This is a collaborative post: Being a freelancer is great. You don’t have a boss telling you what to do, you can set your own schedule and work around other responsibilities, and you get to decide what work you take on. But there are also a lot of challenges involved with being a freelancer and if you’re going to be successful, you need to be prepared to meet them. 

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Productivity is the big one that everybody always talks about. It’s hard to stay motivated when you’re working from home, especially if you are trying to work around the kids. But productivity isn’t the only issue that you will come up against, you also need to consider the financial side of things. People don’t always realise how much it costs to be a freelancer when they decide that it’s the right move for them, and this can lead to money worries in the future. It’s important that you think about all of the things you will have to pay for before deciding whether to go freelance or not. These are the main costs associated with being a freelancer. 

Office Costs

The first and most obvious cost that comes with being a freelancer is your office costs. You’re no longer working in an office building where rent is taken care of, so you are going to have to find somewhere that is both affordable and accessible. While coworking spaces can be great, they are also usually pricier than having a separate space at home. Renting an office or just having an extra room in your house are the best ways to go about things if you want to keep costs down. 

Once you get settled into your new work environment, it’s time to think about setting up the actual workspace itself. Unless you have a well set-up office space, it’s impossible to stay productive. Furniture might need replacing if it is not suitable for standing/sitting while working, there might not be enough room for your equipment, or the lighting could be terrible. All of these little things can add up and become an issue down the line, so it’s better to get them sorted out before you start working. Once you factor in the cost of desks and office chairs etc, you can easily end up spending a lot of money setting up your new office space. 

Increased Energy Bills 

The next financial issue you will face is increased energy bills. Since you are now working from home instead of an office building, there’s no one to pay for your electricity and gas. Usually, you’ll be out all day so there’s no need to have the heating on. But when you’re in the house all day in the winter, you can quickly rack up some expensive energy bills. Make sure you do your research into whether or not it’s worth getting a boiler to make things easier, and turn the heating on whenever you’re working. You can take steps to improve insulation in the house and maybe even replace the boiler so it’s more efficient, but this is a big upfront cost you need to pay if you want to make savings in the future. 

Technology Costs 

The next major cost you will have to deal with as a freelancer is technology costs. Software subscriptions, web hosting for business purposes and cloud storage space are all good examples of things that can really add up over time. You need to invest in these things if you want to establish yourself as a freelancer, but they can also be expensive. Make sure you do your research into what software and services are available before you make any big decisions on which ones to go with.  Where possible, look for free options to save as much money as possible. 

You also need to pay for your own computer and if it breaks, it’s down to you to replace it. On average, computers have a useful lifespan of 4-5 years, so this is an ongoing cost you need to bear. Using an old computer will only slow things down, so you can’t really avoid replacing it. 

Taxes 

Nobody likes paying taxes but unless you want the HMRC knocking on your door, you need to make sure that you are up to date with payments. When you are employed, everything is handled for you and your taxes will be taken out of your paycheck automatically. But when you’re a freelancer, it’s up to you to file your own tax returns and pay the bill, which is a cost that a lot of people forget to account for.  

However, this is an opportunity to offset some of the other costs associated with being a freelancer because you can claim them as expenses. It’s important that you understand the self assessment expenses you can make and claim everything you are entitled to. This includes all of your technology and office costs, and a portion of your household bills. Essentially, any money that you spend towards the business can be claimed as an expense and you won’t have to pay tax on it. 

The deadline for filing online is the 31st of January but it’s best to do it early so you know how much you owe and you can plan your finances accordingly. 

Gaps In Work 

Another financial issue you’ll face when you become self employed is the gaps in work that can appear from time to time. This means your income fluctuates throughout the year and it can be hard to manage if there’s no money coming in at all. One of the best things about being a freelancer is getting paid for what you do rather than how long you spend at the office, but this also means that clients don’t pay until they’re satisfied with your work. It’s these slow periods where most solopreneurs struggle with their bills, so it’s important to find ways of slowing down your spending while you wait for new projects to come in. 

All of these costs eat into the profits you earn and can cause financial problems for freelancers, so make sure that you are prepared for them.