How to Become an Independent Contractor and Take Control Of Your Finances

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The pandemic has revealed that more and more of us are dissatisfied with our jobs

Becoming an independent contractor is a legal way to gain financial control and live the life you desire. It’s not surprising that so many people are taking this path, but it may sound strange if you’ve never heard of it.

“How do I go about doing this?” you may be wondering. The first step, of course, is to understand what it takes to be your own boss. When you work as an independent contractor, you have no one to answer to but yourself. You are paid when the project is completed, not before, which means there are no surprises at the end of each month.

This guide will discuss how becoming a freelancer can be a great option for anyone looking for more flexibility in their work and lifestyle

Continue reading to learn what steps you should take right now to become your own boss.

What is the definition of an independent contractor?

An independent contractor is someone who hires out their services to a company or an individual. 

They are usually self-employed and are not employees of the company. This means that they can work on their own terms and are not constrained by the hours or days that the company requires of them.

Why become an independent contractor?

There are numerous reasons why someone might want to work as an independent contractor. 

This is a great option for people who enjoy variety in their work and lifestyle or dislike working within larger corporations’ corporate structures. It’s also a good option if you want to work full-time but can only work part-time due to other obligations.

Independent contractors can also work from anywhere in the world as long as they have access to the internet. People who want to travel or live in different places may find this to be an excellent option. Finally, it’s a good choice for people who want more control over their finances and how they spend their money. 

What are the distinctions between being an independent contractor and an employee?

Most people envision themselves as employees when they consider working for someone else. This is because the vast majority of workers in this country are employees. However, there is another option: working as an independent contractor.

So, what’s the distinction? Employees work regular hours for a single company and are paid a set salary, whereas independent contractors work for themselves. They set their own hours and bill clients for the services they provide.

Being an independent contractor has numerous advantages. For starters, you have more financial control. As an employee, your earnings are primarily determined by the number of hours you work and the amount your employer decides to pay you. However, as an independent contractor, you can set your rates and work however many hours you want.

That means if you’re good at what you do, you can make more money. It also allows you to select your clients and projects. You are not restricted to working for a single company, which can be a great way to diversify your portfolio and boost your motivation.

But what about taxes? 

This is a common concern among those considering the transition from employee to independent contractor. You should be aware of a few things, such as how long it takes to become an independent contractor and which income is taxable and non-taxable.

The IRS has a lot of information about independent contractors on its website. They also have a page explaining the distinctions between employees and independent contractors and important information on what constitutes an employer-employee relationship.

You will most likely be taxed as an independent contractor. Set aside money each month to cover your estimated taxes, which you can do when filing your annual tax return. If you have any questions, you can always contact your tax professional for assistance.

April - Independent Contractor VS an Employee - SAEWA

What are the risks of working as an independent contractor? 

You should be aware of some drawbacks to working as an independent contractor before making the switch. 

One disadvantage is that you will not have the same level of job security as someone who works for a corporation. If your client decides they no longer require your services, you may be out of work. You’ll also have to pay for your own health insurance and other benefits, which can be expensive. Here are a few more drawbacks to think about:

  • If you lose a client, it can be challenging to find new ones.
  • Your employer does not provide a consistent source of income. You will have to find clients and work for them on your own, which means you cannot rely on a single source of income.
  • You’ll have a lot more paperwork than usual when it comes time to prepare your tax return at the end of the year. Throughout the year, you must keep track of all expenses related to contracting work and deduct them from your taxable income. This can be a complicated process, so consult with an accountant if you’re unsure how to proceed.
  • Independent contractors do not have access to a 401k or other retirement savings plan. You will be responsible for saving money for retirement on your own.

Despite these drawbacks, there are numerous reasons why working as an independent contractor is a good idea.

For starters, you’ll be able to work on your own schedule. You can pick and choose which projects you want to work on and how many hours you want to work. This can be an excellent opportunity to gain greater control over your career and life. Working as an independent contractor can be a perfect way to supplement your income.

So, how do you go about becoming an independent contractor?

Let’s get more specific. It doesn’t have to be complicated––you can make it happen in less than a day! Here are the steps you should take:

  1. To begin, determine your area of expertise by reviewing your resume and list of previous job experiences that stand out as exceptional skills for whatever project or task you’re looking to do as an independent contractor.
  2. Second, research the business landscape to determine which companies or organizations require your specific skill set. Once you’ve identified a few leads, start reaching out to them and pitching yourself as an expert who can assist them in reaching their objectives.
  3. Finally, establish a professional online presence by developing a website and/or LinkedIn profile highlighting your skills, experience, and contact information. Make a note of any awards or recognitions you’ve received in your field.

Do I need to start my own business to work as an independent contractor?

You don’t have to start a business to work as an independent contractor.

However, if you decide that starting a business is the way to go, make it a small and manageable one. There are numerous online resources and support groups available to assist you in getting started.

The following are five methods for finding contract work:

  1. Contract job boards: Several websites list contract jobs. Indeed, Monster and UpWork are some popular job boards.
  2. Networking: Make contact with people in your industry or field who might be aware of freelance opportunities. Participate in industry events or form your own networking group.
  3. Social media: Platforms like LinkedIn and Twitter can be excellent resources for finding contract opportunities.
  4. Recruiters: Recruiters usually work with multiple companies and might know of something that would be a good fit for you or your skillset.
  5. Customer referrals: If you have built up strong relationships with customers, this may lead to an opportunity to refer you as a contractor to another company.

What is the best way to market myself as an independent contractor?

Marketing yourself is one of the most important things you can do as an independent contractor. 

This entails developing a solid personal brand as well as an online presence. You want prospective clients to see that you are trustworthy and knowledgeable in your field.

Some suggestions for self-promotion include:

  • Putting together a professional website or portfolio
  • Creating compelling social media profiles
  • Participating in industry-related online and offline communities
  • Creating content that showcases your expertise (blogging, writing articles, recording podcasts, etc.)

What are the advantages of working as an independent contractor?

There are numerous benefits to working as a contract worker and becoming your own boss, including:

  • No commuting: You don’t have to go into an office every day for work; contractors can set their schedules. They can choose when and where they work and how many hours they work.
  • Flexibility: As a contractor, you have complete control over your workload. If there is ever a time when you have too much or not enough work, you can make adjustments.
  • Variety: Contractors often have the opportunity to work on various projects and tasks. This can keep your work interesting and exciting.
  • Tax breaks: As an independent contractor, you can deduct a wide range of expenses from your taxes. Common examples include mileage, supplies, and subscriptions to online job search sites.
  • Higher rates: As an independent contractor, you may be able to charge more than a full-time employee because there is no company paying for benefits or providing accommodations such as sick days or vacation days.
  • Savings for retirement: Many contractors open their own retirement accounts and contribute a percentage of each paycheck. This can be an excellent way to save for the future.

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