If you’re curious about freelancing and joining the gig economy you’re not alone. Many people now have a side hustle and more of them are turning it into their full-time career. In fact, research shows that more than half of Americans will be freelancing by 2027. With this in mind, it becomes increasingly important to understand what this means for you and if it’s a path you may want to explore.
One of the most common questions I hear from people who are in a traditional nine-to-five job or people who are interested in making money online is:
What is freelancing?
It may seem like a silly question, but even if you think you know the answer, you may not know how freelancers actually differ from employees. Want to know more? In this post, I’ll explain what freelancing is and the advantages and disadvantages you can expect if you’re thinking about becoming a freelancer.
First, I just want to talk about why this question is so common. Many people don’t understand what freelancing is and how it works. That could be because of what comes up when you type this question into Google. This is what I saw when I typed in the phrase “what is freelancing?” myself.
Freelancing – earn one’s living as a freelance.
Honestly, I had to try not to laugh. This was one of the least useful answers that I could have possibly come up with. Of course, as you dive deeper into the Google search results there are some articles that go further into explaining what freelancing is. However, if someone is really starting from scratch and they searched this term, they’ll be no better off when they see that definition.
To understand what freelancing is, what you really have to understand first is what a freelancer is.
What is a freelancer?
Freelancers are independent contractors. An independent contractor is defined as a person, business, or corporation that provides goods or services under a written contract or a verbal agreement. Independent contractors typically have control over when and how they get work done. They also have their own tools and supplies and typically provide services to more than one company.
What is an employee?
Employees typically work for one company on a set schedule. The rate and frequency of payment is controlled by the employer. The employer also can train the employee with specific systems and tools. Employees must use those to complete the work. Simply put, employers have control over when, where and how work is completed.
If you want to know more about the differences between being an independent contractor and being an employee, you can look at this document from the IRS. It includes a 20 factor test to help you evaluate the differences between the two.
Note: The information about being an independent contractor and employee is based on laws in the US. If you’re in another country, different laws may apply to you. You should see how freelancers are classified in your location before making the decision to start freelancing.
Advantages of being a freelancer
There are many great things that come with being a freelancer. That’s why more and more people are choosing to enter the freelance world. So, let’s talk about some of the advantages. Then, the reason why it’s becoming an attractive option will be clear.
Setting your own schedule
In my opinion, setting your own schedule is one of the best parts of being a freelancer. You can sleep in if you want. You can work all night or get up early and stop working in the afternoon. When you’re a freelancer, you don’t have to plan your life around your company’s hours. When you work and when you don’t is up to you.
If I’m being honest, I personally stick to a schedule that’s pretty close to 9 to 5. However, I don’t have to set an alarm and if I want to take a break in the middle of the day that’s completely my choice. I love having that freedom.
Creating your work environment
As a freelancer, you also get the freedom to create your own work environment. For some, this means becoming a digital nomad, traveling and working from anywhere. For others, it means that they get to decide what their perfect office space. This could be a desk at the window or your patio. Having this control over your space allows you to create an environment where you can be productive and enjoy the work you do.
When you’re freelancing, you decide how much you get paid. This means that you can do your research and make sure that you’re charging what your work is worth. Many advanced freelancers are able to make more money than they were making when they were traditionally employed. That’s because many freelancers don’t charge hourly, so they stop trading their time for money.
Better work/life balance
As a freelancer, you can also achieve better work-life balance. You get to choose who you work with, set your hours and set your rates. This gives you much more control over your life than you would get if you were working a traditional nine-to-five job.
Most freelancers I know are guilty of going a little overboard and actually work too much. However, if you’re aware of that you can make a conscious effort to stop it. It’s much easier to do when you are your own boss.
Disadvantages of being a freelancer
Being self-employed as a freelancer is great but like all things, it comes with some drawbacks. Here are some of the disadvantages that come with being a freelancer.
You wear all the hats
When you freelance, you’re responsible for everything in your business. Sending your own invoices, email management and doing the actual client work is on you. Some freelancers end up hiring a virtual assistant once they are established to help them manage this work. However, many people take a while to get to that point. This can put a lot of pressure on new freelancers. It takes discipline to get everything done.
Paying your own taxes
When you’re traditionally employed, taxes get taken out of your paycheck. This is not the case when you’re a freelancer. You’re responsible for holding on to a portion of your income to pay your own taxes. You may also need to begin making quarterly tax payments.
The exact amount of tax that you will have to pay will depend on your income and location. If you ignore this you can get into serious trouble. So, it’s really important to know that you’re responsible for this from the start and plan to set money for taxes aside.
Most full-time roles come with benefits like health insurance, vacation days and more. When working for yourself as a freelancer, you don’t automatically get these benefits. You’ll have to find your own health insurance. If you want to take vacation days, you’ll have to factor that into your schedule as well.
Limited social interaction
For some, limited social interaction may sound like a dream. However, even if you like working alone being a freelancer can be really isolating. I can tell you from experience that on some days, I barely speak at all unless I’m talking to my pets. You’re working for yourself and by yourself. While there will be collaboration with your clients or meetings that you’ll have to take, more often than not you’re working alone. That can be a big shift if you’re used to being around a lot of people.
The income security debate
Some say that being traditionally employed provides more income security because you have a set amount of income. Even in a time where the gig economy is booming, freelancing sometimes it can have a bad name because people associate it with having to scramble for work and making little to no income.
I don’t think that there’s been a study that directly compares the income security of freelancers to traditional employees that reflects the direction of the economy today. However, I want to take a moment to speak on this. I personally believe that being a freelancer can give you more income security.
I’ve been freelancing for 5 years and my income has continued to grow year-over-year. In that time I’ve also watched friends and family members lose their jobs and go from a set income to having absolutely no income.
Managing your finances is certainly more challenging as a freelancer. However, most freelancers will never be in a position where they lose all their income at once unless they only have one client. Your experience may vary. That said, based on my own experience as a full-time freelancer, I believe that the path that I’ve chosen creates more income security.
Is freelancing right for you?
Hopefully this post helps you understand what freelancing is and how it works. Most freelancers will tell you that while both upsides and downsides exist, they wouldn’t trade their freedom to go back to a traditional job. Being aware of the disadvantages that come with freelancing is key. Then you can come up with strategies to work with them or around them.
What other questions do you have about being a freelancer? Let me know in the comments.