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It’s important to consider the state of the economy before becoming self-employed.
If you’ve been thinking about going freelance, you’re no doubt in good company. There are lots of benefits to working on a freelance basis, as opposed to being tied to a single employer.
For one thing, you might get to increase your income, all the while getting to set your own work schedule and work from anywhere in the country (or world) you want. Plus, if you have children, you may find that a freelance work setup lends to a better work-life balance and helps you save money on childcare.
But going freelance does involve some risk. And given that financial experts have been warning about a potential recession in 2023 (or shortly thereafter), you may be wondering whether taking the leap into self-employment is really the right choice right now.
So should you give up on your dreams of going freelance due to economic concerns? Not necessarily. But should you factor those economic concerns into your decision? Absolutely.
Make sure you’re prepared for a downturn
Generally speaking, it’s a good idea to have a game plan before resigning from a salaried position and becoming a freelancer. That means having some work already lined up, or at least having a long list of potential clients to market your services to.
But on top of that, it’s important to have a solid level of savings before going freelance. And given the potential for a recession, you’ll really want to go in with a nice amount of cash in the bank.
If a recession hits several months after you go freelance, some, or even all, of your clients might pull the plug on the work you’re doing in order to cut costs. That could leave you without an income for months. And as a freelancer, you won’t be entitled to unemployment benefits. So in that scenario, you’re apt to become very reliant on yourself savings account balance to cover your bills.
Now let’s say you’re going into a freelance arrangement with enough money in savings to cover a full year of living costs. In that case, you’re setting yourself up nicely to get through a recession. So you may feel comfortable moving forward with your plans. But if you only have enough money in the bank to pay for a few months of bills, you may want to put your plans to go freelance on hold and build up more cash reserves.
It’s good to proceed with caution
We don’t know whether a recession will hit in 2023 or not. But since many experts seem to think we’re in for one, it’s a good idea to take those warnings seriously.
That doesn’t mean you have to give up on going freelance. But it does mean you should go in with plenty of cash reserves as backup.
And remember, if going freelance doesn’t work out in 2023, it doesn’t mean you’re doomed to work a salaried job forever. Rather than get depressed, keep working on your savings so that you’re eventually in a stronger place to become self-employed.
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