As a full-time freelancer, you’ve experienced that one morning when you wake up with a severe hangover, and thank your lucky stars you don’t have to get an MC to skip work that day.
But 12 hours later, when the hangover has run its course, your curse themselves for having wasted the day, and lament having to burn your weekend completing the work you didn’t get done.
That pretty much sums up the life of a freelancer. For every advantage you enjoy, you get socked in the face by a disadvantage of equal magnitude. Don’t need to start work at 9am? Well, I hope you like working at 3am.
Here are four big disadvantages of being a freelancer, and how to deal with them.
1. Lack of a stable income
Whether you’re a struggling artist or $1 million a year super tutor, the lack of income stability can be unnerving. Even if you make more than enough to get by, all it takes is one bad month to cause you to question whether you’re on the right path.
As a freelancer with a variable income, you can’t treat money in the same way as an employer who earns the same annual amount. Compared to your salary-earning peers at the same income level, you’ve got to maintain a bigger emergency fund, and spend a smaller proportion of your income. This will help tide you through the tough periods.
2. No paid medical leave
There is no feeling more damning than being too sick to work when you’re a freelancer. Sure, you don’t have to go through the rigmarole of queuing up at a doctor’s clinic and asking for an MC. But every day you’re too sick to work means you lose that day’s income.
Always give yourself some wiggle room when planning your work schedule. Plan to turn in assignments days in advance and don’t leave things till just before the deadline, so you won’t be forced to hire a body double to do your job should you fall prey to an unexpected illness.
You also want to make sure you’ve got adequate medical insurance coverage for more serious illnesses that require hospitalisation.
An integrated shield plan should be the bare minimum for most Singaporeans, and you can tack on riders if you want more to be covered in more areas. Compare plans using MoneySmart’s health insurance wizard if you don’t have one.
3. No automatic CPF contributions
A significant chunk of an employees’ wages get locked away in their CPF accounts, never to see the light of day until they decide to buy a home or have hit withdrawal age. Freelancers are forced to make Medisave contributions, (8% of income for those aged 35 and below) but no more.
As a freelancer, this is great news if you have your own savings and investment plan. You still have the option of paying yourself CPF contributions, but it’s not compulsory.
But for those for whom the CPF scheme was really designed, ie. people who don’t have the discipline to save for their own retirement, not making CPF contributions can lead to picking up cardboard at age 80.
Freelancers also do not get to enjoy employer’s CPF contributions, which for employees is basically extra money above and beyond their official salary. That means more work, more slogging to earn the money as a freelancer.
It is crucial that freelancers take responsibility for their own financial planning. You will need to find ways to save and invest your money to prepare for retirement, and if you plan to buy a home, must be independent enough to save up for the downpayment on your own. If all this is beyond you, consider just gritting your teeth and making those CPF contributions.
4. Lack of training opportunities
As an employee, if you work in the same company for 10 years, you will probably see some kind of skills progression even if you’re the most passive person on the face of the earth. You might even have the benefit of being sent on course.
No such thing for freelancers. You could very easily end up doing the same damn thing forever if you don’t take skills upgrading into your own hands. And should your industry change, it’ll be up to you to upgrade yourself, or get left in the dust.
Other than (obviously) using your $500 SkillsFuture credit, connecting with a community of other freelancers or even employees doing similar work is very important. As a freelancer, especially if you’re running a one-man-show, it’s all too easy to end up in a silo, where you’re working all alone with no input or feedback from others.
Being part of a community can help you figure out things like how your industry is changing over time, what new skills you should pick up, how you should change your rates over time and so on. And it’s always nice to have friends with whom you can commiserate!