Making it work: managing finances as a freelancer

SINGAPOREANS are embracing full-time self-employment and the freelance lifestyle. A Ministry of Manpower report from 2017 found that freelancers make up approximately 8.5 per cent of the workforce, and it was noted then that the number would likely increase. As appealing as the flexibility and independence to set your own hours and choose your own projects may be, being your own employer also means providing your own benefits - health care, retirement savings, CPF contributions, not to mention taxes and any other types of savings and investments.

Successfully managing workloads and clients may be a familiar task for many freelancers, but managing the financial side of a business may not be. Staying on top of expenses as well as insurance, investments and government-required contributions can be overwhelming. Making this task even more difficult is the likelihood that a freelancer's income will fluctuate month-to-month. However, learning to manage financial obligations is a critical aspect of a business that every freelancer must understand and master.

Ensure a steady flow of income

When taking on short-term projects or freelance assignments, the art of invoicing clients will become imperative for freelancers. In Singapore, the usual time frame for payment is 45 days, but the payment period can be negotiated in the contract to assist with cash flow.

Another point that can be negotiated is payment based on project milestones. Freelancers could ask for upfront payment before commencing work and collect the remaining upon completion. Although freelancers often collect payment after project completion, a 50 per cent upfront deposit is not an unreasonable ask, especially with new clients or for projects that may have multiple deliverables.

In addition, freelancers could use platforms that match companies with freelancer services to build up a steady stream of projects. Though this adds a third party to the process, it is also a scenario that can assist freelancers in the arduous task of collecting payment, as well as with financial and client management. What's more, third-party platforms can provide financial protection and dispute resolution, when required.

Protect your health and finances

The loss of a health insurance plan and corporate MediSave contributions is often a large consideration for those who are looking to leave full-time, traditional employment in favour of the freelance life. But being self-employed is not synonymous with being unable to afford a health care policy. There is a range of options available for freelancers, whether they are single or have a family.

Freelancers should research the different types of private insurance policies that are preferable for their needs and gather quotes. Once a policy has been chosen, keep in mind that there are economical supplementary options specifically designed for freelancers that provide protection against financial loss in the event of prolonged illness or hospitalisation. Once the policies are in place, freelancers can then factor the cost of the policy into their hourly or project rate.

Save for the future

In addition to having a steady flow of income, freelancers still need to be saving for emergencies, holidays and other future considerations, such as retirement and their children's education.

It is often advised that emergency savings include at least six months of living expenses, and it is highly recommended that freelancers work towards that. This is to prevent them from getting into a financial bind if they encounter periods where work is hard to find or client payments fall behind.

As for CPF, the only required scheme for those who are self-employed is MediSave, but freelancers can still make payments into the retirement and housing schemes if desired.

Overall, becoming self-employed is a viable career choice in Singapore that can be as financially rewarding as it is creatively fulfilling - so long as freelancers know how to successfully manage their finances and plan for their future. By understanding how to invoice, maintain health insurance, and save for the future, freelancers can move away from living paycheck-to-paycheck and achieve the same financial stability they would receive from a traditional workplace.

  • The writer is general manager at ZomWork