Being an employee in someone else’s business too often means that you’re giving over control of your career to someone else. As such, making the shift to being a freelancer or an entrepreneur can help to redress that balance in your favor.
While this undoubtedly puts the full control of your career squarely in your own hands, it still presents some challenges. Not the least of which is the issue of financial security. The good news is that your decision to take your own path doesn’t mean that you no longer have access to the tools that make your future stability possible. It just takes some additional effort and knowledge.
Let’s take a moment to review a few of the areas that you can focus on to maintain your liquidity both now and when you retire.
When you’re being employed by a company the subject of your finances and retirement funds is largely taken out of your hands by human resources (HR) and benefits planners. When you’re going it alone, you won’t generally have that safety net of experts helping you prepare for your retirement or future security, so you need to take a more active role in your investments.
As a freelancer or entrepreneur, you can utilize tools like self-directed individual retirement accounts (IRAs), which give you a wider range of investment and stock options than most regular IRAs or your basic 401(k). It means that you can make informed decisions about where your funds are directed — based on potential returns, industry stability, even your ethical standards. As such, you’re not relying on someone else to make the right decisions for you, you are fully in control of your money and your future.
However, it’s important to note that being intentional about where your assets are placed also means being honest with yourself about how knowledgeable you are. The ability to read the markets and make prudent decisions is not everyone’s strong suit. If this is you, it’s worth being more intentional about who you choose to handle your retirement funds. Research automated IRA providers and investment firms. It can even be wise to take time to speak to representatives to see if you can build a trusting rapport beyond their sales pitch.
Make a plan
One of the aspects that is easy to overlook, particularly if you’re becoming a freelancer, is the importance of a plan. Too many independent contractors and solo entrepreneurs just launch straight into their enterprise as soon as the opportunity presents itself. However, whether you’re building a small company or working within the gig economy, making a plan for your operations is key to securing your financial stability both now and in the future.
Commit to some market research alongside knowledge of your present client base. Get to know what your likely projected income will be, and the steps that you can take to grow this. Remember that life as an entrepreneur or freelancer is subject to a lot of uncertainty, you’re never really going to be able to predict your long-term income. But having a guide to take you step-by-step through growing can help you to keep the finances you need coming in over the long term. This doesn’t need to be complicated — remember that the key to any plan is clarity. Make sure that you understand what your financial goals are and how you’ll get there.
You also need to understand that one of the cornerstones of any business plan is to make an accurate assessment of cash flow and where this will be invested. The same should go for your independent operation. At the beginning of your path, it’s wise to do this monthly. The frequency of this analysis can help your onward planning to be more agile. You cannot just assess your current state of financial affairs, but also where the trend for your liquidity is going. As such, it allows you to divert funding toward your personal retirement funds as appropriate.
Diversify your income
An aspect of being an entrepreneur or freelancer that can be quite unnerving is the need to rely upon the flow of client or customer money. Indeed, it’s something that many self-employed people find most stressful. The element of the unknown can be a driving force, but it can also leave you feeling quite vulnerable. One way to take control of your finances for both now and a stable future is by diversifying your income.
Some of the most effective ways to do this can be to generate passive income streams that are related to your active income efforts. Starting a YouTube channel or podcast can help you gain ongoing advertising revenue and attract sponsorship. This can also double up as a digital content marketing tactic, which in turn helps to build your audience and diversify your client base. Merchandising can be effective too if your business revolves around creating intellectual property (IP) through writing, animation, or graphic design. Utilizing print-on-demand services can minimize the effort you have to put in and generate additional revenue.
However, it’s also important to think about how diversifying your income can help you to live the kind of life you want. If you are interested in travel, consider how your skills can be parlayed into keeping your income flowing as you journey abroad. You may be able to continue your business while working remotely. But if you’re a writer, photographer, or videographer, it can be smart to consider getting work from clients in the travel industry. There may also be seasonal work at your travel destination that both provides you with income and perspectives on other industries that can help your primary independent business. In either case, diversification can help make sure you can maintain financial health as you pursue positive life experiences.
Going it alone is an adventure, but it can also leave you financially vulnerable. As such, it’s important to be more intentional about your retirement investments and make plans on how to move forward and grow. These efforts, alongside some focus on diversified income, can ensure you maintain the independence you deserve alongside the financial security that stabilizes your future.
About the Author:
Jori Hamilton is an experienced writer residing in the Northwestern U.S. She covers a wide range of topics but takes a particular interest in covering topics related to business productivity and marketing strategies.