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Freedom. It’s the first word that may come to mind when thinking about freelance or contract work. Freedom to make your own schedule and be your own boss. That freedom seems to thrive in chaos. Article content
In fact, 33 per cent of self-employed Canadians stated their main reason for self-employment was gaining the freedom to be their own boss, according to Statistics Canada.
The pandemic led many to realize working from home wasn’t so bad. In fact, working online with less travel time meant many had time for passion projects — projects that brought in cash.
And it’s not just freelancers who benefit, says Matt Barrie, CEO & chair of Freelancer Limited.
“Businesses have started to believe in hiring digitally and using gig workers to get their projects done,” says Barrie. “They start to see the cost-effectiveness in doing this.”
Today, there is an enormous demand for freelancers. Amid the pandemic, the number of self-employed individuals fell from 2.9 million in 2018 to 2.6 million in 2021, according to Statistics Canada. That number is rising again, hitting 2.7 million as of March 2022. Article content
Despite the popularity of freelancing, there’s a lot to consider before embarking on that path. Be prepared
Freelancing should start with a discussion with your family. Your loved ones will be directly affected, so everyone needs to be on board with not having the stable monthly cheques of a full-time job.
“We can become very comfortable, almost complacent, when we have a regular paycheque,” says Stuart Gray, director of RBC’s Financial Planning Centre of Expertise. “New self-employed individuals are often surprised when they file their first tax return and have not planned for it.”
If you’re considering contract work or freelancing, you should also have a meeting with your financial advisor. You want to make sure all of your long-term goals are being met. You also want to ensure that you take advantage of work benefits while you can. Article content
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Your prep may involve setting up insurance, investing in your Registered Retirement Savings Plan, saving for taxes, creating a budget and starting an emergency fund.
“Ensure that you have funds set aside that you can easily access to fund income shortfalls as you get your business up and running,” says Gray. “There is no rule of thumb, but this should likely be a minimum of three to six months’ worth of expenses.” Consider your options
With everyone on board, and savings in the bank, you still have to decide how deeply into it you want to go. Article content
For some, it might be using contracts for extra cash flow and keeping their full-time job for benefits. Others may want to take a deep dive into it. As Barrie notes, it is certainly possible to make a living by freelancing, though there is a learning curve.
“This online marketplace helps you connect with clients and freelancers from all over the globe and challenge yourself professionally as well,” says Barrie. “The market is ready to compensate freelancers across a broad spectrum. For example, there are freelancers earning $10 per hour and there are others earning $150 per hour.”
That’s why it’s important to do research into your career path before you get into freelancing or contract work. Your paycheque could be small while you build your clientele. With time, it could be as stable and even more lucrative than your full-time job ever was. Article content
“Based on stories told by many of our freelancer users, they usually started freelancing as a part-time career,” says Barrie. “When they have repeated and regular clients who go back to them because the clients are satisfied with their work and trust them, they then decide to become full-time freelancers.” How to get started While every situation will be different, there are definitely some starting points to consider when deciding to freelance.First, you should set aside money for taxes. For this, it’s better to err on the side of higher taxes, and start with setting aside 30 per cent of each paycheque for taxes and other government payments like the Canada Pension Plan (CPP).Next, you’ll want to keep putting money aside for that emergency fund. For this, putting aside around 10 per cent of each paycheque would be a great place to start. This could also go in a Tax-Free Savings Account (TFSA) so you can withdraw the funds at any time while continuing to grow, Gray says. The same doesn’t go for an RRSP. Article content “While the […]
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