Freelancers have it different. The volatility of their arrangements, difficulty of tracking finances, and unstable income all mean that they need to use an alternative approach to investing their money. Luckily, there are ways to change this situation for the better, but it takes some research and planning. A sound investment strategy, when done right, can provide a much-needed income stream to enhance your freelance paycheck. In this post, we’ll teach you just that.
Have your own tax-protected savings accounts
Workplace tax-sheltered accounts each have their own tax protection advantages. Fortunately, some of them can be started by anyone, no matter their employment status. However, pensions are irreversibly tied to the workplace. Because of this, freelancers need to take advantage of every tax-sheltered account available to them. To make serious progress as an individual investor, it is advisable to have a tax-protected account before anything else. You will have to comply with annual contribution limits, which you can allocate into a variety of bonds, stocks, funds, ETFs, etc. From here, any employer-provided account you can use as an independent contractor should be maxed out as much as possible. Depending on whether these accounts are traditional or otherwise, such as SIPP – Self Invested Personal Pension – you may need to pay taxes on the cash when the funds are deposited or withdrawn. However, you won’t have to pay both in, as in the case of a tax unprotected account.
Learn to save money for investment
Saving money while working as a freelancer isn’t easy. However, in most cases, you can find a way to save a bit of cash. For instance, you can:
- Write off as much as you can on your taxes. Find a tax professional to help you identify all your savings opportunities. The expense of this service will almost always be paid off in the savings you gain.
- Invest first, whenever you receive money, especially before you spend a dime for any other purpose.
- Save on office supplies with stationery companies, which have lower prices than local retailers.
Other options to invest in
Besides tax-sheltered accounts, stocks and shares are some of the easiest places to start investing in. Although riskier than a straightforward savings account, stocks and shares have their own advantages. For example, you won’t have to pay taxes or capital gains tax.
Another great investing option is Forex, or foreign exchange trading. It is a decentralized global market where all the global currencies trade. The currency market is the biggest, most liquid market in the world with an average daily trading volume of $5 trillion. To access it, you will need to go through user-friendly trading platforms like Ever Forex. From there, you will be able to trade in multiple ways. For instance, Fundamental trading is based on following the news for several countries and playing the currencies from countries with strengthening economic trends, against the ones with worsening economic trends.
The amount of cash you should invest
This figure will depend upon the goals you want to achieve. Instead of just saving a set amount, you should be agile and adapt to your income and expenditures. Always investing a set percentage as a general rule of thumb isn’t a good solution, since it can often put investors off. The range of investments should be something you can afford but that stretches you a bit. Monitor its condition and think of it as a kind of a bank account so you’re motivated to add more. However, when you’re considering how much money to part ways with, you’ll have to identify how risky your investing behavior is. This is because most of the markets mentioned here can be volatile. It is advisable to always ensure you have enough easily accessible money available if needed. In other terms, that not all of your cash is locked away in long-term investment plans.
Investing while being a freelancer is not as simple as it would be if you were working for a traditional employer. However, it can still be a profitable venture, particularly if you budget the cash to put into investment accounts. Keep working hard, research all the options available to you, and you will be well on your way to build future security for yourself.