Are you interested in the FIRE movement (financial independence, retire early)? Its core idea of retiring early, having built up a large enough financial cushion to live off, is certainly tempting, however amassing the hundreds of thousands of pounds required can stump many.
Central to FIRE is the idea of reducing outgoings while maximising saving, and while many people do this while in salaried employment, is it possible to reach FIRE status by freelancing? We think so, but before you start working for yourself, it’s crucial you understand how to properly gear your freelance business to the needs of FIRE.
The pros and cons of freelancing
To start, let’s take a look at how freelancing works and what benefits, and drawbacks, it has compared to full-time salaried employment.
First, the pros. Freelancing means you have much more control over your work, allowing you choose your offering, workload, clients, and much more. This means you can create a brand for yourself and your skills, which can be difficult when working for someone else. With freelancing, your success is all up to you, so if you have an amazing idea, particular niche expertise, and a drive to get things done, you can work hard to position yourself – and charge customers – accordingly.
The main drawback of freelancing is the lack of a safety net. If you encounter hard times and clients aren’t easy to come by, you will have to eat into the money you have saved and work even harder to drum up more business. There are also no benefits to enjoy, such as employer-matched pension contributions, which can eat into your earnings. You will have to get used to doing your own taxes too!
How to freelance for FIRE
Whether freelancing is for you is very much down to your appetite for risk, drive to succeed, and resilience. However, even if you think it would suit you, then there are still plenty of other things to consider before you begin using it as a means to gain financial independence.
1. Make yourself exceptional
First, what is your special skill? According to the Association of Independent Professionals and the Self-Employed, there were 2.2 million UK freelancers in 2020, a number of which has only grown over the past year, making plenty of sectors highly competitive.
One great way to elevate yourself above the pack is by being an expert in a particular niche, so consider what you will bring to prospective clients that others cannot, and make sure to base your business around this. If you are unsure, then invest in your skills before you begin.
2. Plan, plan plan
How much will you earn? Who will your customers be? How will you market yourself to them? How long will you need to work to reach your FIRE goals? If you are to retire early, you must create a robust business plan that shows you how much you will need to work, how many clients you will require, and how you will need to operate your business.
Part of this involves planning for emergencies. For instance, if you need a car for your business and yours breaks down, you may require self-employed car finance to purchase a new vehicle. How much will this cost? How will your business’ books need to adapt to swallow the extra expenditure? With more information at your fingertips, you can cushion your FIRE freelance business through the inevitable bad times.
3. Start as a side hustle
Before you go all-in on your grand freelancing business idea, test the waters. In your own time, begin taking on one or two clients to triple check whether your business is viable, and tweak aspects of your offering, marketing, or operations prior to leaving your current job. This way, you guard against risk and don’t unduly jeopardise any FIRE funds you’ve already been amassing.
4. Keep your savings high
If your business blossoms, adapt your saving patterns accordingly, as opposed to letting your lifestyle change in kind. FIRE is all about creating a large collection of funds to live off of, so the more you save now, the sooner it will be that you can leave the busy working world all together and pursue a life of leisure!
