If you're unemployed, you aren't alone. Nationwide, the unemployment rate remains stagnant at just under 10%, and almost half of these 14 million people have been jobless for more than six weeks.
TUTORIAL: Macroeconomics: Unemployment
Of course, when you're unemployed, you're aggressively looking for your next full-time position. Between networking, writing cover letters, and researching companies, you're working quite hard with little spare time. At the end of the day, however, the job search doesn't pay, and unemployment benefits are so minimal that you can barely meet basic expenses.
For most of us, joblessness is a humbling (if not demoralizing) experience. Still though, there are ways to make the most of your spare time. For one, you could invest in your own business by starting your own freelance practice. Across industries, independent contracts are in high demand, especially for project-specific tasks like programming, writing, marketing, public relations and data analysis. As you focus on building your network, you may end up building your very own agency. Freelancing could become your next full-time venture. Here are some basics to get you started:
What Is Freelancing?
Typically, companies hire freelancers to complete task-oriented projects like graphic design, programming, marketing, data analysis, blogging and copywriting. All of these projects are on a contract-basis with a definitive start and end date. Freelancers can customize a project load by serving multiple clients and by working on a number of projects. While some freelancers work from home, others rent office space in co-ops. Some companies ask freelancers to come to their offices. (For pros and cons of freelancing, read Be Your Own Boss By Freelancing.)
Independent Contractor Vs. Employee
Freelancing is very different from working somewhere part-time, especially from a tax perspective. As an employee, you are an agent of the company. As an independent contractor, you are self-employed, meaning that you own your own business. When you're an employee, your parent company will withhold your taxes, but when you freelance, you are responsible for paying your own on an annual or quarterly basis. Legally, independent contractors must set their own hours and provide their own resources like laptops, office equipment and training materials. If you're freelancing, you have a specialized set of tax responsibilities, so you'll benefit from consulting an accountant.
Freelance projects are on a contract-basis, and terms will vary from project to projects. Depending on the company and assignment, you may be paid hourly, weekly or monthly. You might also be paid a flat fee per assignment. Depending on your client, travel and regular meetings may be necessary.
If you're freelancing, it's helpful to think about your project in terms of an hourly rate. Given that you have industry experience in your chosen field, you should know how long a typical project or assignment will take. For instance, a writing assignment that pays $10 will not be worth it if it takes you two hours to complete. Conversely, if it takes 10 minutes to write, you're effectively earning a dollar for every minute that you've spent on the project – in other words, your hourly rate is $60. When accepting projects, you should also consider how much you'll be paying in taxes. As you gain more projects and clients, it is important that you track receipts for business expenses while keeping a detailed record of your earnings.
Types of Work
Consulting opportunities are available in a variety of fields for a number of skillsets. During a job search, keywords like consultant, independent contractor and freelance can help you locate opportunities. Across industries, the demand for writers, graphic designers, web developers, programmers and statisticians are quite high. There is also high demand for people with extensive industry experience. (For more on consulting work, read Consulting – Everybody's Doing It, Should You?)
Where to Find Work
Your personal network is the best way to find freelancing work. You might come across freelancing marketplaces that match providers with buyers, but you'll quickly see that these sites charge a commission for work. Furthermore, many freelancing marketplaces are open to individuals overseas who are able to work at extremely low rates. Given the cost of living in the United States, these low-paying gigs create a highly competitive atmosphere. If you're unable to find work through your professional network, you may find it beneficial to attend industry meet-ups to expand your contact base.
You work from home, and you are able to generate a stream of income through a variety of sources. You don't depend on a company for an income – you depend on yourself. As you network with more companies, your freelance gig might eventually lead to a full-time salaried position. Logistically speaking, you can pick up work very quickly, and you're eligible for tax benefits. On your resume, you won't have a gap for the time that you were unemployed.
Work can be tough to find and, especially at first, it isn't steady. From a personal finance perspective, you'll need to save as much as possible to prepare for the time that you're not earning. Above all, if you're thinking about self-employment for the long term, you should keep in mind that health insurance premiums are extremely expensive. If you're receiving unemployment, freelancing may interfere with your benefits. Furthermore, you're responsible for all of your business overhead costs including conferences, trainings and resources to get the job done.
The Bottom Line
Freelancing is a balancing act, especially in-between jobs. Think of self-employment as the entrepreneurial alternative to unemployment, and maybe you'll find your next full-time job.