One in four Americans now participates in the gig economy, according to the NY Post. New online and mobile platforms like Uber, Etsy, Airbnb, and Lyft have made it easier than ever to make money in nontraditional ways. These sites have been driving others to embrace gig- or contract-based work of all sorts. But what does it take to become a successful freelancer?
For starters, you need to treat yourself like a business. Here are some tips for finding success and avoiding headaches in the gig economy.
Network. People are a resource. If you are new to the gig economy, you can learn a lot from those who’ve come before you. Look for membership organizations or unofficial groups where you can connect with a mentor, ask for advice, and learn about best practices in whatever industry you are working in. While the gig economy can be cutthroat and competitive at times, more often than not, you will still find people who want to help others out. Just remember to pay it forward and help others after you’ve established yourself.
Dedicate a workspace. The ability to work from your couch or bed is one of the benefits of embracing a freelance lifestyle. However, many self-employed people find they are most productive if they have a dedicated space where they can concentrate and keep all of their records. Decide what type of workspace works best for you. Do you need an entire room, or is a multipurpose area okay? How big of a workspace do you need? Standing desks are a contemporary option, or you can keep it old school with a traditional writing desk. What will motivate you? You can consider a vision board or hang up inspirational quotes.
Track your income. If you are a full-time employee with no secondary income source, you can typically rely on your employer to give you a W-2 at the end of the year to let you know how much money you earned over the year. As a freelancer, you have no such luxury. You will need to track everything you bring in.
Save for taxes. As a contract worker, taxes won’t be automatically taken out of the paychecks you receive from clients. That means you will need to save for those taxes yourself. A good practice is to set aside a certain percentage of each check you give and earmark it for taxes. What that percentage should be depends on how much income you expect to earn and where you live, so do some research or talk to a certified public accountant.
Pay estimated taxes quarterly. All that money you are setting aside for taxes should be sent to the IRS every quarter. It’s good practice, if only because it ensures that you don’t accidentally spend that money throughout the year. The process of paying estimated taxes is simple and involves only one form.
Track your expenses. You have to spend money to make money, and when you do, you should track that because it’s likely tax-deductible. Business cards, website maintenance fees, office supplies, and your monthly phone bill are costs associated with your business, so keep track of them. You can use fancy financial software or a simple spreadsheet. Just make sure you know how much you spent, where you spent it, and why. Also remember you can deduct certain costs associated with your home office, too. You’ll want to look up the current IRS rules for specifics on those.
Report your income. It may be tempting to skim on your annual taxes, but don’t do it. You are required by law to report all income, even that which didn’t warrant a business giving you a 1099-MISC form after the end of the year.
Many people are finding success in the gig economy, and you can, too. Make sure to network, create a suitable workspace, track your income, and save for tax season.
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