Freelancing - Adviser Investments


In 2019, 57 million Americans worked a full- or part-time freelance job, a number that was trending upward even before the millions of layoffs caused by measures to curb the pandemic’s spread. So how do you start working for yourself in a way that sets you up for success?

If you’re considering freelancing—consulting, doing taxes seasonally, tutoring or starting a small business or private practice—or have already hung up your own shingle, here are four things to keep in mind:

  1. A Rock-Solid Budget. Whether you’re freelancing part-time or it’s your main employment, establish a solid budget in the context of your overall financial plan. Your budget will help you grow your business without losing sight of your other goals, like building a cash reserve for emergencies, accumulating more wealth, saving for education costs or retiring earlier.
  2. Supercharge Your Savings. Speaking of retirement, among the biggest benefits of freelancing are the myriad ways that you can supercharge your retirement savings. Earning additional income through freelancing on the side, might allow you to max out your retirement contributions at your day job. Or you can open a retirement account on your own, such as a solo 401(k) or a SEP-IRA. Both options allow you to save up to $57,000 in 2020, and an additional $6,500 if you’re 50 or older. As a bonus, with a solo 401(k), you can choose to defer taxes or pay taxes now via Roth contributions.
  3. Don’t Forget Uncle Sam. All that extra income does come with a price in the form of additional taxes, especially if you’re freelancing as your primary source of income. Your employer withholds taxes from your paycheck to help you minimize payments when you file your return. However, since you’re employing yourself, you’ll need to hold back your income at your marginal rate. You’ll also want to start making quarterly tax payments to avoid penalties and unnecessary shocks to your cash flow. On the plus side, freelancing opens the door to a variety of deductions, such as home office, technology and travel expenses that you can use to reduce your tax bill.
  4. Shields Up. As you go your own way, it’s key to ensure that you’re properly protected. We often recommend a personal umbrella insurance policy as a hedge when we discuss financial plans with our clients, but working on your own can present new challenges and potential risks that require specialized insurance. This might mean malpractice insurance and errors & omissions insurance for your private practice. Or it could be as simple as an adequate business liability policy, if you need broader protection. Adequate insurance protection includes medical, life and disability if your freelancing work is your main job—as with withholding taxes, we often rely on our employers for administration and offsetting costs of these key safety nets.

Before you take the leap, it’s worth talking with an experienced professional to help you navigate the details, protect against the unexpected and find satisfaction in your new gig. So give us a call. We’re here to help, and we’d love to hear about your new endeavor.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit or call 800-492-6868.

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