Learn How to Increase Profits and Save Money for Retirement as a Freelancer Freelance and side gigs have existed for decades, but the last couple of years have accelerated the popularization of these types of jobs. The rise of stable internet connections and...
This story originally appeared on Due
Freelance and side gigs have existed for decades, but the last couple of years have accelerated the popularization of these types of jobs.
The rise of stable internet connections and powerful computers have enabled us to switch to hybrid working conditions — or to even work entirely from home. Nowadays, there are many ways to earn money by freelancing online and, thus, make a living.
In fact, according to a study performed in 2020, nearly 41% of the American workforce dabbles in freelancing.
With all this in mind, we want to shed some light on strategies that can help you:
- Make it as a freelancer,
- Increase your profits,
- Set up a steady income, and
- Save money for retirement.
How to make it as a freelancer
No matter what line of work you're in, making it as a freelancer usually entails a couple of generalized steps:
- Mastering your craft,
- Valuing your work,
- Marketing your skills,
- Acquiring high-profile clients, and
- Doing the best job you can.
Master your craft
Let's say you wish to succeed as a freelance graphic designer or a copywriter — the first thing you'll have to do is put in the hours and master your craft.
There are many online courses on websites such as Skillshare or YouTube that can help you with the introductory steps of mastering your craft. The next steps would be to:
- Immerse yourself in research,
- Do the necessary work, and
- Ask for help when you need it.
Many successful entrepreneurs have talked about the difficulties of starting out and learning a new craft, let alone mastering it. That's why it's essential to be persistent, as well as consistent.
After you've mastered your craft, you'll have to learn the importance of valuing your work. Many have tried and failed due to a lack of self-confidence and ended up underselling their work.
A good way to start valuing yourself and your work is to keep track of the metrics that will help you get a clear picture of how much effort you put into work. Some of the metrics to track, regardless of your field of work, could include the following:
- Research time,
- Working time,
- Revision time,
- Editing/touching up time,
- Time spent on communication with your client, and
- Marketing time (e.g. social media).
Advertise your services and products via social media
Apart from various freelancing platforms, the easiest way to get noticed is through social media. You could even find an influencer to promote your brand.
In fact, according to Statista research, the number of brand-sponsored influencer posts on Instagram in 2020 amounted to 6.12 million, and the number will keep growing in 2022.
A similar growing metric goes for Twitter and Facebook — if you want to make a name for yourself, it's not a bad idea to invest in brand-sponsored posts.
However, you don't want to drift away by investing in influencer marketing that has no direct connection to your line of work — e.g. you don't want to work with fitness influencers if you need to market your line of children's toys.
Just find people in your own field who are willing to do brand-sponsored marketing — and take it from there.
Acquire high-profile clients
Getting in contact with high-profile clients is no easy task, and it usually requires perfecting the previous step, i.e. marketing your work and skills.
A good marketing campaign will undoubtedly help you attract clients organically — but there are ways you can speed up the process and find great clients with ease.
Firstly, when sending professional emails, it might be a good idea to personalize the text with subtle information about the potential client. For example, you could throw in information regarding their latest projects, endeavors, or campaigns to show them you've made an effort and done your research before reaching out.
Secondly, establish credibility by showcasing your previous work in a portfolio. If a potential client sees the work you've put into designing a logo, writing a text, or developing a website, it might make them more likely to look into what you have to offer.
Thirdly, establish a social presence among the people in your line of work. Try to network with as many people as you can — including beginners, intermediates, and professionals.
Not only will a strong social presence help you get noticed, but it'll also establish you as an experienced person in the field.
Do your best
No matter the project, you should always strive for perfection, even if the task at hand is way too easy and requires minimal effort. The client will always notice sloppy work.
Even the smallest mistake could cost you a breakthrough in the market, especially if you're trying to make it in a competitive field.
How to increase your profits as a freelancer
Once you've set up your rates, found clients, and started doing the actual job — chances are, you will find modest success at the start and not earn much. However, if you wish to become genuinely successful and earn more, you'll have to find ways to increase your profits, for instance- starting an ecommerce business, service based websites or so on.
One of the ways to boost your earnings is to up your rates as your brand grows. However, there are other ways to start earning more as a freelancer.
Upsell your skills
Upselling is a process of convincing a customer or a client to purchase an additional product or service or offering them an upgraded version at a higher price.
In truth, upselling is a process that exists in all spheres of life and business, and it's not a bad thing when done non-aggressively. It's a solid strategy to increase your profits and let your customers and clients know about what you have to offer in general.
Evolve your business
Taking on a new approach to your business strategies can seem scary, especially if you're branching out and trying out new things. When you add in the risk of losing your current clients due to shifts in your day-to-day activities, it makes it even more difficult to evolve your business.
A Professor of Business Strategy, Laurence Capron, talked extensively about evolving a business in her recent interview with Yale Insight.
Firstly, she claims that the prospect of growing a business revolves around the idea of increasing the scope of your activities and, therefore, becoming more competitive. The same can be applied to freelancers — if you want to make it, be ready to branch out and embrace change.
Secondly, she claims that the main reason many CEOs decide to evolve their businesses is due to two factors: market demands and utilizing background knowledge.
By background knowledge, she refers to the educational and professional backgrounds of employees. Companies can use this knowledge to expand their offers and services and improve their product lineups.
Although this approach primarily applies to companies, freelancers can learn from it too.
You can apply these tactics to fit your own freelance business plan — if you feel like the market demands are changing and the demand evolves beyond your skill set, it might be time to adapt and embrace the change.
Likewise, if you have underutilized skills or background knowledge, see if you can use it to broaden the scope of your services.
Most successful businessmen and entrepreneurs have paved their way to success by relying on four things:
- Critical thinking,
- Unique Selling Proposition
- Goal setting, and
So, think rationally, don't let emotions overwhelm you, and seek advice from experienced people in the field. Set your goals, work toward improving them, and repeat the process until it works for you. If the variables change, you can still use this method to adapt and restart the process.
How to improve your financial stability
Now that you've developed a steady client base and actually started making a profit, you should strive to make your income steady and track your expenses. Freelancing always comes with a risk of fluctuating income, but there are methods you can use to improve your financial stability.
You can improve your financial stability as a freelancer by:
- Separating business and personal expenses,
- Creating a "rainy day" fund, and
- Spending within your means.
Separate business from personal expenses
You shouldn't spend your own money on client projects and consider taking personal loans for such requirements. The first thing you should do when starting a job is to try to calculate the amount of money you'll need to invest in the project before you get compensated.
If any unexpected costs emerge, say, for additional materials, save the bill and get reimbursement from the client.
Furthermore, Stefan F. Dieffenbacher, Founder of Digital Leadership notes that –if you have clients that you already worked with and know what to expect in terms of business cost and revenue, you can calculate the approximate cost of the project to avoid using the funds you allocate for personal expenses.
Set up an emergency fund
When budgeting for the upcoming month, you can take into account any recurring personal or business costs. However, make sure to always set some money aside for any unpredictable costs.
For example, you never know if your hard drive will decide to give out on you. You can decide on the exact amount you should set aside — most freelancers opt for 5% of their monthly income.
Resist the urge to splurge
Finally, you need to refrain from spending more than you can afford to.
We all tend to spend way more than we should, which is why it's not a bad idea to make a detailed list of your monthly costs — starting with the necessities and working your way down to any redundant expenses.
How to save money for retirement as a freelancer
Not everyone loves setting aside money for retirement, especially if it means you have to tighten your belt today. However, it's a necessity, and, according to research, 87% of the American population has either a retirement plan or savings.
When it comes to freelancing, the problem becomes even greater.
Usually, both public and private employees invest in 401k or private retirement plans by deducting a certain amount from their monthly incomes. However, freelancers often have a hard time saving up as there is no financial stability in most lines of freelance work.
Therefore, what can you do?
Most financial advisers and institutions advise people to set aside at least 10% of their monthly income toward a retirement plan and gradually build up to 15%, at the very least.
Also, many people follow Rule 25, according to which you should calculate your planned annual expenses and multiply them by 25 — this is the amount of money you should strive to save before you retire so that you can spend your golden years in comfort.
Our advice is to multiply your planned annual spendings by 30 if you can afford it — which is to account for:
- Inflation rates,
- Unexpected expenses, and
- Prolonged lifespan.
Another idea is to invest in long-term insurance products, such as annuities. They can help you regulate finances and create a steady retirement income stream on a monthly basis.
Freelancers have enormous benefits from annuities and most insurance companies offer detailed analyses of projected financial plans.
As a freelancer, it's never too early to start thinking about retirement. You should begin saving up early — no matter how much money you can afford to set aside each month.
Frequently Asked Questions
What is the 5% rule for retirement?
In relation to retirement, the 5% rule states that your goal during your first year of retirement should be not to make withdrawals that amount to more than 5% of your entire fund.
Naturally, exceptions can be made for unexpected payments — but this rule is designed for fixed expenses. As years go by, you can adjust the expenses for inflation and try to lower them by at least 0.5% each year.
How often should you increase your retirement savings?
In essence, you should increase your retirement contributions on an annual basis by at least 1%. However, this often gets in the way of your savings plan, which is why it might be a good idea to split the increase in half and distribute it between the two plans.
What is the 50-30-20 rule?
A former law professor and a US Senator, Elizabeth Warren, has often raised awareness of the "50-30-20 rule," which states that all your incomes should be distributed on the following basis:
- 50% for necessities,
- 30% for "wants," and
- 20% for savings.
The 20% for savings can later be split between your standard savings and retirement funds, based on the amount of your monthly income. The general rule is that you should at least put aside 10% of your savings for your retirement fund.
Freelancers don't have it easy — they often have to juggle tasks, worry about finances, and work too many hours in a week.
Still, that does not mean society treats them any different when it comes to making a living and planning retirement strategies.
The common mantra among freelance workers is — don't stress and always seek advice from people that have been through it — it will make saving for retirement much easier.
The post Learn How to Increase Profits and Save Money for Retirement as a Freelancer appeared first on Due.