I’ve been a full-time freelancer for more than a year now, and cutting the W-2 strings wasn’t a decision I made lightly. I had just changed careers from museum work to digital content editing and writing a year before I started freelancing part-time, and taking it a step further seemed like a scary prospect.
Ultimately, though, I took a deep breath and decided to try it out — after using my part-time freelance income to put my personal finances into solid shape first. I paid off all my debt and built actual savings for the first time, giving myself a safety net.
Here are the money changes I faced as a result. If you’re considering becoming a freelancer, I hope my experience can help you decide.
1. I’m never not thinking about income taxes
No one really enjoys paying taxes, but they’re the price of living in a civilized society. If you’re a W-2 worker, you likely only think about income taxes once a year, when you file your tax return (and perhaps dream about a tax refund). Your employer pays on your behalf, and you can find a summary of the taxes paid on your paystub.
As a freelancer, I’m not so lucky — not only do I pay higher taxes (as both employer and employee), but they aren’t taken out of my pay automatically. Instead, I have to keep track of how much I earn and ensure I’m putting aside enough money to cover my tax bills with my state and the federal government — which I pay quarterly.
I don’t have to do all the math by myself because I pay a CPA to file my annual returns and tell me how much I should be paying every quarter based on my earnings. Every time I get paid, I take a percentage of it right off the top, and it sits in a sub-account of my high-yield savings, ready to go when I owe taxes (on Jan. 15, April 15, June 15, and Sept. 15).
2. I have to fund my own PTO
No traditional employer means no traditional employer-sponsored benefits, like paid vacation time. In my museum days, I wasn’t usually privy to great benefits, but my longest-tenured gig did offer plenty of PTO. These days, if I want paid time off, I have to plan ahead and fund it myself.
At the end of last year, I decided to do just that, and designated another sub-savings account as my personal PTO fund. I’m steadily funneling post-tax cash to it, with a goal of having at least two weeks’ worth of my typical pay ready to go. If I want to take a trip and not do any work, or even just need a sick day, I can make up the paycheck shortfall out of this money.
3. Health insurance is my second-largest monthly bill
My days of getting health insurance through work are over. Instead, I turn to my state’s healthcare marketplace for a plan — and since I qualify for no income-based subsidies, I must foot the bill for it entirely. For 2024, my monthly health insurance premiums are my second-largest expense, after my housing.
To be fair, I could have selected a less costly plan. But my cheaper 2023 plan cost me a ton of money beyond my premiums, thanks to its high deductible — and no, it didn’t even qualify for an HSA. So I decided to splurge a little in 2024. That’s one perk of getting your own coverage — you can opt for whatever plan you want.
4. My work (and earning power) is entirely flexible
If I’m starting to bum you out with my lamentations about health insurance and taxes, I’m sorry. But the work flexibility I gained when I became a full-time freelancer is absolutely worth more to me than any of the above issues I deal with now.
I usually worked on a fixed schedule and from a fixed location for the entirety of my old career. This made sense, as the work I was doing was for the benefit of spaces that the public visited in person. Now my work is entirely based on the internet, and as a remote freelancer, I can do it from wherever I want.
Usually, this means I work from home — I’ve put time and money into creating a comfortable home office, and it’s the area where I’m most productive. But I can also take my work with me if I’m traveling, which means I don’t end up needing to take as much time off unpaid (or dip into my PTO fund as much). Working is a good way to kill time in an airport, in case you’re wondering.
It also doesn’t matter if I work outside the typical nine-to-five schedule; since my work is on the internet, it’s always available to me if I have wifi. I’m a morning person, and in the past when I had jobs on that traditional “office work” schedule, I struggled to make it past 3:00 p.m. and stay productive. Now I can start my work day earlier and finish earlier — or take a break in the afternoon and come back to my tasks later in the day if I have the time and inclination. It’s been a game changer and easily worth the financial complications of freelancing.
Is freelancing right for you and your finances? Well, if the thought of sourcing your own benefits and paying more taxes more often isn’t a turn-off, you might want to consider it. In my experience, the benefits have far outweighed these drawbacks — both for my life and my budget.
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Source: 4 Ways My Finances Changed When I Went Freelance
