Financial tips for first-time freelancers
Thinking of going the do-it-yourself route? Here’s what you need to know.
Reset Your Career
You’ve been working hard for years now and want a change. But how can you do something different? What if you want to work from home, or want to go out on your own? These series of stories explain how to hit the reset button on your work.
-
1. Don’t ditch the benefits
You may be eligible for medical, dental and life/disability insurance through a professional association’s insurance partners or a spouse/partner’s employer.
-
2. Set up a contingency fund
Your cash flow will likely be more unpredictable so build a financial cushion to fall back on during any slow periods – consider a Tax-Free Savings Account.
-
3. Pay the taxman
Put aside a portion of your earnings to pay income tax and GST (if applicable) – you may pay annually in the first year then move to quarterly instalments if you exceed your province’s net tax owing threshold.
-
4. Deductible expenses
Be sure to keep all business expense receipts – if you’re working from home, the portion of your household expenses related to the workspace may be deductible from your business income for tax purposes.
-
5. Lifestyle
Be prepared to adjust your spending habits (e.g., vacations may have to wait until your business is established), especially during the critical start-up period.
The upside to being downsized
How to get on the fast track to “Why didn’t I do this sooner?”
Anne had mixed feelings as she stared at a box containing the contents of her office, representing nearly a decade of her career. She had anticipated her role would be eliminated and thought she was emotionally prepared but found herself nonetheless stunned… and inspired. This was the push she needed to finally start her own business. “It’s a big leap!” exclaimed Anne. “I think if someone offered me a job at that moment, I would have jumped on it, but I’m glad that didn’t happen.”
Some people, like Anne, see change coming, but many find themselves in similar situations without warning. If you’re not prepared, a loss of income may mean taking on more debt or depleting your retirement savings.
Like many Canadians, Anne traded her daily commute for a home-based business. The freedom to set her own hours and be her own boss was a long-time dream. Anne couldn’t control the timing of her employer’s downsizing but it worked out well. She had saved enough money to ease the financial stress while focusing on starting her business.
Those savings, along with severance pay and employment insurance (EI) benefits, kept her financially afloat until it was profitable. Through the federal government-funded Self Employment (SE) program, Anne received EI benefits in addition to income generated by her start-up, plus business skills training (eligibility requirements for the SE program may differ by province).
Some people, like Anne, see change coming, but many find themselves in similar situations without warning. If you’re not prepared, a loss of income may mean taking on more debt or depleting your retirement savings. Both scenarios can have long-term consequences.
Is it time to ditch the suit and commute?
Here’s what a survey of more than 650 working parents revealed about flexible work, like working from home, having a flexible schedule or working part-time:
90%: Absolutely certain or very confident that a job with work flexibility would decrease stress levels
89%: Having a job with work flexibility would help them be a more attentive spouse/partner/ significant other
84%: Children are the reason for wanting a job with flexible options
52%: Flexible work options would increase the amount of time for date nights
9%: Current work-life balance is great
Source: 3rd Annual Work-Life-Relationship Survey by FlexJobs
Three proactive bounce-back tips
The key to quickly moving on after a job loss is proactive planning. It may actually be the best thing that’s happened to your career. “After decades of rush-hour traffic and office politics, I was ready for a change – I just couldn’t initiate the first step,” said Anne, adding that her only regret is not starting her business sooner.
-
1. Consider your options now
Would you retire early, go back to school, look for another job or maybe start a business?
-
2. Research government programs
Determining your next step may be easier if you qualify for educational or financial assistance.
-
3. Put money aside
Even if you never use it to replace income, an emergency reserve will help you more easily manage any major life change.
Sources: Self Employment Program – http://tinyurl.com/z2wa8pk and http://tinyurl.com/jfwf67l
The Impact of Flexible Work on Love, Relationships, Sex and Health – http://tinyurl.com/j36ftte
