Long-Term Investment Strategies to Build Freelancer Stability

By Liz Alton, Contributor, on February 3, 2017

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The last thing I was thinking about when I launched a freelance writing career was long-term investment strategies. Beyond buying a computer that would last for a few years, I focused on the short-term goals of paying the mortgage, buying food and convincing my spouse this was a viable career path.

Over time, however, things became more stable. As I found my voice in the writing space, developed good relationships with clients and developed systems to stabilize my income, my focus shifted. Instead of just concentrating on today, I started to think about the different ways my freelance career could contribute to the future I wanted to build. I also became acutely aware that some of the corporate benefits that create a safety net, from a 401(k) match and retirement savings to disability insurance in case of a health crisis, evaporated the day I went out on my own.

Being a freelancer doesn’t mean sacrificing stability. However, the focus of responsibility shifts to you to come up with — and put into action — a strategy to build the support you need.

Moving From Survival to Sustainability

When you initially get started with freelancing, you focus on a single factor: Finding a way to make it all work. As your business grows and you have month after month where you meet or exceed your income targets (or at least cover your bills), it begins to sink in that an independent career is a viable option. That’s when many freelancers are faced with a critical mindset shift we don’t talk about enough: moving from survival mode to sustainability.

There’s a big difference between the questions, “Can I design websites, write articles or code apps and make enough money to pay this month’s bills?” and “Can I do this for a lifetime and build a sustainable career or business?” A well-crafted freelance career has the ability to grow with you over time, whether that means supporting your desire to travel the world or simply adapting to new life circumstances, like having kids or scaling back to retire.

When you start to think about your business as a long-term venture, it changes how you make decisions. Working with a low-paying client might be a waste of energy, as you could spend that time marketing to find a higher paying or more aligned client. It also reinforces the desire to make smart decisions about investing in the future, like saving for retirement or financing an insurance policy.

3 Steps to Build Sustainability

1. Get a plan in place for retirement. Even though I’m in my 30s and retirement is far in the future, it’s hard to feel really secure without some strategy in mind that will give me stability in my later years. One of the benefits of freelancing is that, in theory, you can continue to work past the typical retirement age. However, I’ve seen examples in my own life where that’s not possible due to health or other issues. Even without the benefit of an employer’s 401(k) match, you can save for the future and have a plan for retirement. Here are a few ways to get started:

  • Learn about the different options available to freelancers, including IRAs and SEP 401(k)s.
  • Start saving something toward retirement. It can be any amount, even if it’s small. Something is better than nothing.
  • Consult a professional who can help you evaluate your income, retirement goals and options to come up with a real long-term strategy. It’s much easier to plan for the future when you know a set contribution of dollars each month will get you closer to your retirement goals.

2. Save three to six months of living expenses. The freelancing life is often feast or famine. The difference between long-term viability or having to go back on the job market is often your available cash cushion. Take the time to figure out your monthly expenses, and set a goal of having enough cash on hand to sustain you for three to six months. Now, put together a budget for how you can save that money over the next year. Put those funds in a separate account, and have a clear definition of what constitutes an emergency for accessing those funds.

3. Invest in insurance. When most people talk about insurance, they immediately think of health care coverage. This is important, of course, especially in today’s rapidly evolving landscape around health care. Freelancers need to stay informed about their options and have a long-term plan in place. At the same time, there are other types of insurance that can add to your stability. An important one to consider is disability insurance. As a business of one, an unexpected health crisis could immediately stop the flow of income. Depending on your goals and unique situation, freelancers may want to consider:

  • Medical, dental and vision insurance planning
  • Pet insurance (Really! It was a big cost saver for me in an emergency situation.)
  • Disability insurance, short-term and long-term
  • Life insurance
  • Home or renters’ insurance
  • General liability insurance, professional insurance or errors and omissions insurance (depending on what field you’re in)

Gaining the benefits of an independent career doesn’t mean giving up stability. As you become more established, it’s important you shift your mindset from survival to sustainability and ask what benefits and resources you should invest in to help your freelance career sustain you over the long term. The right long-term investments can provide the flexibility to do what you love for as long as you plan to be in the job market.

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