Social Security Tips That Every Freelancer Must Know
The freelancing industry is growing bigger each new day as more and more people have switched to remote working.
However, to be a successful freelancer, you need to learn more skills than you can imagine. For instance, you need to learn how to manage your finances, understand self-employment tax, social security, and more.
Remember when employed everything from employment tax and social security is straightforward as your employer deducts taxes from your paycheck. However, as a freelancer, you have to manage budgeting, accounting, taxes, health insurance, retirement planning, and many other things while taking care of freelance work. And sometimes income is irregular.
So how do you plan carefully and track your finances at all times?
In this article, you’re going to learn useful social security tips and tricks to help simplify your freelancing life.
Charge You Freelancing Services Well
As opposed to a 9-to-5 job where the employer decides how much to pay you, freelancing gives you the freedom to decide how much to charge and which services to offer- and to what type of clients. This is perhaps one of the reasons why many people are switching to remote working.
In this case, you need to charge enough for your services so you can make more money and have a higher social security benefit when you retire.
For beginners, deciding how much to charge for your services can be challenging. The image below shows hourly freelance rates based on data collected from over 200,000 freelancers globally.
Have a Budget
As a freelancer from A writers john says: budgeting must become part of your daily tasks. As stated above, freelancing income is normally irregular. Unlike with a 9-to-5 job where you have the same paycheck every time as agreed, with freelancing, you will have to get used to highs and lows because the seasons aren’t always the same.
This is where budgeting can be helpful.
Budgeting isn’t a complicated task since everyone can do it. It simply implies keeping your daily expenses within your income. That means that if you’re making $400 per day freelancing, your expenses shouldn’t go beyond $200.
To budget well, learn some basic budgeting lessons. You can find many lessons about how to budget based on your income online.
There are also handy budgeting apps and tools that can simplify the whole process for you. Make sure you choose a budgeting solution that fits your needs and style since there is no one-size-fits-all app and tool.
Set Aside Money for All Your Taxes
According to essay writing websites, we mentioned above that as a freelancer, you’re your own accountant, account manager, and everything. That means that you have to file annual income tax, pay the required tax bill, and do other things.
You also need to take care of self-employment taxes including Medicare, social security, tasks that are taken care of by employers for salaried employees. Salaried employees also enjoy other benefits when it comes to income tax since employers are required by the law to contribute half to their employee’s social security and Medicare.
As a freelancer, you need to spend the money you earn wisely while setting aside enough amounts to cater to all your taxes.
You can find out more about how much income tax you’re required to contribute on the IRS website.
Distinguish Between Business and Personal Expenses
Knowing how much you have spent on business-related work can be challenging if you have separated personal expenses from business expenses. You can separate the two expenses with the help of a dedicated business credit card or bank account.
Open a business account where you can deposit income from your business. Also, there are many accounting software programs you can use to simplify things. QuickBooks and FreshBooks are two of the most effective accounting programs out there.
Get Yourself Affordable Health Insurance
One of the challenges both freelancers and self-employed face is finding affordable health insurance. Sadly, as a freelancer, you have limited insurance options unless your spouse is a salaried employee with some insurance coverage that covers both of you.
Start Planning for Your Retirement Early
As a freelancer, you must know that someday, you will retire. For that reason, you need to prepare for your retirement.
See, there are many reasons why people choose to become freelancers. One of the reasons is the inability or unwillingness to search for salaried jobs. The other reason is the freedom that comes with freelancing.
While the life of a freelancer can seem exciting, sometimes being your boss can make you forget a lot of other important things like planning for your retirement.
For Monday-9-to-5-Friday employees, planning for retirement isn’t a hard task since the employer contributes a certain percentage to the employee’s retirement fund.
Freelancing is no doubt a lucrative online venture these days. However, even with the huge amounts of money you make, you risk making unavoidable mistakes such as not planning for your social security.
As a rule, you should find ways on how to maximize your social security contributions and plan for retirement as earlier as possible.