A Year of Freelancing

I had previously written a 6 month retrospective of freelancing, and now that it has been a full year, it seems wise to re-evaluate. Generally, everything has been going swimmingly, and there’s not much news to report. However, a few things have changed:

Separating Business and Personal Logistics

While I was previously paying myself a flat monthly amount based on my budget, evaluating my personal finances was still confusing with the business income being tracked alongside my personal assets. I didn’t want months without business income to look like I had lost money, as long as I was able to pay myself from business savings and stay within my budget. As such, I’ve stopped including the business checking and savings account balances in my personal assets on Mint.com and wxBanker. Now all I see coming in each month is my payment to myself without large swings from inconsistent business income, and it is very straightforward to evaluate the sustainability of my personal finances.

I’ve also incorporated as an S Corporation (Michael Rooney Inc), as this allows significant income tax savings via disbursements, plus some great benefits including a medical reimbursement plan and a Simple IRA. Acting as a corporation also can make life easier for your clients, as corporation to corporation work doesn’t require them to file a 1099, and also makes it less likely that you could be reclassified as their employee by the IRS. Talk to your accountant to see if an S Corporation is right for you!

Finally, I’ve been heavily using Freshbooks.com to track time and set up automatic recurring invoices; I just input the hours each day, and Freshbooks handles sending the client a monthly invoice.

Time & Money

While my previous goal was to maintain my salaried income working ~20 hours per week and taking lots of vacation, I’ve found that this wasn’t a good fit for me for various reasons. First, my previous salary was an arbitrary amount, and I can thrive quite well on less while still maxing out a Roth IRA and having savings leftover. Second, I don’t feel a frequent need for vacation or “escape” as my current schedule feels very relaxed, especially as I can be pickier and choose the most enjoyable work when I need to find less of it. Right now, I’m able to comfortably support my budget with ~10-12 hours of work per week; anything extra is “work for work’s sake”.

Incubation and Recurring Income

A specific goal for this year is to develop a recurring stream of monthly income from clients and incubation projects. On the client side, this comes primarily from monthly hosting and support plans. These are currently accounting for about 15% of my monthly budget, and I’d ideally get this to 25% in this quarter.

I’ve also been spending some time on incubation projects with the goal of contributing beneficial software to the world, which can be optionally supported by small recurring donations of $3-$5 per month. I think it is really cool how a personal project with only 1,000 paying users at $5/mo would generate a very significant $60K/year.

I’d love to hear from others who have iterated on their self-employed life and made improvements, or from anyone with any suggestions or comments!

 

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