Debt and Freelancers: Break the Chain of Cause and Effect

By Tom Bentley, Contributor, on June 20, 2017

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In my wayward days, I used to do a lot of hitchhiking. On two separate occasions (both long-distance hitchhikes) I lost my wallet. On both of those occasions, my wallet contained all the money I had in the world. Both times I turned around. You might not have experienced such concentrated blows to your finances in your freelancing career, but “debt and freelancers” are too often two linked terms.

That’s a link that needs breaking.

There are ways to protect your wallet from the crippling combination of poor planning and carelessness that I displayed in my younger days. One action you can take before debt gives you a shovel to the face is to ease into freelancing while you still have your day job and the steady income that it provides. Starting a side hustle, as this long-time freelancer explains, can help you determine if the freelancing life is for you, can give you a sense of income potential and can make you definitively assess your skill set.

I didn’t quit my day job until I’d already been freelancing on the side (no mom, I didn’t cheat on my regular job!) and had a big six-month contract lined up when I quit. The fact that the contract fell through three weeks later was just the gods laughing.

Vintage Cars, Tech Crashes and Tiny Islands

I never went deeply into debt as a freelancer because I didn’t have crazed spending habits, and didn’t need to finance my copy writing business with expensive equipment. Yes, the fact that I bought a lot of vintage cars from the 50s and 60s was irrational exuberance, but one does need a hobby, don’t you think? However, having a plan for your approach to business debt before you take the plunge is good insurance against ill-advised hobbies.

Specifically addressing the “writing side” of debt and freelancers, this Freelance Writing Jobs post offers some specific pointers on the value of having a professional website, how to apply for a debt consolidation loan and the value of having separate personal and business bank accounts. It says nothing about how to pay for the upkeep on a ’64 Dodge Dart, though.

Because most of my clients were tech companies, the tech crash of the early 2000s put my business in a tailspin. Income shrank, anxiety grew and I was so stressed that I had to buy a reliable used car (perish the thought). But the slow recovery pushed me to make a more dramatic move to teaching English classes on a tiny Micronesian island from 2004 to 2005. Business was improving by my return, though I’m not sure I’d advise you to flee the country to fix your “debt and freelancers” situation.

Tracking Income, Tallying the Taxes

Easier than heading to the equator is tracking your income. Know when some months flow and some months lie fallow. The word “budget” might set you snoring, but if you don’t control where your money goes, it controls you. The advice in the NerdWallet post for tax planning and obtaining insurance is sensible with a capital “S,” too.

Speaking of tax planning, take this bit of advice from our British brethren across the pond: A chunk of the money you make isn’t really yours (ouch!). Hannah Martin of the Talented Ladies Club suggests starting an emergency fund. Although it sounds like no fun, having zero means to pay for an emergency is much less fun. As with building anything, starting small and going slow and steady from there can yield significant results.

One of the real scourges of the debt and freelancers lifestyle is when your clients don’t pay you — the little weasels. But if your business accounting is set up on the accrual method, there is a legal way of writing off that debt. Now that’s good writing.

By the way, when I mentioned the story of losing my wallet when hitchhiking? That wasn’t quite the whole story: I’ve actually lost my wallet four times total, though the other two times I didn’t have all the money in the world inside them. In the 25 years since I last lost my wallet, I’ve learned how to hang on to it. Tightly.

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