You yearn for the control and freedom that comes with freelancing, but those nagging fears around going solo just keep holding you back…
People often ask me about the “safety” of a freelance career, as in, “Isn’t it safer, income-wise, to be an employee?”
The assumption—or frankly, false belief—is that freelancers can’t possibly have the same benefits, pay, or security as an employee at a company.
But, as we’re about to show you today, it simply isn’t the case.
So if you’re hesitant to take the leap into freelancing out of fear it’s too “risky”, read on as we debunk some of the most common misconceptions around freelancing and show you why it offers a lot more stability than you might think.
Myth #1: Freelancers Have Less Income Potential
A little-known fact is that you should expect to bring in more money as a freelancer than you would as an employee.
When you’re freelancing, you can work as much or as little as you want to. You set your own rates and don’t have any cap on your income. So if you’re successful in finding good clients, your income can far surpass what you’d earn as an employee in the same field!
Myth #2: Freelance Income is Less Stable
A lot of people like the predictability of getting a regular paycheck, which makes working as an employee very appealing. The downside of that, though, is that you’re not in charge of whether you continue to work there or not; the company is. And sadly, layoffs *do* happen.
It may come as a surprise to people who’ve never freelanced before, but you’re actually much more in control of your work and income as a freelancer compared to an employee.
Think about it: if you get laid off from your full-time job, you risk losing your entire income. But as a freelancer, you have a number of contracts with different clients. If you lose one client, your whole income won’t disappear overnight. Plus, you’ll have the tools and knowledge needed to replace them pretty quickly.
The system of pitching that I teach my students means that they’re always reaching out to companies and business owners about potential opportunities, which means opportunities are always coming in. If a freelancer wants to make more money, they increase their pitching efforts. And if their schedule is booked, they can dial them back a bit.
The fear of a “freelance dry spell” puts a lot of people off freelancing. But dry spells don’t just appear out of nowhere. A dry spell is usually the result of slacking on pitching in favor of other activities. But if you consistently send out pitches, you’ll keep the business coming in.
Myth #3: You Get Fewer Benefits as a Freelancer
One of the major reasons would-be freelancers hesitate to dive into freelancing is because of benefits. The common misconception is that as a freelancer, you don’t get the same benefits as an employee.
But the truth is, you just have to build those benefits into your rates. And as a freelancer, you have the flexibility to build your benefits package how you want it.
See, what your employee doesn’t tell you—and what most people don’t realize—is that the company is factoring in all those benefits (and the cost of those benefits!) into your salary or hourly rate.
So that means even if you don’t want to be on your employer’s healthcare because you’re on your partner’s, it doesn’t change what your employee pays you.
Although creating your own benefits package may seem daunting, it actually gives you much more control over your income and where you spend it.
Myth #4: Freelancers Can’t Take Vacations
One of the wildest myths out there about freelancing (even believed by many working freelancers!) is that taking time off means time you’re not making money.
And on the surface, this is true: if you don’t work, you don’t get paid as a freelancer. But this is why it’s so crucial to know your numbers!
You get PTO (paid time off) at a company because the organization is factoring it into your salary or hourly rate. So as a freelancer, you’ll just have to do exactly the same thing and build time off into your rate.
Plus, the benefit of being freelance is you can build in your vacation time when and how you want. You don’t have to get time off approved by managers or worry about being denied it when you need it most.
Myth #5: You Can’t Save for Retirement as a Freelancer
Freelancers actually have a huge benefit over employees on staff when it comes to saving for retirement.
If you are running a freelance business yourself (as in, you don’t have employees), you can open up a self 401(k), sometimes called a solo 401(k), self-employed 401(k), or one-participant 401(k).
The big perk for freelancers is you can contribute as the employee and the employer. As the employee, it’s very similar to any other 401(k): you have a maximum limit you can contribute each year (it’s wise to check this since contribution limits can change from year to year).
As the employer, you typically have until you file your annual taxes to make the employer contribution. Your employer contribution is a bit tricky, so ask your tax preparation professional to help you understand the limit of what you can contribute as the employer of your business.
Do I Need a W-2 as a Freelancer?
In lieu of the single W-2 form you’d get annually as a traditional employee, a client may ask you to give them a W-9 form if you have invoiced them for more than $600 worth of work.
A W-9 is similar to a W-4 form you fill out for an employer. And just like a W-4 helps your employer prepare to issue a W-2 at tax time, a W-9 starts the process for your client to issue you a 1099-MISC tax form.
If your client is classifying you as an employee, then you should complete the W-4 instead of a W-9. While it’s relatively uncommon, some clients do actually hire freelancers as employees, even for short-term projects.
So, back to the all important question: Is it better to be a freelancer or an employee?
When it comes to deciding whether the freelance or employee route is better for you, the answer is a deeply personal one. It really hinges on the lifestyle you’d like to lead, the work style that suits you best, and the career path you envision for yourself.
But most importantly, don’t let these common misconceptions about freelancing distract you from making the decision that’s best for you!
Your Turn
What’s holding you back from going freelance? Let us know in the comments below!
Last Updated on May 16, 2024.
