JoshA freelancer’s worst nightmare is facing a sudden drop in income. For many, that nightmare was realized in 2020.
The Coronavirus pandemic hit suddenly, and many countries responded by going into lockdown. Businesses temporarily closed, many downscaled their budgets, and some were forced to lay off employees. This had a knock-on effect on the freelance community. A survey by Payoneer found that 61% of freelancers reported a decrease in demand for their services.
Some freelancers were fortunate to have work continue to flow in. For others, like writers, photographers, designers, drivers, performers, and artists work dried up fast. Many had no financial net to catch them.
As businesses start to reopen, work should start trickling in again for freelancers. However, some are likely to continue struggling for a few more months until their finances level out. If you’re a freelancer who had the bottom drop out during this pandemic, here’s how you can rebound quickly and take steps to better prepare for unexpected events in the future.
How has COVID-19 affected the freelance economy?
The coronavirus pandemic hit everyone hard, including the freelance economy. The good news is it hasn’t killed it. Signs of life are still there.
Fiverr, one of the largest freelance marketplaces, reports that business activity is rebounding strongly after a sharp decline of 10-15% in March. In addition, Fiverr saw new freelancers signing on to the platform in record numbers. Upwork, another popular freelance marketplace, has also seen an increase in the number of freelancer sign-ups.
The Coronavirus crisis has certainly contributed to that. Lockdowns led to soaring unemployment levels that are likely to remain high for some time. To survive, more people are turning to freelancing to earn an income. Both Fiverr and Upwork believe this trend will continue as we slide into a post-COVID-19 recession.
Recessions tend to boost freelance numbers. After the 2008 global financial crisis, many who lost jobs turned to freelancing and never looked back. In the past, freelancing was seen as a temporary solution between jobs. Today, many choose to freelance full-time, believing it offers greater income security than a traditional job. A study commissioned by Upwork and Freelancers Union showed:
- 63% of freelancers agree that with a diversified client portfolio, they feel more secure than working for one employer.
- 50% say no amount of money would persuade them to return to a traditional job.
The freelance economy is expected to continue thriving, so there’s no need to rush back to a cubicle job. All you need to do is find ways to recover from a financial loss and create better financial security in the future.
1. Assess your current financial situation
The first step towards a stronger financial future is to take a hard look at your current financial situation. If you’ve been running a freelance business, you should have a record of income and expenses. If you don’t, it’s time to put one in place and set up a monthly budget. You need to see where your money goes before you can make changes to your spending.
Once you know how much you’re spending, look for cost-saving opportunities to help tide you over the next few months. Be ruthless about what you cut from your budget. In the short-term, can you live without Netflix, ordering takeouts, and visits to the nail salon?
In the long-term, find ways to lower your recurring bills. Become an energy-efficient ninja to lower your electric bills. Shop around for cheaper insurance or switch to a different payment plan. For example, choosing to pay your car insurance in full usually works out cheaper than monthly premiums.
When you start analyzing your income, you’ll start to notice trends. Are you busier in the summer months? Does work take a dip over the holiday period between Thanksgiving and New Year?
If you notice recurring patterns, you can start to make better financial plans. Perhaps you can save ferociously during the busy periods and use the savings to take a vacation during the quiet times. Freelancers need vacations too! So plan for it.
2. Find cash in a hurry
After the lockdown dry spell, it’s a relief to know assignments are picking up. However, it may be a while before you are back on steady financial feet. In the meantime, here are a few ways to find extra cash to fill the gap.
- Sell items you no longer use. There’s no better time to clear out your closet, garage, and any other nooks and crannies you’ve stashed unused items. You can have a yard sale, pawn electronic goods, sell clothes to thrift stores or consignment shops, or sell items online. This will put cash in your hands fast.
- Apply for unemployment benefits or COVID-19 relief funding. For the first time in history, the U.S. government is providing unemployment benefits to those who are self-employed. There are also several COVID-19 relief funds for gig workers such as:
- Freelancers Relief Fund
- Writers Emergency Assistance Fund
- MusiCares COVID-19 Relief Fund
- Comedy Gives Back COVID-19 Emergency Relief Fund
- The Actors Fund
- Adapt or expand your service offerings. Some freelancers were creative during the lockdown and adapted their service offerings. Being versatile helped them stay afloat. Perhaps you’re a personal trainer who can also do online training sessions or a writer who can sell an online writing course.
- Follow up on outstanding invoices. Many clients deferred payments to freelancers when their businesses closed during lockdowns. Now that they’re back in business, send them a friendly reminder to pay your outstanding invoice.
- Reach out to previous clients. As businesses get back up to speed, there may be a backlog of work they can farm out to freelancers. A few of your old clients may be relieved to know they can outsource urgent tasks to you.
- Offer a service to your community. Advertise a dog walking or babysitting service, or run errands for the infirm or elderly.
- Donate blood plasma. If you can overcome your needle phobia, you can make a few bucks selling blood plasma. The average pay is $50 per donation.
3. Prepare For The Future
Apart from global pandemics, anything could put you out of commission at any time. An accident, illness, the death of a loved one, a natural disaster, or your biggest client may end your contract. As a freelancer, you must be prepared.
Build a buffer fund
Build an emergency fund that will cover at least six months’ expenses. It will be a lifesaver when life throws an unexpected curveball.
Take out income protection insurance
Freelancers are responsible for their own medical expenses and have no unemployment fund to fall back on. In addition to medical insurance, it’s wise to also take out income protection insurance. It will cover a loss of income should you suffer a long-term illness or become disabled.
Create multiple income streams
If you rely on one or two clients for all your income, you’re in a precarious position. Keep marketing to attract new clients and create additional income streams. One freelance writer sells romance novels online, creates online courses, and does affiliate marketing. Should her client work dip, money will continue rolling in from other sources.
Invest in long-term savings
In addition to a six-month emergency fund, invest in long-term savings and a retirement fund. Speak to a financial advisor to find the right investment strategy for you. You’ll have greater peace of mind knowing your financial future is secure.
How will COVID-19 change freelancing in the future?
COVID-19 has had an interesting “side effect”. It has put a spotlight on the freelancing and gig industry, one that is growing rapidly. It’s predicted that the majority of the U.S. workforce (50.9%) will be freelancers by 2027. With such a large freelance community, governments are finally starting to take freelancers more seriously.
In the United States, unemployment insurance was previously never afforded to freelancers. COVID-19 was the first time U.S. freelancers had access to unemployment funds. Better employment benefits for freelancers is a conversation that is likely to continue as freelancing becomes more mainstream. It may also affect political sidings. Around 72% of freelancers say they will consider crossing party lines if a candidate supports freelance interests.
The future for freelancing looks promising. It seems social distancing and wearing masks isn’t the only “new normal”. Freelancing and remote working is also becoming the “new normal”.
As a freelancer, you’ve learned how to manage a fluctuation income, adapt to different clients and survive lean times. Now you can add rebounding from a pandemic to that list. As resilient as you are, when the next crisis hits, wouldn’t you rather be prepared? Planning for the unexpected is smart. Creating a financial cushion to soften the blow and help you rebound faster.