Is Freelancing Really A Financially Risky Decision?

I’m often told I’m brave to rely on a freelance income. It’s seen as inherently risky to be a freelancer, and a job is generally seen as being synonymous with financial security. While I do understand the thinking behind these attitudes, I can’t say I wholly agree with the conclusion.

There are, or course, plenty of risks associated with being a freelancer, and it’s vital to mitigate them. But for the purposes of this article I’m looking at income security alone. Are you really more at risk of a sudden cut in income if you freelance?

The Risks of Freelancing

Yes, there are risks associated with freelancing. I could lose a client tomorrow, and a chunk of my future income would disappear. Depending on the client, it could be 1% of my income, or 35%.

A client can also simply decide not to pay. I can honestly say this is a rare occurrence, but when it happens there is often surprisingly little that can be done about it, given the legal costs involved in recovering what’s often a relatively small amount of money.

Freelancing also means I’m responsible for a lot of things my employer would be responsible for, or contributing to, were I employed. These include things like pension benefits and healthcare.

It’s time for a disclaimer. I live outside the USA. So as long as I pay my taxes I’m entitled to free universal healthcare. My country also provides a (limited) state pension for everyone who pays into the general tax system, and there’s good provision for private pensions aimed specifically at freelancers and sole traders.

The system where you live can impact just how risky freelance work is for you, so it’s vital to take that into account.

The Risks of Having a Job

There are also risks associated with having a job. If I had one, and no other income, I could lose my job tomorrow, and 100% of my income with it. What’s more, that income would be quite difficult to replace quickly.

Whereas it’s possible to pick up a new freelance client from a job board with a pitch that takes around 15 minutes, without leaving my desk, finding a new job tends to be a little more time consuming, and can even involve relocation for some workers. Freelancing is generally a more agile way to live.

Having a job also means generally being bound to a specific location, as long as that job lasts, which means you’re at the mercy of economic forces in that area. People complaining about the cost of real estate in certain metropolitan areas invariably have jobs keeping them tied to that area. The freelancers can consider other options, other cities, even other countries.

Is It Best to Have Both?

Many would argue it’s best to have both a job and a freelancing side hustle, and I don’t disagree. I wouldn’t advise anyone to give up their job to freelance, if they haven’t already started. But sooner or later, successful freelancers have to make a decision. Freelance full-time? Or start turning lucrative freelance work down because the job doesn’t leave them enough time for it?

Maybe turning the work down is the right decision for you, but before you decide, take a good look at your overall position. Factor in how secure your job is, what benefits it offers you and the potential growth in your freelance business.

Only you can make the decision, but don’t assume freelancing is always the ‘riskier’ option. Sometimes multiple clients, and income streams, can actually spread the risk rather than increasing it.

About the Author

Karen Banes

I’m a freelance writer specializing in online business, personal finance, travel and lifestyle. I also work as a content creator for hire, helping brands and businesses tell their stories, grow their audiences, and reach their ideal customers. I’ve lived, worked and studied in six countries, across three continents. Stop by my blog TheSavvySolopreneur.net to learn how to run your own (very) small business on your own terms. You can also connect with me at my website KarenBanes.com or follow me on Medium.com.