the year is the last thing you want to be doing!
A tax pro will put all this information together and make sure you get the best discounts. The tax laws changed for 2018, I knew this but didn’t really know how it affected the actual tax pay out. My tax lady was able to count all of this in, knowledgeably, and then inform me about the pros and cons of it later! Saved me a headache and a half!
Having a tax pro is fantastic because you always have someone to ask when you have any questions.
For example, estimated taxes. Did you know that when you start working for yourself you have to start paying taxes quarterly? You have to estimate what you’ll make that year and pay in parts to the IRS throughout the year. If you don’t, you incur stupid penalties and fees at tax time!
Awesome, how do I calculate how much I’m going to earn when I just started this and have no clue? What do I do if I can’t make a payment? What methods do I have to pay? Etc. etc. etc.
A tax professional will run you about $200+ at filing time. Other than that you just gain an awesome, tax knowledgeable, friend.
How do you find a tax person? Ask your family! Ask your friends! Ask your network/coworkers etc. People are weirdly proud of their tax pros and would GLADLY spread the word onto you. I ended up finding mine through a friend in the industry! Seriously, just ask people! You’ll have to many to choose from.
Final remarks on this point: the internet exists, but half the information about taxes is super confusing and hard to read. It’s a lot easier to email your tax person and ask away. Seriously, helps a ton and I’d say it’s way worth the $200. You’re going to end up paying just about the same amount through any of those online filing methods trying to figure this all out anyways!
2. Software and hardware!!
I went freelance with 3D and Motion graphics. While this expense was quite higher for me than for other industries, I think everyone needs this to some degree. I mean it’s 2019, everyone is working through a computer or a phone.
If you are in a position like me where your job requires you to work in certain applications and have the computer power to handle it, be prepared to hash out some serious cash in that direction! Something you really don’t have to worry about when you’re employed by someone.
I ended up building an entire PC from the ground up when I went freelance. While this was amazing and I now have an awesome machine, I’m still paying off that credit card debt. Haaaa.
Software too is actually crazy expensive. A lot of apps in 3D and design have subscription based plans which make them easier to afford, but this is still an expense you need to be aware and prepared for.
Do this smart and do the research beforehand. Don’t waste money where you don’t have to. Assess the type of work you’ve done in the past, what your reel consists of, and base your necessities of programs and computer on that. Do you need every program out there? No. Get just what you need and build on it as you go. Don’t get sucked into the gimmicks of buying the most supped up computer ever!! You honestly, probably won’t need it. If you end up needing it, try to put that into your estimate for the job that requires you to upgrade. Buy based on the work.
One resource that really helped me was the site User Benchmark PC Builder.
It allows you to preview all kinds of different models of every part you’d need for a computer. You can compare prices, capabilities etc. and come up with the best build for you both in price and ability.
In regards to software, just be smart. Share with a friend if you can. Don’t do anything illegal but be smart. Subscription based programs are nice because you can get the subscription when you need it, then cancel when you don’t. Do research on the programs you need and see what the best options are! Don’t pay for what you don’t use!
3. Health insurance!!
Probably the worst thing on this list mainly because it’s something we normally completely don’t think about!
I am about to go through this hardcore because I turn 26 in August and my parents insurance can no longer cover me. That’s when the search starts for the cheapest, yet best for the money, insurance!
Normally your company pays for your insurance, or so it seems. You pay a little bit and they cover the rest. You still end up paying a lot for it but it’s not as noticeable when it just gets taken out of your paycheck automatically every month! It’s a little different when you’re paying by yourself!
I think the cheapest insurance I’ve found here in Illinois, that was at least some type of coverage, was for approximately $300. Insurance can range usually around $300-600+. Keep this in mind when you’re making the decision to go freelance! This is an expense you’ll have to pay and only you know how much you go/need medical care. If you currently go to the doctor a lot then expect to pay $500+. Sadly this is unavoidable but being prepared ahead of time can help you budget and estimate how much you need to make a month to stay afloat.
There are lots of moving parts with freelance, I’m still working my way through them all! Added expenses, added worries, challenges etc. but it’s also super rewarding!
If you’re deciding to make the switch, keep these three things in mind as expenses that you will have to pay:
A tax professional, which would cost about $200+ during filing season. Software and hardware expenses. Don’t buy what you don’t need! Plan for the work you expect to do and build on what you have as you go! Health insurance! We forget about it while employed full-time but as a freelancer it becomes another full expense. Usually health insurance runs anywhere from $300-600 but it all depends on your health situation. Do the research and plan ahead!
Information is power and knowing helps you do your best. Comment below anything else you are curious about or would like to know my experience on! I would love to help even one person be a bit more prepared during this process!