The 5 Biggest Mistakes Freelancers Make

By Amanda Meadows on 18 May 2016 0 comments

Freelancing is a constant push and pull. You have the freedom to be your own boss, but sometimes we're not the best bosses of ourselves. Steer from making these five common mistakes freelancers make, and get ahead of the pack.

1. Forgetting to Withhold Taxes

This is one of the first issues freelancers encounter. It's easy to get excited by lump sum contractor checks. You drop that check into your checking account to pay bills and buy yourself something nice, then before you know it, you've spent it all without saving anything. Come tax time, you're facing a hefty bill. Why?

The IRS charges a self-employment tax of 15.3% no matter how much or little you make. Unfortunately, there are only so many deductions you can claim, so it's very unlikely you can avoid the tax. Prevent the huge financial burden of a large tax bill now by automatically putting away 20% of everything you earn. The 15% goes to paying the self-employment tax, and the remaining 5% is there to help pay state taxes and, of course, the tax prep fees –– the more 1099s you have, the pricier your preparation will be.

2. Neglecting to Save for Retirement

New freelancers sometimes operate under the misconception that they don't have the knowledge or enough capital to invest in their retirement. It can also be difficult to consider saving for retirement when times are thin. If the freelance gigs are trickling in slowly at the moment, you might be savings-averse. But this is exactly why retirement savings are so important. Considering the uneven payment schedule of freelancers, a place where your money can grow slowly over time is an important safety net to have.

It's actually super easy to set up an IRA, Mutual Fund, CD, or any other kind of investment account. Find the financial institution you prefer, and they will give you the step-by-step in person or over the phone –– they'll even do most of the work for you (you are giving them money, after all!). At the end of the day, as a self-employed worker, you, and only you, are responsible for your future, so it's time to get proactive.

3. Losing Track of Expenses

Being a freelancer means having to balance both incoming and outgoing dollars. Do you have to spend money on raw materials? Do you spend hours of unpaid time and/or money on research before doing the job? This should all be tracked and never go beyond a certain limit you determine, based on the work.

Also, some clients are easier to please than others. If you fall into a deep hole on a problem project, be sure to speak up. They might be able to give you a bigger expense budget or increase your hourly rate to cover it.

4. Not Setting a Schedule

Next to setting a work budget, setting a schedule may be the most important thing you can do to ensure you can make the most of each project, and each day on the job. If you come to your desk each morning without a list or a plan, that's a sign that you may need a time management intervention.

Start each day with a to-do list. First, you need the overall to-do list –– one that covers all your ongoing projects and what must be done for each, with deadlines. Then, break those project to-do lists into weekly and daily to-do lists, respectively. Hang up a marker board in your office, with your milestones and goals for each day and week regularly updated. Google Calendar is also a great tool for creating tons of mini-calendars that sync with all your devices.

5. Skipping Self-Marketing

Are you the type of person who dives deep into a project then once it's done, dives into another? Well, not many people will know what you did if you don't take the time to tell them! Self-promotion is a crucial tool in managing your reputation. Build in time to your schedule to share your work with your personal and professional networks.

How do you keep former, current, and future clients updated on what you do? Try starting a portfolio website, updated every few weeks with new work you've completed. Are you the type of contractor who relies on lots of new clients? Consider posting listings on all the gig websites: Craigslist, Guru, Thumbtack, Tispr, and others.

Do you know a lot about topics related to your freelance job? Start a blog section to your website that answers frequently asked questions about your profession. Being known as an expert in your field can drastically improve your perceived value to clients, resulting in more work, and even better pay!

Have you made any mistakes as a freelancer? Share with us!

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