It doesn’t matter which way you look at it, the freelance market in the UK (and across the globe) is continuing to grow at an incredible pace.
There are now an estimated 1.4 million British freelancers nationwide, for example, which represents an increase of 14% during the last decade. Even more impressively, the flexibility offered by the UK’s burgeoning army of freelancers is worth an estimated £21 billion to the national economy, which underlines just how important it is to long-term growth and stability.
From Full-time Freelance: The Key Financial Considerations
While these numbers make for a compelling argument for anyone who aspires to enter the freelance market, however, making the transition from a full-time role is extremely challenging. This is particularly true from a financial perspective, as you must be prepared to charge a lower rate for your services while you establish your reputation and build a viable client base.
With this in mind, here are three steps towards making a structured and ultimately successful transition from full-time employee to freelancer: –
- Reduce your Monthly Outgoings Clearly, you should never take an ill-prepared plunge from full-time work into freelancing, as you must set aside a predetermined amount of time to build an initial network and organise your finances.The latter part of this process starts with the reduction of your monthly outgoings, which creates a more manageable budget that can be sustained on a reduced income. While the ultimate aim is to build your income so that you can maintain a higher standard of living, achieving this requires a willingness to sacrifice on your outgoings on a short-term basis.The most important thing is to cut recurring living costs such as bills and groceries, as these make the biggest dent in your disposable income during the course of the year. We would also recommend eliminating all unnecessary expenditure for an initial period of time, which means delaying those holiday plans or any projects aimed to remodelling your home. Another thing to consider is this great resource that helps you convert your hourly freelancer wage to an equivalent annual income
- Increase your Savings and Build Interim Income Streams Now, there are two potential benefits of reducing your expenditure as an aspiring freelancer. Not only can you create a more frugal lifestyle and enables you to establish your new career, but it also affords you the opportunity to commit more into savings and create a financial safety blanket for the immediate future.In general terms, you should aim to reduce your monthly expenditure by around 20%, half of which should be committed to savings (with the other half helping you to achieve a sustainable lifestyle).For those who wish to save more during this period and have a greater appetite for risk, it may be beneficial to use these savings to create an additional income stream. It only takes a relatively small amount of money to trade on the financial markets in the modern age, for example, especially when you deal in derivatives like currency through an online platform such as ETX Capital. This can incrementally increase your income in the short-term, or those of a more conservative nature may choose managed accounts that deliver long-term gains for an uncertain future.
- Set Realistic Pricing to Secure your Initial Contracts From the perspective of financial security, it is important that you secure a handful of initial contracts prior to leaving your full-time job. While this may not be money in the bank, it creates a number of confirmed orders that equate to a specific financial value and provide genuine peace of mind for new freelancers.Whether these are rolling contracts or longer-term agreements of three of six months, they enable you to plan your finances in greater details and allow you to estimate your initial income.To achieve this, you will need to pay careful attention to pricing, as you look to set a fair and mutually beneficial rate that is hourly and competitive. This must reflect your skill-set and level of experience, while effectively motivating you and allowing you to compete for initial contracts.
If you get your pricing wrong, you run the risk of either alienating potential clients or failing to achieve your bare minimum income goals.
This post is in association with FTX