Sometimes in life, unexpected opportunities come up. That's what happened to me a few years ago when a very interesting company approached me and offered me to work with them on their software. The only catch: they offered me a freelance contract. Happy in my company at the time but also very intrigued by this tempting offer, I started to weigh up the pros and cons. The result: I decided to take the plunge and embark on the adventure of freelancing.
I know what you're thinking: "Is this going to be another story about your life? " The answer is yes, absolutely. And the lesson? Well, it's very simple. My aim here is to explain how you can make a successful transition to the world of self-employment and avoid the pitfalls along the way.
As a freelancer, an account to exclusively receive payments from your clients is a must. With Vivid, you can combine your private and business account in one app. You'll have up to 15 Business Pockets in your Vivid Business account, each with its own German IBAN to manage everything from incoming payments to taxes. Move funds from your business account to your personal account without waiting for regular bank transfer times!
In addition, business account holders receive an exclusive platinum black VISA card, 4% cashback on every card payment and up to 10% cashback on brands popular with freelancers like Fiverr Business and HP. If you have international customers, you also get access to more than 100 currencies for currency exchange, plus free and unlimited SEPA transfers and direct debits. All at zero cost.
Obviously, when you prepare your transition from employee to freelancer, many questions arise. One of the first is to know what steps to take before you start. It used to be a long and difficult path, but in recent years the various European administrations have made efforts to try to simplify the process of moving from one status to another.
However, there are some essential steps you will need to take. First of all, you will need to make sure that you register as a self-employed person. The easiest way to do this is to contact your local tax office to find out what you need to do. Don't be afraid: tax officers are actually here to support you, not to cause you trouble. It is in their interest to help you, as a properly created application means less work for them in the future.
Another step you will not be able to avoid is contacting your health insurance provider. It is essential that you consult them to find out what type of plan they can offer you. Don't hesitate also to reach out to your health insurance company to find out what consequences your move to self-employment will have. Spoiler alert: you may well have to pay a higher amount for your health than you did as an employee.
One of the other major aspects to consider when becoming a freelancer is money management. Becoming self-employed often means saying goodbye to a stable and regular income. While some months you will earn much more than you did when you were employed, you may also have less successful months. In addition, you won't be entitled to unemployment benefits if you don't work for a certain period of time, or to paid holidays if you take time off. Remember, becoming a freelancer means becoming your own boss, with all the advantages, but also the disadvantages that this implies.
Becoming your own boss also means that you will have to deal with many things that were previously unknown to you. Generally, in Europe, when you become self-employed, you can no longer take advantage of the withholding tax for your income tax. You will therefore need to calculate your income, but also your expenses to optimise your tax return. A tip for you: keep all your receipts! As a self-employed person, you can deduct many of your expenses to pay less tax.
If, like me, you are not experts at filing and sorting papers, this additional task can seem overwhelming and stressful, and can potentially take up a significant amount of your time. The easiest and often most cost-effective option for you is to find an accountant to handle your taxes. This will save you many doubts and cold sweats.In addition, in many cases, hiring a tax specialist will actually cost you less than the extra tax you would have paid if you had tried to optimise your return yourself. Unlike you, this professional knows all the laws and refund possibilities available to you, which will usually save you a significant amount of money in the end.
One of the hardest things about being self-employed is that, financially speaking, you don't really have a safety net. Think of the past year: with the corona pandemic, a considerable number of people lost their jobs or had their working hours reduced. Many employees were able to benefit from partial unemployment or government support. But for the self-employed, the path has been even more difficult. Although some countries have set up support systems for freelancers, getting access to them was not a given.
Being self-employed means thinking about the present, but also about the future. One way to do this is to diversify your sources of income. Obviously, the first thing to do is trying to get as many clients as you can, rather than depending on just one or two.
On top of that, you can also start investing part of your income in financial products. The idea behind this remains the same: diversify your income sources as much as possible to avoid being deeply affected if one of them dries up. Of course, before investing, it would be wiser to know what you are getting into and to understand the ins and outs of the investment world. That's why we bring you new content every day, which you can find in the Invest tab of your Vivid application. And to help you get started, we've also created the Vivid Classes. With them, you can learn in five lessons, easy to read and understand, the basics of investing, what stocks are, ETFs, risk or what to base your decision on when investing in a company.