How to Prep Financially to Go Full-Time Freelance

This post is a collaboration with TD Insurance, but all opinions are my own.

I’ve been running Half Banked as a side hustle alongside my full-time job for three years now. At different points during that time, there were moments when I sat down to evaluate whether I was really ready to leave it all behind and dive head first into the gig economy.

The short answer: I wasn’t.

The longer and more thorough answer, is of course, this entire post.

The gig economy is here to stay, whether it’s full-time freelancing, starting your own business, contract work, or working a bunch of different gigs that together make up your full-time work.

Almost three-quarters of millennials—my people!—say they either have had, currently have, or anticipate having some kind of gig economy job in their lives, according to a study done by TD. Based on the people I know, that sounds just about right, and I’d very much count myself as one of the people who said yes.

That said, let’s be clear: I love my full-time job!

But when I look at the world of work over the next ten or twenty years and think about all of the amazing freelancers I know who are currently building awesome careers on their own terms, it’s crazy to imagine that I won’t be fully dependent on a gig job at some point.

Since I’m a total nerd that genuinely enjoys examining the financials behind exciting life decisions, I wanted to break down exactly what you need to know financially to help make full-time freelancing work for you.

There are some wonderful things about self-employment but there are also wonderful things about working a full-time job. If a bit of planning can help you recreate those elements in your personal business or side gig, why not make that happen, right?

Know Your Basics

Remember how I never shut up about tracking your spending? Well, if you’re thinking about jumping into the gig economy, it’s even that much more important.

Understanding how much money you spend – and on what – should be the foundation of your financial life, but it’s something you can easily lose track of when you get a steady paycheque. When you’re responsible for creating your own paycheque, it becomes even more important to keep track.

To make informed decisions and understand how much income you need to bring in, you need to know how much money your basic expenses cost every month. This will also help you to accurately price your services to build a sustainable freelance career or business.

Prep for Income Volatility

There are so many perks that come with working a gig job, but almost 9 out of 10 people surveyed by TD said they had concerns about it as well. Income volatility was listed as one of the top concerns.

It can be an adjustment going from receiving a consistent paycheque to not knowing when, or how much, you’ll be paid. Luckily, this is something you can prepare for.

I personally know of the financial struggles that come with working a gig job—I used to have very feast-or-famine months with Half Banked too. The projects I was working on and the terms of my freelance contracts were such that I’d tend to get paid all at once or not at all for a few months. These days, I pay myself a set paycheque twice a month from my business like clockwork, which makes budgeting way easier, and it’s not because anything changed with my projects or my payment terms.

What I do is allocate a specific percentage of my income, no matter how high or low it is in a given month, to pay myself. That money sits in an account until the 1st or the 15th, and on those days, I take out my pre-determined paycheque and send it to my everyday chequings account.

That process stays the same whether I’ve had a big month or a slow one, so sometimes I’ll have a big amount sitting in the account, but this is the crucial difference: I keep that money there to pay myself during the slow months, and I based my “paycheque” on how much I need to cover my budget, not on how much I’m earning each month.

Save an Emergency Fund

Sometimes, no matter how well you plan it, you might run into a time when you need extra cash on hand. That’s where your emergency fund can come to the rescue.

Although calculating how much you need in an emergency fund can be tricky, especially if you have multiple sources of income or access to government benefits, being self-employed makes it a little bit easier: You need to save six months of your basic expenses.

Hint: this is much easier if you track your spending, *wink wink, nudge nudge*, because you’ll know exactly how much those basics actually cost.

You likely won’t have the same government or employer benefit programs to fall back on, so you need a bigger buffer of cash on hand to protect yourself. If you don’t have that saved up yet, it should be skyrocketing to the top of your priority list as we speak, or something you focus on tackling before you dive into the gig economy full time.

Get Your Own Insurance

It’s easy to think of your benefits package at work as a standard thing… until you don’t have it anymore.

Eight in ten millennials TD surveyed counted life insurance as a big perk of their standard benefits package at a full-time job, but only 16% of them actually had it through their gig job.

But here’s the good part: getting life insurance is easier and more affordable than you think it’s going to be. The younger you are when you get a term life insurance policy, the less you’ll pay over the term you’re insured for, and the more likely you are to be able to get coverage.

TD has a Right Fit Coverage Assessment tool that can help you figure out your coverage needs from the comfort of your couch. Unlike with a workplace policy, where they hand you a set amount of coverage that doesn’t take your needs into consideration, TD’s tool walks through some easy questions to figure out how much coverage is right for you.

Designing everything to suit you is one of the big perks of the gig economy, right? If you have the freedom to design your day, you might as well have the freedom to design your benefits package.

I used the assessment tool to work through two different hypotheticals—getting coverage as a single individual, and getting coverage as real-life me who has a mortgage and a spouse—and it gave me really clear, accurate recommendations about what coverage I needed and why.

From there, getting a quote is as easy as filling out an online form, and based on my experience, I think you’ll be pleasantly surprised at how smooth the process (and pricing) really is.

You Can Build the Perks You Want

With some planning and attention, and a little bit of work upfront, you can set yourself up for a self-employed adventure that includes all of the perks you might be missing with full-time employment, at least financially speaking. We’re talking steady paycheques, insurance that fits your needs (and your budget) and a fallback plan in case anything goes wrong.