If you have ever received one too many memos about an error on your TPS report, reached your last straw after having your red stapler taken away, or simply daydreamed of working from home, you may have considered becoming self-employed at one point or another. If the thought of having the freedom to choose what tasks you want to do and where and how to do them intrigue you, you may want to keep reading. Freelancing offers just this, so we wanted to take a moment and walk through the basics of getting started with freelancing and see if it’s right for you.

What is Freelancing?

Freelancers are individual contractors who work for themselves rather than for employers. This group includes those who prefer to work for themselves, recent grads who have difficulty finding employment, employees who have been laid off, consultants who work with several companies, and members of the gig economy such as Uber or Lyft drivers. Often freelancers charge on an hourly or project basis.

“Freelancing is not a pass to work ‘when you want’; it’s a gift to work ‘at your best.’” – Yuwanda Black

Freelancing allows you to set your own schedule, but it is much more than that. Freelancing allows you to utilize your strengths and expertise in a way that benefits others while providing you with a living on your own terms.

Freelancers have the opportunity to work in whichever environment suits them best. Some work from home, some work from co-working spaces, some from rented offices, and some on-site at clients’ or customers’ locations.

If you are considering becoming a freelancer, you are not alone. It is projected that, in 2027, freelancers will make up 50.9% of the total U.S. workforce. This number represents 86.5 million freelancers versus 59 million freelancers in 2020.

Where to Start

If you are interested in freelancing, a good place to start is to figure out what product or service you can provide that others are willing to pay for and to then develop a business plan.

There are many good books and websites about freelancing that can walk you through exercises to decide which products or services you will offer. One such exercise is to list out all of your skills, subjects you are knowledgeable about, and topics you are interested in and look at where these areas overlap. Another exercise is to observe people around you and notice what types of products or services that they might want or need that would enhance their lives or make their lives easier.

Once you know what products or services you want to offer, you may want to come up with a business plan. Your business plan is simply a document stating what you want to achieve and how you will achieve it. It can be as short as one page, as long as twenty pages, or whatever length with which you are comfortable. The point of the business plan is to help you get organized. If you feel that you know what you need to do to get up and running, you will likely have a shorter plan. If you need to put more thought into your marketing, mission, values, pricing, service, or product offerings, etc., you will have a longer plan. The important thing is that you develop a plan that you will actually follow and get started.

Challenges You May Face Getting Started

Finding Clients/Customers

One challenge facing freelancers is how to find clients. There are several ways to find people who will be interested in your products or services. Some of these avenues include working on projects for friends and family, attending networking events in your industry, attending events at your local Chamber of Commerce, maintaining a presence on social networks such as LinkedIn or Instagram, setting up a website and using search engine optimization (SEO) to drive traffic to your website, doing volunteer work to build a network, and printing business cards with a QR code on the back that links to your website or LinkedIn page. It can be helpful to try one or more methods to see which is the most effective for you.

DO THIS: Start with your innermost circle – family, friends, old coworkers, neighbors, etc. and put all of their contact information in a spreadsheet. This is a strong group of people who already know, like and trust you. Reach out to them and encourage them to reach out to their family, friends, old coworkers, neighbors, etc. You get the picture. 🙂

Deciding What to Charge

Deciding what to charge can be one of the most difficult areas for freelancers who are just starting out. There are different fee structures that can be used, but two of the most common are charging by the project and charging an hourly fee. Once you decide whether to charge by project or hourly, determining how much to charge per project or how much to charge per hour can present another challenge. As with the business plan, there are many resources (books, websites, etc.) that provide ways to calculate how much you should charge for your products or services. One method is to do market research on what others are charging for similar products or services. Regardless of which fee structure you choose, you will want to be sure that you clearly spell out to your clients/customers what they will get for the price you are charging.

It can also be helpful to project out how much you expect to sell or what level of service you expect to perform and how much you expect to make for your first year. You can then estimate your expenses for the year so you get an idea of what your profit will be for the year. You may even want to project out to five or ten years. You will also want to consider the value of your time when deciding what to charge.

One mistake that freelancers make starting out is pricing their services too low or discounting their services unnecessarily. If you are just starting out with no experience, it may be a good idea to provide discounted services. However, if you are experienced in the area you will be working in, it may not be a good idea to provide a discount because it could communicate to your clients/customers that your product or service is not as valuable as it really is. If you do provide discounted services, inform your clients/customers of your regular price so that there is no sticker shock if you charge them the full price in the future.

DO THIS: Sometimes it’s easier to zoom out and look at the bigger pictures. Write down your goal salary for the year. Ideally, something that will cover all of your business + real life expenses and then some. Divide this number by twelve and voila, this is how much you’ll want to make each month, whether you’re charging per project or hourly.

Financing, Budgeting & Bookkeeping

A common mistake that freelancers make is believing that they will be profitable from the start. For most freelancers, it can take up to five years to see a profit. In the years before the business is profitable, it is important to have a plan to finance the business.

Before you begin freelancing, you will want to think about how you will finance the expenses you will incur when getting started. Some ways to finance your business include incurring debt such as loans or lines of credit, receiving gifts or investments from friends or family, utilizing your savings, or maintaining a side job while you get started.

Once you have your financing set, you will want to budget for startup costs such as advertising and marketing, equipment such as computers and office furniture, office supplies like pens and paper, travel, and membership dues/subscriptions. It can also be helpful to have a spending plan for ongoing costs projected out anywhere from the next year to the next several years.

It is also helpful to set up a way to track your income and expenses. You will need a good system to track this information, which you will need at tax time. A good system will also allow you to keep track of how your business is doing.

You will also want to make sure you separate your business from your personal affairs. For example, you may want to apply for a separate identification number, called an Employer Identification Number (EIN). You will want to open a separate bank account for your freelancing income and expenses. You will also want to use your freelancing funds solely for the business and pay yourself a salary as opposed to dipping into the profits of your business to pay your personal expenses. Keeping things separate is allows you to track how your business is doing as well as keep your records organized for tax time.

DO THIS: That spreadsheet we mentioned earlier? Add another page to it, this time listing out your income sources (loans, lines of credit, gifts, investments from friends or family, savings, job, etc.). Then, if you don’t have separate accounts yet for your business expenses, add a third page to this spreadsheet for an organized space to keep track of your expenses. 

Freelancer typing on their computer


One thing many freelancers do not consider is estimated taxes. Estimated taxes are quarterly tax payments that are required by the IRS and state. If you expect to owe taxes at the end of the year, you are required to estimate how much you will owe and make payments throughout the year. If you file your income tax return at the end of the year, owe money, and have not made any estimated tax payments, you will be subject to penalties and interest. It can be helpful to engage a company who does tax planning, such as South Bay Financial Partners, to calculate your estimated taxes and ensure that you are aware of the payment deadlines.

Another consideration related to taxes is your business structure. If you begin freelancing and do not elect a business structure, you will by default be considered a sole proprietorship, meaning that you will be taxed personally for all of your business income (less any deductions) and also carry the business risk should something go wrong. About 75% of businesses in the US are sole proprietorships and there is nothing wrong with choosing this structure. However, there are other business structures available such as LLC, S Corp, partnership, and even C Corp that freelancers can consider that may be more advantageous. South Bay Financial Partners can advise you on the advantages and disadvantages of each business structure and help you decide which one would suit you best.

DO THIS: Set calendar reminders for April 14th, June 14th, September 14th and January 17th next year (aka one day before estimated taxes are due – so you won’t forget).

Retirement Plans

Employees often have the benefit of their employers offering 401k plans and do not need to put any thought into choosing a type of retirement plan. As a freelancer, you will not have an employer provided plan and may want to decide if an SEP, Solo 401k, Solo Roth 401k, or other type of plan will be best for you as you save for retirement. There are different costs and tax considerations associated with each of these plans. A company such as South Bay Financial Partners can help you choose the plan that is best for you.

DO THIS: Read and bookmark our blog post, What the Heck are 401(k)s, HSAs, and Other Confusions.

Next Steps

We hope you have found this article a helpful starting point! We will have many more resources to come. In the meantime, if you would like more information on freelancing or any of the topics mentioned above, contact us, or join our online community, Your Amazing Financial Life (YAFL). There you can post questions, get access to exclusive content, gain insights from other community members and sign up for one-on-one financial planning or long-term financial coaching sessions.

Make sure to follow us on Instagram, too, where we have our Freelancing 101 IGTV series!Freelance Tips and Tricks IG Live