freelance

5 Tax Mistakes Freelancers Need to Stop Making

Aja McClanahan — Wed, 07 Feb 2018 09:00:06 +0000

No doubt about it, being a freelancer is hard. From serving clients to staying on top of your money game, there's no shortage of work to do. Sometimes, things may be overlooked or set on the back burner while you tackle pressing business matters. However, there is one major thing that just can't be ignored — taxes.

As your own chief financial officer you'll need to be aware of major tax missteps that could ultimately ruin your business. Ideally, you'll engage the help of an experienced small business accountant who knows the ins and outs of tax strategies for freelance business owners. However, you've got to have your ducks in a row to double and triple check their suggestions and advice, too. (See also: What Freelancers and Side Giggers Need to Know About Income Taxes)

These are the top tax mistakes freelancers really need to stop making.

1. Not paying self-employment tax

As a freelancer, you probably have a number of clients that pay you without deducting any taxes. Because you are a contractor, you are responsible for any and all taxes on your income.

Self-employment tax is a term that covers two main taxes: Social Security and Medicare. As an employee of a company, your employer would cover part of this tax. However, lucky you, since you are your own employer, you get to pick up the tab on the entire tax bill.

On the other side of paying all these taxes, you do get some reprieve by deducting a portion of these payments from your gross income, which can reduce the amount of taxes you owe overall.

Just know that it's very important to pay self-employment taxes on your freelance income. If your client issues you a 1099 form, it's also transmitted to the IRS. The IRS becomes aware of this income and can demand you to make an accounting for that money if they suspect you owe taxes on it.

2. Not having an accounting system

Making a lot of money as a freelancer can also increase your tax liability. If you don't have a good system in place to track all of your income and expenses, you could end up paying more (or less) taxes than you're supposed to.

Charleen Fariselli is a CPA who has worked with small businesses for over 10 years. She says that freelancers who don't accurately track income and expenses are at a disadvantage. "This affects their taxes because they don't have a good accounting system and are often losing deductions so they pay more in tax," she says.

Charleen also adds that a lack of a good accounting system can have an impact on making timely, accurate tax payments: "These freelancers can't calculate what their taxable income is each quarter for making tax payments, so they over or underpay, if they pay at all."

The good news is that there are many accounting software options out there to help you organize your books, including QuickBooks, Xero, Wave, and Freshbooks. You can also use a simple Google Sheets document. (See also: 5 Free Accounting Tools for Freelancers)

3. Mixing business with pleasure

One of the worst things a freelancer can do is allow their business expenses and income to spill over into their personal finances. For example, a business owner may use a business credit or debit card to cover a personal expense like purchasing groceries for their family.

The biggest problem with this behavior is how it affects record keeping for tax filing purposes. Joshua Zimmelman of Westwood Tax & Consulting says that bad record keeping can cause confusion for freelancers at tax time. "Too many freelancers miss out on deductions because their finances are not organized," he says. "Separating your expenses from the start makes filing your tax return so much easier."

If you need help keeping your personal and business finances separate, you can opt for a business checking account or credit card. You could also use both.

If you do have to use money from your business dealings to cover personal expenses or vice versa, make sure you keep a record of such transfers. A small business CPA can help you categorize (loan, owner draw, paycheck, etc.) the transactions so that you don't run into problems with record keeping or tax liabilities. (See also: The 5 Biggest Mistakes Freelancers Make)

4. Neglecting retirement savings

The freelance life can be a roller-coaster ride of feast or famine, but it's still important to keep savings in the equation — especially retirement savings. Saving for retirement is not only critical for your golden years, but can also help you save on taxes.

When you put money away for retirement, it reduces the amount of your income tax withholding. Joanna Zarach is a consultant who helps freelancers plan for retirement. She says, "Solo retirement plans are the most effective way to lower your tax bill now and to build tax-free growth in your investment accounts."

There are different options to save for retirement. Some smart options include:

Individual 401(k): This type of account is ideal for solopreneurs who want higher contribution limits. You can save with pretax dollars while receiving tax deductions for employer contributions (you are the employer) as well.
SEP IRA: Tax-deductible contributions are made by the employer (in this case, you). Growth is tax-deferred until withdrawal.
ROTH IRA: With this type of retirement account, you save after-tax income that grows tax-free forever.

5. Neglecting health care contributions

Paul Jacobs is a CPA, EA, and officer at Palisades Hudson Financial Group. He says he often sees freelancers, "Forgetting to deduct health insurance premiums. A great tax break that is available to the self-employed is the ability to deduct this expense."

As a small-business owner, there are tax benefits when you pay insurance premiums for yourself and family members. Premiums for medical, dental and, in some cases, long-term health insurance qualify.

Reporting these premiums on your taxes can reduce your adjusted gross income (AGI) which can make you eligible for certain tax breaks. The only caveat here is that you may now have to itemize deductions in order to take advantage of this deduction come tax time due to the recent Tax Cuts and Jobs Acts of 2017.

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This article is from Aja McClanahan of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 New Year's Goals Every Freelancer Should Make

Kentin Waits — Wed, 20 Dec 2017 09:00:07 +0000

It’s part of the magic of the season — each new year is a chance for a new beginning. For those of us who freelance, this time of year is particularly important. It’s a moment to reflect on what’s going right in our businesses, what needs improvement, and what goals should shape the next 12 months. In short, it’s time to plan for the care and feeding of our self-made careers. With that in mind, here are eight New Year’s goals every freelancer should make.

1. Build your brand

No matter how small the enterprise, branding matters. If you haven’t established a brand for your freelance business, resolve to do it this year. Remember, a brand is more than a logo and tagline; it’s also the experience clients have with you.

If you’ve already established a brand, apply it consistently and flawlessly online, in all printed material, and in person. Remember, the goal is to make sure clients keep your business top-of-mind and recommend your services without hesitation.

2. Update your LinkedIn profile

LinkedIn has established itself as the social networking hub for all things employment-related. Its network connects professionals in nearly every field imaginable — and many of them are in desperate need of freelance help. If your LinkedIn profile is out of date, sloppy, or incomplete, it reflects poorly on you and your business. Update it ASAP. (See also: 7 Things You Should Never Do on LinkedIn)

3. Learn a new skill

Regardless of what field you’re in, markets never stand still. Changing technologies, new tools, and shifting tastes all demand that freelancers adapt or die. Stay competitive by sharpening your current skills; stay engaged by learning new ones. (See also: 10 Things All Successful Freelancers Do)

4. Expand your network

Freelancing can be isolating, especially for those who work from home. A strong network of colleagues will keep you engaged socially and plugged into new professional opportunities. Devote an hour or two each week to expanding your network through social media, blogs, and industry events. (See also: 11 Ways Freelancers and Telecommuters Can Make Friends and Network)

5. Ditch toxic clients

Take a critical look at your project list for the past couple of years. Are there clients who consistently paid late? Had endless demands and unreasonable deadlines? They’re likely costing your more money than they bring in. Free yourself by phasing out chaotic professional relationships. But be diplomatic; bad clients often employ good people and you never know where those folks may land.

6. Bump up your rates

For many freelancers, it’s tempting keep rates low to draw in more business. But over time, this loss-leader strategy can do more harm than good. Not only does it keep you at a financial disadvantage, it implies your services aren’t as professional or in-demand as your competitors’.

Assess what price the market can bear and adjust your rates accordingly. Communicate the increase clearly in writing and give your clients at least 60–90 days notice.

7. Make time for downtime

When you work for yourself, the boundary that separates your personal and professional world can get a little fuzzy. This year, establish (and stick to!) a more formalized schedule — one that allows for real downtime and breaks from client calls, email, and paperwork.

8. Save for retirement

Without access to employee-sponsored retirement programs, freelancers must take the lead on saving for the future. Roth, traditional, and SEP (Simplified Employee Pension) IRAs each have distinct benefits and limitations. Choose the one that works best for you and make regular contributions — starting now. (See also: A Simple Guide to Retirement Plans for the Self-Employed)

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This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Turn Your Instagram Account Into a Paying Gig

Camilla Cheung — Thu, 16 Nov 2017 09:30:10 +0000

When it comes to digital marketing, Instagram is at the top of the heap. With 800 million users as of September 2017, the visually-driven platform is a big moneymaker for brands who are savvy about social media marketing.

So how can you leverage that marketing power to make some money off your own Instagram account? Assuming that you're just a regular individual who has built an engaged following, there are certainly ways to make an extra buck or two, or even support yourself, using your Instagram account. (See also: 5 Social Media Stars Who Earn Way More Than You)

1. Create sponsored posts

If you have a lifestyle or product-driven Instagram account, doing a few sponsored posts can provide a neat little side stream of income. Once your account has amassed a few thousand followers, you can start reaching out to brands (or they'll reach out to you) about doing a paid post. How much you'll be compensated varies greatly depending on the brand, how specialized your niche is, how engaged your followers are, and whether you'll include other services, like writing a blog post or hosting a giveaway.

Be wary of fatiguing your followers with constant sponsored posts, however. The whole reason why Instagram marketing is so popular is because it seems more authentic and engaged with its audience than traditional forms of marketing. Too many sponsored posts could make you look like you're just a brand mouthpiece.

2. Create content

With the growing importance of Instagram marketing, many brands are focusing more of their ad budget on creating content for social media channels, and often they hire freelancers for this rather than employ full-time staff. With this comes a whole new job category, the content creator — someone who is paid to create photos and written content for Instagram posts.

You don't need to have a huge following to sell your services as a content creator, but you do need creative photos and captions. Many brands are finding that it is less expensive to hire a content creator than to hire a professional photography studio — the photos don't need to be as detailed or as formal-looking, and can often be taken with natural light. You can also sell your Instagram photos through services like Snapwire, Foap, and Lobster Media. (See also: Earn Extra Income With Your Smartphone Camera)

For written content, instead of going through a marketing firm, some brands (especially smaller ones) are hiring freelance copywriters instead. What this means is that Instagram users with clever captions and descriptions are able to find work in content creation by using their Instagram accounts as an online portfolio.

3. Turn free products into paid work

Influencers, even small ones with just a few thousand followers, are often inundated with offers of free products in exchange for an Instagram post, a review, or a shoutout. While free products can be fun, they don't pay the bills.

What you can do, however, is turn these offers of free product into paying gigs. For products that I'm interested in, I'll often create an Instagram post using the free products. If the brand reacts favorably, I might email my contact at the brand offering freelance writing or photography services. Quite often, pitching brands for paid work turns into an opportunity to blog for them, create a set of product photos, or for long-term collaboration. (See also: How I Scored Tons of Free Stuff By Building a Small Social Media Audience)

4. Become a brand ambassador

Becoming a brand ambassador can set you up for steady income every month. Brand ambassador programs can vary greatly in compensation, from free products and an affiliate incentive, to monthly paid partnerships. Here, your status as an influencer will play a large role — the more engaged your followers are, the better a package you can negotiate. It's always best to work with a brand you truly believe in, so that you are authentic to your followers when you promote it on a consistent basis.

5. Do brand consulting

Once you have amassed a good number of followers who respect your opinion, some brands recognize that you may have good feedback to give them on how they market their brand. They may be willing to pay for that feedback. I personally know a few bloggers/Instagrammers who have been paid to spend a few hours chatting with a company about their products and how they can improve their brand image. There's also a whole category of Instagram consultants who help small or new accounts and brands polish their social media strategy and their Instagram feed.

6. Earn through affiliate networks

Earning money through an affiliate network means that every time someone makes a purchase based on your influence (by clicking an affiliate link with your unique code attached to it), you gain a commission. Affiliate sales can be a great way for influencers to earn income, but they tend to be more effective if you have a large following or if the product you're marketing is super popular. Nevertheless, affiliate sales can be another way to diversify your income stream, and for some influencers they can be extremely lucrative.

Because personal accounts on Instagram allow only one live URL (the link in your profile bio), and do not allow direct linking through Instagram photos, affiliate marketing on Instagram is different from blogs or other forms of social media. Some influencers have turned to third-party apps like LIKEtoKNOW.it, which send subscribed users an email with links to buy the products when users click "like" on an influencer's photo. You can also send users to your blog or another website where you have your affiliate links available.

7. Adhere to federal requirements

It's important to remember that the Federal Trade Commission notes that all Instagram posts (even the temporary posts on Instagram Stories) should fully disclose if the creator received compensation in any form for the post. This applies to free products as well as to monetary compensation. On Instagram, you can use the hashtags #ad, #sponsored, or an explanation in the caption. If you're going to be making money off your Instagram account, you must be upfront about it with your followers.

You must also be responsible for reporting your income and paying taxes on it, so you will want to factor that into your asking rates. Brands who pay you are reporting their expenses on their end, so you must also report them when you file your income taxes to avoid a potential penalty.

If you've spent time building a following on Instagram, why not make it work for you financially? You might be surprised at how our growing social media use has resulted in a growing industry where you could earn some extra money, or even start an unconventional new career.

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This article is from Camilla Cheung of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Build Business Credit When You're Self-Employed

Elaine Pofeldt — Tue, 07 Nov 2017 08:30:20 +0000

It's hard to beat the freedoms of being self-employed. But with the joys of being your own boss and creating your own schedule come some trade-offs. One trade-off can be unsteady income.

Even if you are very careful about your finances, it's possible that a great business opportunity will present itself that you simply don't have the cash for. If you've built good business credit and have access to a business credit card or line of credit, it will be easier to jump on those opportunities.

Building good business credit can seem like a mysterious process if you've never done it before. Here's how to get started. (See also: Best Credit Cards for Small Businesses)

1. Establish strong personal credit first

The vast majority of small business credit cards require you to personally guarantee the charges you make — even if the card is issued in your business's name. That means if the business fails, you will still be responsible for the debt.

Because you ultimately will be the one who pays the balance, expect lenders to pay attention to your personal credit when you seek business credit. Under the Fair Credit Reporting Act, when you apply for business credit, a lender has the right to look at your personal credit profile to evaluate whether to issue it to you.

To make sure you have a full array of options when it comes to business credit cards, make sure you are paying your personal cards on time and not maxing them out. A high credit utilization ratio — that is, using a large percentage of the credit available to you — can cause your credit score to drop. (See also: 5 Ways to Improve Your Credit Score Fast)

2. Run your business like a business

If you want to get business credit in the future, keep good financial records by using accounting software such as FreshBooks, QuickBooks or Xero. Using software designed for this is much easier than using spreadsheets and reduces the chance that you'll make mistakes.

Many accounting software programs have a "reports" function that allows you to create a profit and loss (P&L) statement with the click of a button. A P&L statement shows all of your sales and expenses for a set period, such as a year. To get a business line of credit with your bank, you will very likely have to produce one of these statements, so this feature is a huge timesaver. (See also: 5 Free Accounting Tools for Freelancers)

3. Keep your business finances separate

Before you try to open a line of credit with your bank or apply for business credit cards, open a business checking account. This will show lenders you are serious about running your business.

Maintaining a business checking account also gives you an opportunity to develop a relationship with your banker. If money is flowing into your account regularly, you are maintaining more than the minimum balance, and you are handling the account responsibly (i.e., the checks you write are clearing), chances are that your banker will begin to offer you products such as a business credit card and possibly a line of credit.

Don't use your business checking account to pay your personal bills. You need to establish separation between your business and personal finances and keep accurate records.

To open a business checking account, you will generally need a federal Employer Identification Number (EIN). You can apply for one online through the IRS.

4. Use your business credit card strategically

If you don't have strong personal credit, you may still be able to get a business credit card. There are some higher-interest cards designed for people with a "fair" credit score.

While paying higher interest isn't ideal, if you use the card responsibly, you'll be able to improve your credit profile and should qualify for better deals in the future.

Once you get a business credit card, use it regularly to make business purchases and pay the bill on time — ideally in full — to build a history of using it responsibly. Don't use the card for personal spending. If you connect this card to your accounting software, it will be easy to enter your business expenses, saving you a lot of time.

5. Monitor your business credit report

How do you know if you are actually building good business credit once you make these efforts? Use the free searches on Experian, Equifax, or D&B to see if your business's credit is being tracked. (You will have to pay to get the actual report).

There's a different system for business credit card scores than for personal ones. Business credit scores go from 0 or 1 to 100. Each of the major credit bureaus uses its own formula, but factors such as how long you've been in business, your credit utilization, and the lines of credit you have opened in the last six months are likely to affect your score.

If you find your business isn't on the radar screen of the major credit bureaus and you have already gotten your EIN, try applying for a free D-U-N-S number with Dun & Bradstreet, which should get the ball rolling.

All of these steps take some work and can't be done overnight, so start early — ideally a few months before you think you'll need business credit. It'll pay off. Having strong business credit is a valuable asset that you'll greatly appreciate if you ever get into a cash crunch.

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This article is from Elaine Pofeldt of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Moves Every First Year Freelancer Should Make

Emily Guy Birken — Mon, 30 Oct 2017 08:30:14 +0000

When I started my freelance career seven years ago, I honestly had very little idea of what I was doing. I made some seriously painful mistakes that affected everything from my bottom line to my stress level to my relationships with some of my clients. (See also: The 5 Biggest Mistakes Freelancers Make)

But even though self-employment mistakes are common, they're not inevitable. You can make the transition to self-employment much smoother and easier to handle if you commit to doing the following things in your first year as your own boss. Not only will you lay down the good habits and policies you'll need throughout your new career in self-employment, but these moves can also help your career start off with a bang. (See also: Day Job or Freelance: Which Is Right for You?)

1. Set aside 30 to 35 percent of every paycheck for taxes

One of the double-edged swords of working for yourself is the fact that your paychecks will generally not have any taxes withheld. While it feels pretty good to have the full amount of money you earned coming directly to you, it can really mess up your finances if you don't plan ahead for taxes.

Many of the newly self-employed can get themselves into trouble by assuming they'll pay their quarterly estimated tax bills with whatever funds they have received as of the quarterly estimated tax due date. But Uncle Sam doesn't care if you have a slow work spell or are waiting on some payments that are not quickly forthcoming from a client — he wants you to pay the taxes you owe on time. (See also: Avoid IRS Penalties With This Simple Estimated Payment Strategy)

You can bypass the quarterly stress of finding the necessary funds to pay your tax bill by specifically setting aside 30 to 35 percent of every check you receive. This does take a depressingly large bite out of your paychecks, but it gives you the peace of mind to know that you will be able to cover your estimated tax payments. In addition, by putting this money into a savings account, you can earn a little interest — which already puts you financially ahead of folks who have their taxes withheld.

If your diligent savings of 30 to 35 percent of each paycheck means you have more money than you need for taxes in your first year of self-employment, then you can always use the leftover money to reinvest in your business or smooth over any lean months in your second year of self-employment. (See also: 7 Things I Learned About Money After I Went Freelance)

2. Hire an accountant

Speaking of taxes, they are going to get more complex now that you have begun working for yourself. While it is certainly possible for you to complete your taxes all by yourself as you've done in the past, the money you spend on an accountant for your self-employment taxes can both save you time and lower your stress. (See also: 5 Free Accounting Tools for Freelancers)

Asking for referrals from trusted colleagues or small business owners can be the best way to find the right accountant or tax professional for your needs. Don't let this important part of self-employment go on the back burner. Having an accountant throughout your first year of self-employment can help you to accurately pay your quarterly estimated taxes on time, and take advantage of deductions and other tax benefits that you might otherwise miss.

3. Determine your payment floor

During my first year as a freelancer, an educational company contracted me to write lesson plans for English teachers. I had been working as an English teacher before my freelancing career, and I loved that this company was committed to using humor in all of its resources. I thought it was a perfect fit, and I quoted them a price per lesson plan that felt reasonable for my expertise (and comedic chops). They offered me a fifth of what I asked for. Since I was worried that I wouldn't be able to actually make a living as a freelancer, I took the job.

It was a huge mistake.

Here's why: The amount of work that I put into each lesson plan meant I was earning less than minimum wage for my hours of toil. It took me months to get through the initial contract of 10 lesson plans, in part because I knew how little I was making and it was difficult to prioritize this client over those who paid more for less work.

Even though the company loved my work, we parted ways after I finished the first round of lesson plans. They were just as happy to get a quicker and less-funny turnaround from another freelancer who did not have my expertise. I was glad to no longer be working so hard for a company that did not financially value my contributions.

After this experience, I learned to figure out my payment floor — the least amount of money my time was worth. Once I knew my payment floor, it became much easier to recognize which jobs were worth my time, and which jobs would leave me feeling overworked and resentful. Knowing your payment floor may seem premature in your first year of self-employment since you feel like you are hustling just to capture enough clients to keep the lights on. But you are better off holding out for clients who value you, rather than taking any job, no matter how low the pay.

4. Build free time into your schedule

There are a couple of common scheduling traps that can trip up the newly self-employed:

Working all the time. Since you are now completely in control of your schedule and your career, and since you presumably love what you do, it can be very easy to throw yourself into your work 24/7.
The planning fallacy. Even after seven years as a freelancer, I still underestimate how long it will take me to complete a project, because it never occurs to me that my kids might get sick, my internet might go out, my research might uncover more complex issues than I anticipated, or that I might be struck down by an unexpected nap after eating too many carbs for lunch.
Lack of discipline. For some newly self-employed individuals, it can be difficult to stick to self-imposed (or even client-imposed) deadlines if you don't have a boss to keep you honest. It's a lot harder to succeed in self-employment if you have trouble sticking to a work schedule.

All three of these scheduling mistakes can be helped by building free time into your schedule. Forcing yourself to take time off from your otherwise nonstop work will prevent burnout and allow you to be far more productive. Having a free afternoon built into each week has helped me to improve my on-time percentage, because it leaves some slack for when life happens and I'm not able to finish things according to my pie-in-the-sky planning assumptions. And anyone who struggles with self-discipline will generally have an easier time forcing themselves to work if they know that there is free time coming. (See also: Self-Employed? Tips for Taking Time Off Without Trauma)

5. Capture excess income in a savings account

When you are self-employed, there will be some months when several paychecks or client payments come in all at once. This can feel pretty great, especially if you can thank your own hustle for making it rain, but it's important to be disciplined about this kind of excess income and put it in a savings account. That's because you are likely to have a low-income month sooner or later, and that excess income can be the difference between you being able to pay your bills as usual and you having to go grocery shopping with couch cushion change. (See also: The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS)

During your fat-paycheck months, you should not only set aside the 30 to 35 percent you put away for your taxes, but you should also put whatever additional excess income you can afford into a "rainy day" savings account. This account is where you will go to get the money you need to keep everything running smoothly during any lean months. And like your taxes savings account, if you don't end up needing to dip into this rainy day savings account, that means you will have money already set aside that you can potentially invest back into your business. (See also: How to Budget Consistently Without a Steady Paycheck)

6. Insist on clear contracts

Everyone who has ventured into self-employment has at least one story about being stiffed out of payment from a client. For instance, in my first year of freelancing, I was hired to write for a startup parenting website. I wrote several articles for the site, but I was only paid for one of the half dozen pieces I provided them. (See also: 8 Ways Freelancers Can Make Sure They Get Paid on Time)

The client was in the wrong for not paying me — but I also made a mistake in accepting work from them without a contract. Our arrangement was based on nothing more than email exchanges and a phone call. We did not have a contract that spelled out our legal expectations of each other, which meant it would have been very difficult for me to pursue the client for the money they owed me.

In addition, contracts are also helpful for defining the scope of a project and specifying the details of a termination fee. A contract that outlines the specific timeline and deliverables will protect you from having to revisit the same project over and over again for no extra money if your client insists on more edits or revisions or a larger scope than you expected. Similarly, if your client decides to end your project, having a contract that specifies the termination fee you'll receive under such circumstances will protect you from having wasted your time.

Welcome to self-employment!

You can set yourself up for se lf-employment success in your very first year as your own boss. Planning ahead for everything from taxes to lean months to time management to contractual disputes will help you create a self-employment career that you'll love for years to come. (See also: Freelancing: A Beginner's Guide to Doing It Right)

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Don't Get Audited! How Your Side Gig Needs to Handle Taxes

Damian Davila — Thu, 26 Oct 2017 09:00:06 +0000

The gig economy is booming. In 2016, a TIME poll found that 45 million Americans offered some kind of good or service through an online platform, whether it was running errands, renting out their homes, or offering rides in their cars. With so many people earning extra income this way, you can bet that Uncle Sam wants its fair share of those earnings. Understanding some basic rules about taxes in the gig economy can help you avoid frustration and penalties.

Renting out your home

At $924 per month, Airbnb hosts command the highest average monthly income out of all others taking part in the sharing economy. Here are some key things to keep in mind if you rent your space. (See also: 13 Things I Learned From Renting Out My Home on Airbnb)

1. The 14-day rule

According to the IRS, if your rental property also serves as your residence, and you rent out the space for no more than 14 days during the year, you don't have to report those earnings as income. Note that you also cannot claim any deductions from rental expenses if you rent for fewer than 14 days per year.

Airbnb and similar companies will still report your earnings even if you're under the two-week threshold. But as long as you provide documentation that you meet the 14-day rule, you don't have to include rental income on your federal return. If you do have to report income, use Schedule C or E of Form 1040.

2. Deductible expenses

The IRS allows you to deduct a long list of applicable costs for your rental operation, including advertising, cleaning and maintenance services, utilities, property insurance, and property taxes. Check the rental section on IRS Publication 527 for a full list of eligible expenses.

You can deduct 100 percent of direct rental expenses such as fees to Airbnb and rental insurance, and allocate a portion of general expenses such as mortgage interest and utilities. If you only rent out a room that is one-sixth of the size of your home, you can only allocate one-sixth of a general expense.

3. Form 1099-K

When you earn over $20,000 and make over 200 transactions in a calendar year, Airbnb will issue you a Form 1099-K. Airbnb will mail you this form and keep an electronic copy under "Payout Preferences." This form is an IRS information return used to report certain payment transactions, which improves your voluntary tax compliance.

4. Pay attention to local occupancy taxes

On top of the IRS, you should also keep an eye on state and local government agencies. For example, throughout 2017 the House Finance Committee of Hawaii is evaluating an "Airbnb bill" to collect hotel room and general excise taxes from Hawaii-based short-term and vacation rentals.

5. Report rental losses

In the event that your rental operation goes sour, you can deduct losses up to applicable limits. Let's imagine that you own a $400,000 home and that you spent $400 to get a room ready for rental. However, nobody took you up on your offer. Per the IRS at-risk rule (for property placed in service after 1986), you can write off up to $400,000 in rental losses. So, you can deduct the $400 as a rental loss on your return.

Driving people in your car

Lyft and Uber drivers make an average $377 and $364 per month, respectively. Here are some tax-related pointers to keep in mind when declaring that income. (See also: How to Get a High Rating and Make More Money as an Uber Driver)

1. Keep track of all 1099s

Unlike a full-time employer, Uber and Lyft won't issue you a W-2. Instead, these and other ride-sharing companies issue two types of 1099 forms to most drivers.

Form 1099-K: Includes all payments that you received from customers directly related to driving.
Form 1099-MISC: Keeps track of all other non-driving income, such as payments for referrals and other types of bonuses.

While companies aren't required to issue a 1099-K unless you process 200 transactions or more (and make at least $20,000), and they're not required to issue a 1099-MISC unless you make at least $600, Uber and Lyft generally will issue those forms anyway just to remind you to report your income made through ride-sharing.

On Uber, access your tax documents by logging in to partners.uber.com and clicking "Tax Information." On Lyft, look for tax documents in the "Tax Info'" tab of the "Driver Dashboard" of your Lyft app.

2. Deduct applicable expenses

You'll quickly notice in Box 1a of your 1099-K that the reported amount is actually greater than what you received. The reason is that the reported amount in that box includes Uber's commission and other fees. On your Schedule C, Profit or Loss from Business (Form 1040), you can deduct those fees and other applicable expenses. Some examples are:

Bottled water and snacks for your passengers.
Business taxes and license costs.
Highway tolls.
Car cleaning expenses.
Car maintenance costs.
Gas.

It's a best practice to keep a copy of all receipts so that you can back up your claims. One great way to do so is to open a bank account or credit card and use it solely for driving-related expenses. That way, your monthly statement becomes your monthly expense report. (See also: When You Should Get a Business Credit Card Over a Consumer Card)

3. Include mileage in your return

Within your 1099s, you'll also receive a summary for "On-Trip" mileage. For all business miles driven in 2017, you can deduct 53.5 cents per mile. So, if you were to drive 2,000 miles, you would deduct $1,070 (2,000 x $0.535) on your return.

You may also deduct additional miles that Uber and Lyft didn't report as long as those miles are directly related to your gig. Some examples are miles that you drove before a ride was canceled or on your way to meet an Uber or Lyft inspector. Keep a detailed log of those miles and include date, time, initial mileage, and final mileage.

4. Consider getting a separate smartphone

An internet-enabled smartphone is a key part of your operation. To make it easier for the IRS to identify what mobile phone expenses are related to your driving, get a new phone and use it exclusively for Uber or Lyft. This way you'll be able to deduct 100 percent of all phone costs, including cost of the phone, monthly charges for voice and data, and any essential accessory (chargers or mounts) from your driving income.

Tips for all side giggers

Whatever your gig, be sure you're keeping up with your taxes.

1. Report all income

From assembling furniture through TaskRabbit to delivering business supplies with Postmates, there are plenty of other ways to make money through the sharing economy. (See also: 13 Ways to Make Money Online That Aren't Scams).

All companies have to issue you a 1099-MISC once you make $600. Even when you don't hit that threshold and don't receive a form, report the income on your return. The IRS charges a 25 percent inaccuracy penalty on top of applicable taxes and interest for late payments.

If you happen to complete additional tasks or services for a client that aren't tracked on an app or website, it's a good idea to still include them in your income. When you're making the bulk of your income through the gig economy, your federal tax return becomes a key document to prove how much you make per year. This can be useful when applying for a credit card or other form of credit.

2. Make estimated federal and state tax payments

Lessen the tax blow by submitting estimated tax payments throughout the year. Use Form 1040-ES, Estimated Tax for Individuals to submit tax payments up to four times per year. For tax year 2017, you can submit payments on April 18, June 15, September 15, and January 16, 2018.

Most states also allow side-giggers and freelancers to submit estimated tax payments. To learn more about your state tax obligations, contact your local state tax office.

3. Adjust withholding from your day job

Don't pay more taxes than you have to. If a full-time employer is already withholding taxes from your paycheck, use the IRS Withholding Calculator to adjust how much is taken out. It has been estimated that 75 percent of Americans pay too much in taxes throughout the year. The calculator will provide you suggestions to adjust your withholding so that you meet your tax liability and keep the most out of your day job paychecks.

4. Hire an accountant

Using Schedule C from Form 1040 is a great way to reduce your taxable income, but is also a way to increase your chances of receiving an audit from the IRS. Individuals using Schedule C are more likely than corporations to get an audit. If you're planning to include a very long list of deductions, paying a professional will be worth your while to hedge against a potential audit. You can deduct what your accountant charges you as a business expense, after all.

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This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Moves You Should Make Now for Your 2018 Taxes

Christa Avampato — Thu, 19 Oct 2017 08:00:07 +0000

Fall is full of wonderful things: pumpkin lattes, crisp autumn air, changing leaves, and tax preparation. OK, tax preparation may not hold the same wonder as fall flavors and vibrant foliage, but this is a critical time to get your financial house in order before the end of the year. In particular, here are six easy tax tasks to take care of before we enter 2018.

1. Re-evaluate your withholding

Did the size of your family change this year? If it did, contact your human resources department to update your withholding so that you aren't overpaying or underpaying your taxes throughout the year.

2. Compare your life situation this year versus last year

Get out your 2016 tax return and consider any changes that have happened in your life since you filed your taxes for that year. Did you move to a new county, city, or state? Did your marital status change, and you'll now be filing jointly? Did you switch jobs or take on some freelance work? All of these changes can impact your tax filing, particularly if you itemize your expenses.

For example, let's say you moved to a new city this year and now work full-time from home. You'll want to have any job search expenses, home office and work-related expenses, and any moving costs detailed and organized before you visit your accountant or start the preparation and filing process yourself. All of these costs are potentially deductible on your taxes if you have well-organized records of them.

If you moved this year, make sure your employer(s) (full-time and freelance) from 2017 have your updated address so that you get your W-2 forms without delay.

3. Max out your retirement contributions

Are you maxing out contributions to your 401(k), 403(b), and/or IRA accounts? If not, could you afford to increase your contributions to meet or get closer to the max for the year? You can contribute up to a maximum of $18,000 (plus an additional $6,000 if over age 50) to your 401(k) or 403(b) for 2017 until December 31. IRAs give you more flexibility with your 2017 contributions — you can contribute right up until you file your 2017 taxes or Tuesday, April 17, 2018, whichever comes first. You can contribute up to $5,500 per year to an IRA (or $6,500 if over age 50).

4. Make your freelance income work for your retirement

Do you do freelance work? You still have time to set up and contribute to a retirement account that will have tax benefits for the 2017 tax year. In particular, look into opening a Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) account. SEP IRA accounts are specialty retirement accounts that were created for the advantage of business owners and their employees. This applies to you if you're a freelancer.

These accounts can be opened and funded independently from any other retirement accounts you have, such as traditional and Roth IRAs as well as 401(k) and 403(b) accounts from employers. Like other IRAs, you have until you file your 2017 taxes or Tuesday, April 17, 2018, whichever comes first, to set up and fund an SEP IRA for 2017. For 2017, contributions to an SEP IRA cannot exceed the lesser of 25 percent of your compensation or $54,000.

5. Prepare your deduction receipts

This is a task I always leave right until the end, but this year I'm trying to get ahead of the game. I itemize my taxes each year and have to keep track of all of my receipts to make sure I itemize properly.

Rather than letting my receipts stack up over the year, I've been tracking them in a spreadsheet each month to make my tax filing quicker and easier. Don't forget about any job-hunting expenses, either: Make sure to take special note of those expenses related to job searching, as they will be itemized in their own category.

6. Consider homeownership changes

Did you buy or sell a home in 2017? This change has huge implications on your taxes. Make sure you have all of your home purchase or sale paperwork organized so that you can account for it appropriately in your filing.

Fall offers us a slight pause before the rush of the holiday season that ushers us into the new year. Take a little time now to get a head start on tax preparations, and your future self will thank you!

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This article is from Christa Avampato of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Budget Consistently Without a Steady Paycheck

Emily Guy Birken — Fri, 11 Aug 2017 08:30:05 +0000

Freelancers, small business owners, contractors, and salespeople working on commission all have one thing in common: irregular income. Anyone who has worked in these professions knows the insecure feeling you get when you are lurching from flush months to lean months as work (and on-time payment) waxes and wanes.

Since the majority of budgeting advice starts with the assumption of a steady paycheck, it may seem like budgeting is out of reach for the average person with an irregular income. Nothing could be further from the truth. Not only can you successfully budget an irregular income, but creating and adhering to a budget can mean the difference between surviving the lean months and thriving through them. (See also: The Smart Way to Budget on a Freelance Income)

Here's how to create a budget if your income is inconsistent or irregular.

The cash flow bucket system

Before you even get started, you should know what budgeting success will look like. According to Roger Whitney, certified financial planner and podcaster, "the goal for inconsistent income is to slowly build up your savings to the point where you can pay yourself a regular monthly salary out of your cash reserves."

How do you do this? By using a method called the cash flow bucket system. With this system, instead of having your paychecks deposited into your checking account, they will go into savings. Once a month, you'll transfer the amount you need for expenses and bills into your checking account. This is your own self-created "monthly paycheck." This system is a great fit for anyone with irregular income, because it keeps excess money from burning a hole in your checking account, and will help you smooth over the irregularities in your income.

However, creating a cash flow bucket system can take a little more time with inconsistent income. Here are the steps you need to follow to get this system to work for you.

1. Capture excess income

Before you plunge headlong into depositing all of your income into your savings account, start by putting away excess cash during high-income months. This can take some discipline.

Anyone who has received irregular income knows the feeling of being flush when several paychecks or client payments come in all at once. It's very tempting to use that excess income for discretionary spending, especially if you can thank your own hustle for the huge payday. But before you blow the big check on a steak dinner, slow down and remember how tough it is to go grocery shopping with the change you pilfered out of the couch cushions.

That's why it's so important to recognize when you are experiencing a flush month and immediately put aside as much of the excess income as you can. The larger your savings account is as you start the cash flow bucket system, the easier it will be for you to smooth over the inconsistency of your income.

2. Determine your minimum budget baseline

The next step is determining your baseline expenses for a regular month. This baseline should be comprised of the expenses that are the absolute essentials for maintaining your life — such as your rent or mortgage, utility bills, transportation, groceries, and child care.

This figure should be relatively easy to calculate. Write down your fixed expenses, such as your rent or mortgage, and estimate the fluctuating expenses, such as utility bills and groceries, by figuring the average cost over the past six to 12 months.

When you know your baseline minimum, compare it to your existing savings account balance. Assuming you already have some money saved, you can see how many months' worth of minimum expenses you have set aside in your savings account — or how much you need to accumulate. It's a good idea to have three to six months' worth saved up, depending on the variability of your income. Just recognizing that you could survive with no money coming in for several months can help ease a great deal of the financial stress that comes with an inconsistent income.

3. Calculate your discretionary expenses

Once you know the bare minimum that you need to have on hand to keep the lights on and everything running, it's time to calculate how much you spend each month on discretionary purchases. This will include your spending on everything from dining out, to entertainment, to your hobbies.

It's a good idea to go over several months' worth of bank statements and credit card bills to figure out how much you have spent on average on these discretionary expenses in the past. This way, you can come up with an average monthly discretionary budget.

Be prepared to cut your discretionary spending as needed, since that can help you smooth over your inconsistent income more quickly.

The best way to pare down discretionary spending is to cut things from easiest to hardest. If you love your weekly movie date with your best friend, then make sure that $15 you spend per week is preserved in your budget. But if you get coffee at the local coffee shop out of habit rather than enjoyment, then be prepared to start brewing your own.

4. Start having your paychecks deposited into savings

Now that you've beefed up your savings account during flush months, and figured out your baseline budget level and monthly discretionary spending, you can start having your payments from clients deposited directly into savings, rather than checking. Then, on the first of each month, transfer your "monthly paycheck" from your savings account into your checking account to pay for your monthly expenses.

This is where things differ between someone with a steady paycheck and someone with irregular income. Depending on how much money you have already set aside in your savings account, and how frequently you deal with lean months, early on you may need to decide from month to month whether you will be living on your baseline budget or your baseline budget plus discretionary spending.

However, as you build up your cash reserves, you will be able to eventually switch to an automatic transfer of your baseline budget plus discretionary spending.

5. Keep an eye on the system

Your checking account will be nearly depleted by the end of the month, but if you calculated your budget correctly, the money should last you until the first of the following month.

If you find you are running short before the end of the month, you will need to look at your expenses to see where your calculation went wrong or your spending was too high. You can also decide to move more money from your savings account into your checking account or end all unnecessary spending until the next month begins.

6. Start saving for the future

The final step of budgeting irregular income is to incorporate saving for the future. While the cash flow bucket system will put excess income into your savings account and hold it for your lean months, it does not take the place of saving for retirement or other financial goals.

Once you have reached a point that you have enough savings to consistently pay yourself a monthly salary, factor saving for the future into your monthly budget. Set up an automatic transfer of that amount from your savings account to your retirement fund or (other savings vehicle). Though you won't see that money in your monthly "paycheck," you will need to factor in the deduction from your savings account.

Budgeting like a boss

Earning an irregular income can feel overwhelming. Not knowing how much you make from one month to the next may seem like a liability. But with the right money management, your irregular income can empower you to take control of your finances, your career, and your life.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Strategies for Paying Off Debt When Living on a Variable Income

Annie Mueller — Wed, 02 Aug 2017 08:00:09 +0000

Paying off debt can be a challenge even if you have a steady paycheck. When your income is variable, it's even harder. These strategies can help you take care of your financial obligations even when your salary isn't stable.

1. Set a budget from your baseline

Take a look at your earning potential and set a baseline. Base it on what you can expect to earn even in a worst-case scenario month. For example, if you're in sales and you earn a base salary plus commission, your baseline is your base salary. If you're a freelancer with several contracted clients and fluctuating income from other projects, your baseline is what you earn from the ongoing contracts.

From your baseline, build a budget that covers the minimum payments you need to make every month. If more money comes in, you can split it among savings and paying down debt. (See also: The Smart Way to Budget on a Freelance Income)

2. Reduce your expenses and bills

Be very detailed in your baseline budget. Your recurring bills are the starting point; your actual spending is just as important. You need to know, for example, if you spend $100 on books every month, or if your grocery bill is $200 more than you think it is. Once you're aware of all your bills and expenses, look for ways to reduce them. You don't need to reduce them all; keep the expenses that give you the greatest payback in satisfaction and minimize the costs that don't add much to your quality of life.

If you're paying off more than one debt, debt consolidation might be key to reducing multiple high-interest payments into one monthly payment. Explore your options to determine if you can lower your debt interest and payments and close that gap.

3. Build up your gap savings

When you have a high-earnings month, send a percentage into a savings account and let it accumulate over time. When needed, you can use it to fill in the gap when your baseline earnings aren't quite enough.

4. Pick up a side hustle

Another strategy for closing the baseline gap is to pick up a steady side job. There are many kinds of side hustles and part-time jobs you can consider; it's most helpful, in this case, if you find one that will give you a predictable amount of earnings every month. That way, you can add it to your baseline so that there's no longer a gap between what you'll make and what you need to make.

When you get that big commission or finally get paid for the last project, it's tempting to splurge and enjoy the high times. A little splurging is good for morale, but the key to surviving and thriving on a variable income is making the most of the big paydays.

5. Follow a savings plan

You may not be able to add to your savings during the lean times. But when your earnings spike, save a good percentage of it. Put a plan in place before you get the big payday. You might decide, for example, that anything over your baseline gets divided into three categories: 30 percent for savings, 30 percent for debt payments, and 30 percent for expenses that have been on hold. That leaves you 10 percent for splurge money.

6. Follow a debt reduction plan

If you use the plan above, or one similar to it, you'll know that a set percentage of your earnings over baseline go to reducing your debt. It's good practice to pay off the debt with the highest interest rate first, otherwise known as the avalanche method. You can also negotiate with creditors if you have a good chunk of the debt ready to pay. Some creditors will reduce your total amount owed if you're able to pay off most of it in cash, right away.

7. Maximize your savings

Finally, don't let a variable income keep you from being smart about how you save. While it feels good to have cash at the ready, it's a smarter long-term strategy to put your savings into high-earning investments. Build up a decent emergency fund so you can handle a crisis and close that baseline gap as needed. Put any savings beyond the emergency fund into longer term investments with a higher yield, so you make the most out of your income, variable or not.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Signs It's Time to Close Your Business

Kat Tretina — Tue, 27 Jun 2017 08:30:14 +0000

Many people dream of launching their own business. Some start small, with a side gig or moonlighting on top of their full-time job. Others jump right into launching their own company. Regardless of the business type, surviving can be difficult. According to the Small Business Administration, 50 percent of new small businesses close within five years of opening.

However, it's hard to know when to shut down when you've poured your heart and soul into a business. Making a smart, objective decision can be compromised by the passion you have for your company and the thought of the money and time you invested. Having a list of concrete indicators can help you make a wise choice.

Here are five clear signs it's time to make the difficult decision to close.

1. There's no more profitability

It can take a while for a small business to break even, let alone turn a profit. But while you should expect some time to ramp up your clientele, your business should show progress and eventual profitability. Otherwise, you'll be unable to pay your bills, buy inventory, or afford basic essentials.

If you've been working around the clock and cannot get in the black month after month, it may be time to reconsider your business model and sustainability.

2. You cannot take a large enough salary

Many entrepreneurs forgo paying themselves to help their business grow and succeed. The expectation is that after a year or two, they can start taking a salary. In the meantime, they have to live off their savings or rely on credit cards to fill the gap.

That's a dangerous game to play for too long. Going without pay — or working for less than minimum wage with a side gig — can cause you to go into debt and give a false sense that your business is doing well.

3. The market changed

While your side hustle or business idea may have been successful for the first few months or even years, the market can change. What was a hot business can cool down quickly as time goes by.

For example, driving for ride-share services was a great way to make extra money. Some drivers found it so lucrative they quit their jobs to drive full-time. However, there's been more competition in the industry, and companies like Uber and Lyft have cut drivers' rates to attract new customers. That can make it more difficult to make money, and many are making a fraction of what they used to.

If you see your earnings decline continually, don't hold onto hope for a recovery for too long. It's better to cut your losses and pursue something else than to be overly optimistic about a return to form.

4. You no longer enjoy it

When you first started your business or side gig, it may have consumed and fulfilled you. But while working on a passion project on a part-time basis can be enjoyable, it can change when you devote more of your time to it or make it a full-time endeavor.

Work can start feeling more like a drag than fun. If you go to work every day dreading what's to come, consider shutting down to give yourself the freedom to start elsewhere.

5. It's just not worth your time

Make sure to calculate how much you need to earn (and not just to pay your bills) for your small business to be worth your time. If you're working 20 hours a week, but making just a couple bucks an hour, it may be a better idea to invest your time in another business or just enjoy your hobbies.

Closing a business

Shutting down a business of any kind can be hard. Whether you invested $100,000 to launch a restaurant or just $500 to start an online craft store, you likely feel very passionately about your work. The idea of closing it and admitting defeat can be difficult. But doing so can save you thousands over time, and free you to pursue a new career or side business you enjoy.

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This article is from Kat Tretina of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Ways Freelancers and Telecommuters Can Make Friends and Network

Andrea Cannon — Wed, 22 Feb 2017 10:30:36 +0000

Working from home can be a great thing. It allows you to work where you want, when you want, and has a number of other perks. However, it can be a bit lonely. Luckily, with the power of the Internet (and some motivation to get out and socialize), even those without an office water cooler to mill around can network and make new friends.

Networking Resources

Working off-site can take a toll on your professional network. To build your reputation, find mentors and collaborators, and connect with people in your industry, take advantage of some of the following networking resources. (See also: 15 Simple Networking Tricks)

1. LinkedIn

LinkedIn is one of those most common, popular ways to build and maintain professional relationships. It makes it so easy to network online with other professionals in your field. You can also use LinkedIn to find networking events and opportunities in your area, or connect you with organizations you are interested in.

2. Shapr

Shapr is an app that can connect you with like-minded people, allowing you to swipe left (pass) or right (interested) on your connections. You can set your favorite ways to meet, your passions and interests, and what you're looking for (collaborators, job opportunities, inspiration, potential investments, or new friends).

3. Work Your Existing Connections

Ask friends, past and current co-workers, or even your employer for recommendations on local networking events or seminars. Most cities have their own organizations that specialize in these types of events for working professionals of all kinds. If you can't find any from asking around, try a Google search, LinkedIn, or social media.

4. Take Classes

Consider taking a night class. In addition to growing your skills or teaching you something brand-new, you might befriend some fellow classmates along the way. Even online classes can connect you with new people with similar interests or background in your field.

5. Volunteer

Research some local organizations that could use a hand, and offer your time. Not only will you be contributing to a worthy cause, but you'll also be gaining experience (which looks great on a resume), expanding on your skill set, and of course, meeting new people. Volunteering allows you to become part of a community, which is a great way to expand your network.

Friendship Resources

If you don't get out much, maybe you should start! In the meantime, your smartphone or computer can also be the perfect friendly matchmaker.

6. Bumble BFF

Bumble was originally a dating app, but has expanded to include a "Bumble BFF" feature. Instead of swiping left or right on potential dates, you'll do the same for potential friends. Once you're paired with a new friend, you have only 24 hours to start a chat, so procrastinators and fair-weather friends aren't welcome.

7. Atleto

If you're looking for a workout buddy, then Atleto can help you find local sports activities and fellow fitness enthusiasts. The app can connect you with friends from your existing social media accounts, or you can find new friends in your area. This is a fun way to find an accountability buddy to help you reach your fitness goal.

8. Friender

Friender allows you to swipe left or right on potential connections. You'll create a profile based on personal interests and activities you enjoy, and Friender will recommend a few folks with mutual interests. This app is only for making friends, however, so you won't have to waste time with people who are looking for more.

9. Meetup

Meetup is an online organization with nearly 30 million members that hosts endless gatherings and social functions. You can meet people based on your occupation, personal interests (like hiking or cooking), location, and other factors that are important to you. Join a local club, take up a brand-new hobby, or explore somewhere new, all while making new like-minded friends along the way.

10. Social Media

There can be more to interacting with your Facebook friends than a simple "like" or the occasional comment. Reach out to those friends and old co-workers through Facebook, Twitter, and/or Instagram. Invite them out for lunch or drinks, and simply catch up. It'll feel great to get out and sit with people face to face.

11. Get Out More

Once you are no longer in school or working from an office, it can be challenging to meet new people in person. The best thing to do is visit places where connections naturally occur. Maybe find a book club through your local library, or sign up for that fitness class or 5K you've been aspiring to run. Try a local arts or cooking class, or even take your kids on a playdate where you can mingle with fellow parents. There are countless ways to meet new people if you just get out there!

This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What to Do When You're Sick of Your Side Gig

Kat Tretina — Mon, 13 Feb 2017 10:30:39 +0000

It seems like everyone these days is juggling more work than ever. On top of your full-time job, you may also run one or two side gigs. And while that side hustle can bring in extra income to help pay down debt or boost your savings, managing multiple jobs can leave you feeling run down.

If you rely on that extra income, decreasing stress is not as easy as just quitting your gig. There are other ways you can maintain your income while reducing your chances of burning out.

What Is Burnout?

Burnout is a real condition, not just a buzzword. According to Psychology Today, burnout is a state of chronic stress that can cause mental and physical fatigue, feelings of detachment, and even depression.

If you are experiencing burnout, you may feel tired all the time. Or, you may have chronic insomnia due to stress. Many people have trouble focusing or may have a compromised immune system. In some cases, burnout can make you physically ill, causing everything from gastrointestinal problems to headaches.

Burnout does not occur all at once; it slowly builds over time. If you recognize a few mild symptoms, it's important to take action now, before it's too late. Use these techniques to regain balance in your life.

1. Ditch Some Lower-Paying Customers

While it may seem contrary to maintaining income, one of the best things you can do to manage burnout is to cease working with your lower-paying clients. Many side hustlers and freelancers have clients that simply don't pay very much, but keep them around because some income is better than none. But by spending time on these smaller clients, you're wasting valuable time you could be spending relaxing or pursuing bigger fish.

2. Pursue Only the Golden Geese

Similarly, if you are looking for new clients, focus only on the most lucrative prospects. For example, instead of sending out 10 pitches a day, send only one or two to big-name clients that can afford top rates. You'll land fewer jobs, but the ones you get will be far more profitable. That way, you can do less work while keeping the same cash flow.

3. Hire Some Help

If possible, hire some help. That can mean hiring someone to deliver groceries or baby-sit the kids. Or, it can mean hiring a virtual assistant to help manage mundane tasks, such as invoicing or answering emails. Paying someone to help you a few hours a week can free you to focus on more profitable work and give you more downtime.

4. Set a Schedule

When you juggle a full-time job with a side gig, it's easy to work around the clock. But working at all hours can lead to fatigue and stress. Instead, schedule yourself at least one full day a week with no work at all, to allow yourself to recharge. While you may be afraid to skip work for the day, you'll be surprised at how refreshed you are and how much it may help your productivity.

5. Take a Day Off (From Your Real Job)

If you're feeling overwhelmed, taking a day off from your real job can be as refreshing as a full vacation. If you have paid time off, plan a long weekend and take a day to work solely on your side gig, while still giving yourself some time to relax. Doing this every few months can give you a much-needed break without damaging your income stream.

Working a side gig can be a great way to earn extra income, but it can be difficult to manage your time and maintain your health. By using these tips, you can juggle both your jobs and keep your income streams flowing.

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This article is from Kat Tretina of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Easy Ways Retirees Can Earn Extra Income

Ashley Eneriz — Mon, 06 Feb 2017 10:30:32 +0000

Whether you want to boost your retirement savings before you hit the magical age of 65, or you need some side income as a retiree, you are in luck. The Internet has made it easier than ever to earn money without committing to a 9-to-5.

Here are nine websites that can help you boost retirement income.

1. Shutterstock

Enjoy taking photos? Your photographs could earn money if they are approved and purchased by others. The photos that sell the best are high-quality images that can be used as stock photos for websites and eBooks. Shutterstock pays contributors $0.25 per photo download, which doesn't seem like a lot. However, if your collection of photographs gets downloaded 2,000 times over the year, that is an extra $500. You'll need a current form of government-issued ID to join Shutterstock, and you'll also need to submit up to 10 images for their initial review. Once their review team approves your first image, you can start selling.

2. Airbnb

When the busyness of raising a family starts slowing down, many couples discover a passion for travel. You can pursue travel while still paying the mortgage with Airbnb. You can even rent out an extra room or guesthouse with the site. Simply sign up, create your listing (make sure you include lots of photos), and set your rate. What you charge is up to you, but you'll want to factor in the location and the space you're renting.

3. Teachers Pay Teachers

Are you retired from education, or perhaps just love creating fun teaching materials? Teachers Pay Teachers is a website that allows users to upload their lesson plans and resources for others to purchase. The site boasts that they have helped teacher authors makes $330 million since the creation of the site.

4. TaskRabbit

TaskRabbit is not just for Millennials or college students; it is for anyone who wants to earn money doing odd jobs, from putting together Ikea furniture to writing a retirement speech. You never know what someone will post. Experts and nonexperienced individuals alike can earn extra cash through this site if they live in a popular area.

5. Care.com

Care.com is a site that connects individuals who need services with local help. You can apply for local job listings in child care, adult and senior care, pet care, and home care. The best part is that you can find work that fits in with your schedule. Some parents just need a trusted adult to pick up or drop off their children at school, while others just want a weekend baby sitter. Don't automatically assume that your tight schedule won't be a good fit for this site. Another thing I love about Care.com is that the site includes background checks, so more people feel confident with whom they hire.

6. Tutor.com

If you are knowledgeable in a certain academic subject, then why not tutor in it? Tutor.com hires experts in all fields and connects you to their large database of students in need. Potential tutors need to pass an exam and the application process to qualify. Tutors in finance and computer science are in especially high demand.

7. Rover

More pet parents are shying away from kennels and going for personalized overnight pet care. Pet lovers want to know that their favorite pooch is being snuggled or walked when they are gone, not just kept in a cage. Rover is one site that allows you to upload your profile and choose what type of pet care you offer. You can choose to watch dogs at your own place or the owner's, or just tailor your profile to be a dog walker.

8. Skillshare

Most of us are an expert at something, whether that be hand lettering or building computers. Utilize your passion and know-how by turning it into a class on Skillshare. With Skillshare, you earn money every time someone signs up for your course. The site says that their highest-earning teachers make $40,000 a year.

9. Fiverr

On Fiverr, you can make a quick buck (well, at least five) for simple tasks, such as voice-overs, quick articles, or whatever you would like your gig to be. I profiled one of Fiverr's top-sellers who writes resumes. She has been using Fiverr for years and has funded two adoptions with her earnings. Of course, her resumes cost much more than $5.

Before You Start Making Money Online

There are many websites available to individuals looking to boost their retirement income. However, before diving in head first, take these three tips to heart:

Don't Pay for Jobs

There are too many good and free resources available. If a site asks you to pay money for a "secret guide" or "guaranteed moneymaking business," it might not be legitimate.

Your Time Is Valuable

The reason why I didn't list survey websites or websites that pay you pennies to open emails is because I strongly believe your time is valuable. Even if you are single and retired, there is something better for you than making a few dollars per hour clicking through spam or websites. Set an hourly desired rate for yourself and don't be tempted by sites that pay less.

If It Sounds Too Good to Be True...

You have probably said this line to your kids, and I am repeating it to you. If the offer sounds too good to be true, it probably is. There is no such thing as making thousands of dollars for minimal work, so don't believe the websites, email messages, or forum posters that say so.

And Don't Forget About Your Social Security

Your Social Security benefit may be reduced if you earn wage or self-employment income and begin receiving Social Security early, before your official retirement age. Your benefit will not be reduced if you continue to earn beyond your retirement age. To learn more about earnings caps and other details that may affect your decision to work in retirement, see the SSA's FAQ on earning and retirement benefits.

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This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Freelance Your Way to More Income and Flexibility

Amanda Gokee — Wed, 01 Feb 2017 10:00:09 +0000

Freelancing is nothing new, but digital technology has made it easier than ever to work as an independent contractor from home — or the road. A 2016 survey by UpWork, a website matching freelancers with companies looking to hire, found that more people are freelancing than ever before, with 35% of the U.S. workforce now made up of freelancers.

Why the growth? Employers like to hire freelancers, especially for temporary or project work, because the arrangement is more flexible, and they save on employee benefits and extra office space. Freelance workers gain by getting to choose the projects they want and working flexible hours. It's a work model that offers greater choice for both parties.

Challenges to Being a Freelancer

While freelancing offers concrete advantages, many people worry about giving up the stability and benefits of a traditional job. Losing company-sponsored health insurance, paid vacations and retirement contributions are indeed valid concerns, especially since it takes time to attract new clients and develop relationships with them.

For this reason, some people do a combination of both types of work, retaining stability with a part- or full-time traditional job, while also following their passions and earning more money through additional freelance projects.

For others, according to the UpWork survey, full-time freelance work actually feels more secure because they have several different clients, rather than relying on one employer for their income.

Another major concern that freelancers share is receiving fair compensation for the work being done, as well as losing out on a reliable pay schedule. Freelancers often have to balance a "feast or famine" phenomenon, when they may either have too much work or not enough.

Still, the UpWork survey showed 79% of freelancers viewed freelance work as better than working in a traditional setting, and half of them even said they wouldn't take back a traditional job, regardless of the compensation that was offered to them.

That's not to say that freelancing is for everyone or for every type of job, but many of those who have decided to pursue this path have found it extremely rewarding.

Greater Freedom and Flexibility

Freedom and flexibility are two of the biggest draws that attract people to work as freelancers, according to UpWork's survey findings. They feel they have more control over their work schedule by being their own boss. Long weekends are no longer reserved for holidays and special occasions.

Many also enjoy the freedom to choose what type of work they want to do and, in many cases, where they do that work. Especially for people who have been commuting long distances or in heavy traffic to get to their workplace, working in a home office can be truly liberating.

Plus, if you're just freelancing on the side, the extra cash may help alleviate stress about saving for retirement, travel or education.

Getting Started as a Freelancer

If you think the freelance lifestyle might be right for you, the first step is to identify a marketable skill you have that you can use to attract potential clients. Some examples include writing, editing, computer programming, business or financial consulting, and photography, just to name a few. Picking a clearly defined skill and, even better, a niche that you want to focus on will help you to cater to your potential clients and make you an attractive candidate. (See also: 11 Freelance Jobs That Pay Surprisingly Well.)

Make a Portfolio

Gather a portfolio to showcase related projects you've worked on. These may be projects from your current full-time job, or from classes you've taken, or pro bono work you've done to gain experience in the field you want to pursue. A portfolio allows potential clients to see examples of your work to decide if they want to work with you. The better portfolio you're able to put together, the easier it will be to find clients.

Depending on what type of freelance work you are going to do, you may want to make a website to showcase your portfolio online. You can also create a portfolio on UpWork, LinkedIn, or specialist websites like Contently and ClearVoice, which focus on content marketing.

Create a Network

Like any job, networking is a very important part of finding freelance gigs. You can do this using social media, but you should also focus on real-life networking opportunities through conferences, professional organizations and Meetup groups. There is nothing that can replace the value of meeting people face-to-face.

Even social gatherings in your everyday life could lead to valuable contacts. Bring up the work that you do in casual conversations and you'll be surprised how many doors may open for you.

Pitch Your Best Ideas

If you have a great idea for a project, now is the time to reach out to potential clients and, in a professional manner, pitch your idea to them. There's an art to writing a great pitch. Especially if you're contacting an editor or CEO you don't know personally, you will need to make as good of an impression as possible over email.

This is the equivalent of cold calling, so you need to have your pitch polished and well thought out. For writing gigs, it's often recommended to provide a specific outline and an article title. Think about the company's needs, and then send them your best ideas, not run-of-the- mill ideas that anyone could have thought of.

Remember, You're Running a Business

Once you've made the leap to freelancing, whether it's full time or as a side gig, remember you are running a business. You'll need to track your business spending (a dedicated business credit card can help with this), as well as organize your billing, taxes and retirement savings. This all takes time that you'll need to work into your schedule. (See also: The 5 Biggest Mistakes Freelancers Make.)

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This article is from Amanda Gokee of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Day Job or Freelance: Which Is Right for You?

Claire Millard — Tue, 28 Jun 2016 09:30:28 +0000

According to the Bureau of Labor Statistics, one in three American workers earn their keep through a model of work that is not a traditional 9-to-5 job. Many of these are freelance and contract workers, earning their income from one or more different jobs, and known alternatively as "portfolio careerists" or the slightly less glam "slashers" (as in writer/coach/unicycle performer).

For some people, a portfolio career is proof that necessity is the mother of invention. When the economy tanked and jobs were scarce, this was a great way to make ends meet. But it's a very different work environment than a typical full-time job.

While it is unsurprising that the number of people taking multiple part-time jobs might rise during a recession, the trends seem to show that these numbers are continuing to grow — a sign that the days of the traditional model of work are numbered. By 2020, it is anticipated that 40% of the American workforce will work as a freelancer, with a mix of part-time, contingent roles. But which is really better? Here are some pros and cons of each lifestyle.

In Favor of Full Time

For now, at least, full time work is still the norm. So what's so attractive about the traditional approach to careers?

1. High Rollers Are Seldom Part-Time

If what you want out of your working career is to rise through the ranks and achieve the status and salary that comes with that, then a full-time, permanent job is definitely the right option for you. While people in portfolio careers certainly can achieve wealth and status in their respective fields, this is much harder to do. If you want a healthy 401K, benefits package, and paid vacation, then stick to the full-time gigs.

2. Society Is Still Structured to Suit Full-Time Employees

Bringing in a steady full-time income, from a company that is established and understood, has a number of benefits above and beyond the cash. Organizing your taxes, planning your retirement, keeping a healthy credit record, and getting a mortgage are all easier with a full-time job than a portfolio. The variety you get with working several part-time or freelance jobs has to be offset by the increased burden of admin. and organization, particularly in a financial sector which has not adjusted to the needs of this population.

3. It Leads to Better Work Relationships

For many people, the reason you get up to go to work is not so much about the work itself, but rather about the people around you. With bonds built over years of employment, your colleagues can often be the closest people to you — an experience that few freelancers get to share. Consider your social needs carefully before you think too hard about a portfolio career!

The Pros of Freelancing

It's growing at a rapid pace, but will it last? Why is portfolio living attractive to people who could choose a nice, safe 9-to-5?

1. Freelancers Have Multiple Sources of Income

Ironically, a portfolio career might mean better job security than a full-time job. Having multiple income streams means that if one dries up, others can fill its place more easily. Since the economic downturn, more people than ever have found themselves being laid off from their regular jobs. As a portfolio careerist, this can be less of a terrifying option, and more a redirection of your time.

2. You Build a Diverse Set of Skills

One of the reasons that a portfolio career can snowball into a very lucrative choice, is that you naturally develop sets of varied but complementary skills, which can be sold at a premium. Take a freelance writer, who can also take (and sell) a decent photograph, teach writing, or build a personal blog that draws in advertising revenue. Each individual effort links to the next, growing valuable skills all the time.

3. Variety Is a Given

If you're even vaguely thinking about a portfolio lifestyle, then you're probably a fan of new experiences. Since the "same job for life" concept disappeared a generation ago, people have increasingly questioned why staying in one career field is necessary. If you can't climb a traditional career ladder anyway, then why not seek new and varied working experiences. Welcome to the world of portfolio careers.

How to Make Freelancing Actually Work

We are still learning what it looks like to be a successful freelancer. There's probably no single correct way to nail this lifestyle. However, some useful advice has certainly emerged.

If you're thinking of taking this route, then remember:

Keep one or two reliable income sources. Consider an anchor-orbiter model, in which you have one or two steady roles (the anchor), with other work which is more flexible, orbiting around this main income source. This works especially well for people who want to keep some form of a steady job on a part-time basis and build a freelance income on the side.
Build up an emergency fund. And learn to budget as a freelancer. With no fixed income, budgeting becomes more complex, even before you start to worry about paying taxes and keeping up insurance and other necessary payments.
Nothing is forever. If you try the portfolio life and it is not for you, there is no reason why you can't take your newly acquired skills and experiences back into a traditional role. In fact, the broadened horizons of having worked independently might even mean you can find a better role than ever.

What's your best advice for others looking to follow in your footsteps? Tell us in the comments!

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This article is from Claire Millard of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: