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Comparing Online Freelancing to Traditional Employment
(Page 3 of 6)
Expenses and Earnings
This is perhaps the area where the
most misconceptions exist about freelancing, both online and conventional.
A lot of people get into freelancing with completely unrealistic ideas
about how much money they can make doing it. They also look only at the
money they’ll save in certain areas, instead of also considering
where freelancing will cost them more than it did when working a regular
- Expertise Equals Earnings: Simply put,
if you are good at what you do, you can earn a lot of money as a freelancer.
The more specialized your field, and the more you stand out from the
crowd, the more money you can make.
- Work More, Earn More: Unlike a wage-earner
or salaried employee, your earnings aren’t limited, nor are the
hours you can work per week. If you have the projects, the more you work,
the more you earn. Even better, as you work more and build a reputation,
you can increase the rate at which you are paid fairly rapidly, as opposed
to waiting for years to get a decent raise.
- Travel Cost Savings: You can work at home,
instead of commuting to a job. The savings here can be substantial, in
terms of both time and money, depending on what you’re currently
spending. For example, my wife and I both work from home, and this actually
enables us to have only one vehicle for our family of five. We save thousands
of dollars in leasing/ownership costs, maintenance, fuel, taxes and so
- Workplace-Related Savings: You probably
won’t work in your pajamas, but you also don’t need a fancy
wardrobe when you freelance. This can save quite a bit of money if your
profession would normally require business attire.
- Lower Hourly Rates: Due to competition,
especially from workers in lower-cost regions, most freelancers earn
less per hour than they did as full-time employees.
- Uncertainty and Dry Spells: You can earn
as much as you want, but only if you can find enough projects to keep
you busy! This is a bit easier for online freelancing, since freelancing
marketplace sites provide a steady stream of leads for you to bid on,
but dry spells are still
very common. For all but the best and luckiest freelancers, you must
expect significant fluctuations in earnings, and have the resources to
buffer periods of reduced earnings.
- Fees: Online freelancing sites are in business
to make money, just like you. Count on paying roughly 10-15% of your
earnings in fees, depending on the site(s) you use and how much dollar
volume you do each month. For newcomers, those percentages can be even
- No Benefits: Freelancers are independent
contractors and get no benefits. This can be a major issue if you don’t
have a spouse who is able to provide them.
- Work Less, Earn Less: If you have an unproductive
day at the office, your boss won’t dock your salary. But as a freelancer,
if you have a bad day and get only half as much work done as normal,
you effectively only earn a half day’s pay.
- No Vacation or Sick Time: Along the same
vein as the item just above, as a freelancer you get no time off for
vacation or illness. Again: no work means no pay.
- Tax Implications: Self-employed freelancers
may end up paying more in taxes than they would if they earned the equivalent
amount as salaried workers.
- Freelancing Expenses: The counterpart to
saving on travel and wardrobe is the need for a home office or other
place to work, and office equipment such as a computer. Some types of
freelancing may also require you to provide trade-related materials,
especially professions in the artistic field, which the company would
provide if you worked full-time. To take the flip side of the example
I gave before of my wife and myself: while we save by having one vehicle,
we had to buy a more expensive house than otherwise would have, because
we needed two rooms that we could use as offices. (This isn’t strictly
necessary; in the past we’ve shared an office. Of course, we’d
probably be divorced by now if we had kept that up. :) )
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Last Site Update: May 18, 2011
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