Freelancers often rush between jobs because they can’t afford not to. However, you’ll still need an independent contractor agreement template that sets out your role and rights. With this in mind, here’s a guide to staying ahead of your financial fears as a freelancer.
Building Your Freelance Budget
Independent contractors usually have to pay for their own equipment. This alone can put a dent in your savings. But a strong budget will help you manage this. Take stock of every expense you have and set out your monthly outgoings. Look for ways you can cut these down, both short-term and long-term.
It could take months to get your first job when you’re just starting out. Consider saving about 1-6 months of expenses before setting up your business. Similarly, make sure you put a good chunk of the money you make away for taxes and savings.
Contractors can never guarantee a steady flow of work. 39% of Americans carried out freelance work in 2022, according to Upwork. This is a lot of competition for every contract. You can’t plan your budget as if the next job’s a guarantee.
Negotiating Your Contract
A good freelancer agreement will take a lot of pressure off you. This could even help you secure long-term work — as well as steady pay. The clauses you negotiate might be a lifeline when you need them most. Here are some tips for getting a great freelance contract:
- Ask for milestone payments: Contractors can’t always live on lump sums at the end of long jobs. Split the project into ‘phases’ and ask for a payment after each one.
- Check market rates: How much are other firms paying their freelancers for work similar to yours? Look into this and use what you find to set your minimum working rate.
- Know your worth: Similarly, some freelancers accept less because they have no clue when the next offer is. But you should still have standards for the work that you do.
- Consider kill fees: Projects come to an end out of nowhere across every industry. Make sure you discuss a kill fee so you still get money for the work you complete.
- Be open to compromise: Even with this in mind, the market is a chaotic place. You may still have to take some jobs that don’t fit your expectations in some way.
- Clarify change orders: Your client might change their mind and ask you to redo part of the job. Make sure you discuss this — and if it means more money for you.
- Specify a payment method: Agree on how your client will send the money. You may face delays and extra fees if you don’t find the right payment method.
How To Handle Late Payments
The Independent Economy Council found that 72% of freelancers have had an unpaid invoice. Most freelancers deal with late payments at one point. You can protect yourself in your contract if you add a late fee. This means they’ll owe you more if they don’t pay by a certain date.
Most invoices ask for payment within 30 days. This might vary from one industry to the next. For example, fields with fast turnaround times (such as graphic design) may have a 15-day limit. It’s always worth finding the standard for your sector and asking for this in your contract.
You can set the late fee yourself — especially since the client shouldn’t have to pay it. However, most freelancers ask for around 5% interest on late payments. Don’t make it too high.
Sometimes, the client really just forgets for one reason or another. They might not want to work with you if a simple mistake costs so much.
Consider Diverse Income Streams
Some industries let you turn your talents into more than just one key service. This helps when you only have a few clients who might not last forever. You’ll diversify your portfolio and find ways to make money beyond the usual client-worker relationship.
For example, could you offer tutoring services in your field? This allows you to make the most of your skills even when work is slow. You can even write e-books and guides across basically any industry. Software devs can make apps in their spare time that they then sell online. Artists can also sell stickers or prints of their work.
The possibilities are endless as a freelancer. You can even grow your enterprise in any direction you want. There’s no guarantee this will work out — but it’s worth trying if you have more to offer people.
Final Thoughts
Contractors deal with a lot of uncertainty, even in their best-case scenario. Strong planning is the only way to get ahead of this. For example, you should make sure you have a contract you can be proud of. However, you can still branch out from your usual services.
