As someone looking to try freelancing in a couple of years (only been programming for about 2 years) it is reassuring to see that you can make a decent amount of money with almost no network.
How do you find freelancing vs ordinary job?
Do you have savings for harder times?
Freelancing has helped me understand just how much my previous job was paying me that didn't show up on my paycheck. Health insurance, matching 401k contributions, and various miscellaneous other perks are actually quite valuable. So you really have to take these things into account when you set your rates.
The other big difference is that a salaried job means a regular paycheck, no matter how busy you might be in any given month. But there can be a lot of downtime between billable hours freelancing so that's another potential dent in your income.
Personally I prefer to bid a fixed price instead of an hourly rate for a project. This makes it that much more important to consider your initial estimate carefully but it also eliminates a lot of micro-accounting and haggling over how much a single hour is worth.
You also have to be careful not to take on more work than you can handle. Unlike a regular job there's no hard ceiling on how much you can make in a month but it's easy to get in over your head this way.
So far I'm really enjoying the freedom and variety of freelancing but I think a regular job is easier in a lot of ways.
The OP is in the UK so thankfully health insurance is not an issue as it is state-provided out of your taxes (although some companies do provide subsidised private healthcare, which some people might value highly).
You're very right about the other things though - pension contributions, paid sick leave etc. which freelancing doesn't cover, so it's important to compare them carefully.
Healthcare is public, yes (although a private insurance is a popular benefit) but the tax that pays for it (up to 13% I think) is deducted separately. Ie. for your employer to give you a salary of £10000, he has to pay £11300. If you're self employed, you have to pay this, so it can bite you when comparing salary and contracting rates.
Thats not correct. PAYE (Pay As You Earn) tax for employed people and the equivalent Income Tax for self-employed, along with similar rates of National Insurance for both, go into the general tax pot which pays for healthcare and other government programs. Employers advertise pay rates from which the tax is deducted, so in that way they are the same as contracting rates (the tax is deducted from both). Employers also pay a small National Insurance contribution on top, which doesn't come out of your wages.
Yes, it goes in the general tax pot, but it's still called national insurance. Although you don't have to worry about coverage, you very much still have to pay.
> Employers advertise pay rates from which the tax is deducted, so in that way they are the same as contracting rates (the tax is deducted from both).
Yes, this is correct for income tax and the employees portion.
> Employers also pay a small National Insurance contribution on top, which doesn't come out of your wages.
The problem is that it's not a small contribution on top, it's 12.8% above a low threshold. For a £35k salary, it's just under £3,800 - see http://www.listentotaxman.com/. And as a contractor, you have to pay that for yourself.
National Insurance contributions are slightly more complicated than that, but the upshot is you generally won't be paying more personally as a freelancer than as an employer.
When you're employed, both you and your employer pay NI rates. If you're self-employed, you pay £2.65 a week plus 9% on profits over about £8k, which should work out fairly similarly to the rates you pay (out of your gross salary) when employed.
Not all companies in the UK will provide paid sick leave and many will impose a strict maximum number of sick days per year which crossing means automatic disciplinary.
I do now! :) I didn't when I started, in fact I owed a considerably chunk of money to my girlfriend and so priority number one was paying her back.
In terms of the lifestyle, I love it. I honest don't feel like I've "worked" in the conventional sense since I've been back.
There are a lot of things you have to deal with which are unexpected. Finishing a project and realising you might not see the people you've worked with again ( especially if they've been great people to work with) is depressing.
There are times when it can also be lonely. I'm fairly lucky in that I'm currently living with my parents and so there's normally someone around.
In the periods between finding work ( where technically you're unemployed ) it is easy to get depressed and wonder whether you're doing the right thing. Having something else to focus on at the same time, be it a side project, or indeed finding more work is a must.
The biggest benefit is the freedom. Yes I might have work to do, but I can ( for most clients ) do it from where ever I want to do it. If I need a break from the parents, no problem I move my office to the girlfriends for a week. If I want a change of scenery, no problem I just pack my laptop up and I'm good to go!
The second benefit is the amount you learn. I now a much greater understanding of business. Tax, VAT, National insurance, invoices, marketing, chasing payments and how companies operate.
Not to mention the technical benefits of freelancing. I've taught myself backbone.js worked with node.js. Played with Symfony, Silex entered ( and come second in ) coding competitions, taught myself some AWS basics. All things I probably wouldn't have had the ability to do if I was working for someone else.
All in all the last six months have definitely been a positive experience in my life!
It's great to get into the habit of saving some of your income ... not just to hedge against slow times but to build an emergency fund and nest-egg. The popular mantra of "pay yourself first" really works (and let's you run the rest of your life by the balance of your check-book).
"If I need a break from the parents"
Make sure your rate is high enough to provide you with independence too.
Comments
As someone looking to try freelancing in a couple of years (only been programming for about 2 years) it is reassuring to see that you can make a decent amount of money with almost no network.
How do you find freelancing vs ordinary job? Do you have savings for harder times?
Freelancing has helped me understand just how much my previous job was paying me that didn't show up on my paycheck. Health insurance, matching 401k contributions, and various miscellaneous other perks are actually quite valuable. So you really have to take these things into account when you set your rates.
The other big difference is that a salaried job means a regular paycheck, no matter how busy you might be in any given month. But there can be a lot of downtime between billable hours freelancing so that's another potential dent in your income.
Personally I prefer to bid a fixed price instead of an hourly rate for a project. This makes it that much more important to consider your initial estimate carefully but it also eliminates a lot of micro-accounting and haggling over how much a single hour is worth.
You also have to be careful not to take on more work than you can handle. Unlike a regular job there's no hard ceiling on how much you can make in a month but it's easy to get in over your head this way.
So far I'm really enjoying the freedom and variety of freelancing but I think a regular job is easier in a lot of ways.
The OP is in the UK so thankfully health insurance is not an issue as it is state-provided out of your taxes (although some companies do provide subsidised private healthcare, which some people might value highly).
You're very right about the other things though - pension contributions, paid sick leave etc. which freelancing doesn't cover, so it's important to compare them carefully.
Healthcare is public, yes (although a private insurance is a popular benefit) but the tax that pays for it (up to 13% I think) is deducted separately. Ie. for your employer to give you a salary of £10000, he has to pay £11300. If you're self employed, you have to pay this, so it can bite you when comparing salary and contracting rates.
Thats not correct. PAYE (Pay As You Earn) tax for employed people and the equivalent Income Tax for self-employed, along with similar rates of National Insurance for both, go into the general tax pot which pays for healthcare and other government programs. Employers advertise pay rates from which the tax is deducted, so in that way they are the same as contracting rates (the tax is deducted from both). Employers also pay a small National Insurance contribution on top, which doesn't come out of your wages.
Yes, it goes in the general tax pot, but it's still called national insurance. Although you don't have to worry about coverage, you very much still have to pay.
> Employers advertise pay rates from which the tax is deducted, so in that way they are the same as contracting rates (the tax is deducted from both).
Yes, this is correct for income tax and the employees portion.
> Employers also pay a small National Insurance contribution on top, which doesn't come out of your wages.
The problem is that it's not a small contribution on top, it's 12.8% above a low threshold. For a £35k salary, it's just under £3,800 - see http://www.listentotaxman.com/. And as a contractor, you have to pay that for yourself.
National Insurance contributions are slightly more complicated than that, but the upshot is you generally won't be paying more personally as a freelancer than as an employer.
When you're employed, both you and your employer pay NI rates. If you're self-employed, you pay £2.65 a week plus 9% on profits over about £8k, which should work out fairly similarly to the rates you pay (out of your gross salary) when employed.
More details on gov.uk.
That's not the point. The point is that you have to charge more than your salary number to break even as a contractor.
Not all companies in the UK will provide paid sick leave and many will impose a strict maximum number of sick days per year which crossing means automatic disciplinary.
I do now! :) I didn't when I started, in fact I owed a considerably chunk of money to my girlfriend and so priority number one was paying her back.
In terms of the lifestyle, I love it. I honest don't feel like I've "worked" in the conventional sense since I've been back.
There are a lot of things you have to deal with which are unexpected. Finishing a project and realising you might not see the people you've worked with again ( especially if they've been great people to work with) is depressing.
There are times when it can also be lonely. I'm fairly lucky in that I'm currently living with my parents and so there's normally someone around.
In the periods between finding work ( where technically you're unemployed ) it is easy to get depressed and wonder whether you're doing the right thing. Having something else to focus on at the same time, be it a side project, or indeed finding more work is a must.
The biggest benefit is the freedom. Yes I might have work to do, but I can ( for most clients ) do it from where ever I want to do it. If I need a break from the parents, no problem I move my office to the girlfriends for a week. If I want a change of scenery, no problem I just pack my laptop up and I'm good to go!
The second benefit is the amount you learn. I now a much greater understanding of business. Tax, VAT, National insurance, invoices, marketing, chasing payments and how companies operate.
Not to mention the technical benefits of freelancing. I've taught myself backbone.js worked with node.js. Played with Symfony, Silex entered ( and come second in ) coding competitions, taught myself some AWS basics. All things I probably wouldn't have had the ability to do if I was working for someone else.
All in all the last six months have definitely been a positive experience in my life!
It's great to get into the habit of saving some of your income ... not just to hedge against slow times but to build an emergency fund and nest-egg. The popular mantra of "pay yourself first" really works (and let's you run the rest of your life by the balance of your check-book).
"If I need a break from the parents"
Make sure your rate is high enough to provide you with independence too.