Ask HN: Achieving financial freedom through freelancing
10 comments
Financial independence comes down to simply earning as much money as you can while spending as little as possible.
As to how to earn the most money you can, I think that depends a lot on your personal circumstances. But if freelancing hasn't worked out for you then I guess the other options are to get a permanent job or to start your own business. Its impossible for me to say which one is the best option for you though.
As to how to earn the most money you can, I think that depends a lot on your personal circumstances. But if freelancing hasn't worked out for you then I guess the other options are to get a permanent job or to start your own business. Its impossible for me to say which one is the best option for you though.
Define financial freedom. To me, that is the point where I can choose to no longer work and retire. Some call it your FIRE number, and there is a whole subreddit on it. I wouldn't expect that in 7 years of anything. I'd have to pocket, after expenses, like $800k a year to achieve financial freedom in 7 years. Another interpretation of financial freedom is escaping living from paycheck to paycheck. That can be hard, but requires that you pay yourself first and make more than you need. Over time, you have a warchest to smooth out bumps.
I would say to achieve financial freedom, it's necessary to control your finance. You should be responsible for all your spendings and maybe have some special notebook to write down the incomes and spendings to understand how much you could spend and for what. If you can't deal with your finance there is no matter how you are working freelance or at office.
Freelancing does seem to be feast or famine. A lot of it is your network and happening to connect with the right person at the right time to get good projects.
For financial freedom in freelancing you need a long run of really good connections and projects. Even then you need to keep that pipeline full/moving.
I think the key is finding a way to sell products/training and/or a SaaS or productized service. You're really only going to be free when you aren't depending on a handful of clients for your lively hood.
So I would spend 80% of your time on client projects and 20% on your own info products, productized service/SaaS.
I'm just starting doing this myself 80/20. It's always a challenge to keep your own products moving forward. So hopefully setting aside 20% to really focus on my own SaaS will allow me to get this launched in 2020.
Here's some inspiration:
DHH Startup School https://www.youtube.com/watch?v=0CDXJ6bMkMY
https://www.indiehackers.com/podcast/098-adam-wathan-of-refa...
https://www.startupsfortherestofus.com/archives
https://saas.transistor.fm/
I know success stories are probably few and far between but this is doable. Having revenue coming in that isn't tied to the hours you work is a game changer.
Right now you have to sell your time for money, but build something that earns you money while you sleep.
Charge for hosting and maintenance, automate something valuable to your clients. Sell info products/courses. Create a SaaS.
Check out Rob Walling's stair step approach, in startupsfortherestofus.com
Good luck in 2020.
For financial freedom in freelancing you need a long run of really good connections and projects. Even then you need to keep that pipeline full/moving.
I think the key is finding a way to sell products/training and/or a SaaS or productized service. You're really only going to be free when you aren't depending on a handful of clients for your lively hood.
So I would spend 80% of your time on client projects and 20% on your own info products, productized service/SaaS.
I'm just starting doing this myself 80/20. It's always a challenge to keep your own products moving forward. So hopefully setting aside 20% to really focus on my own SaaS will allow me to get this launched in 2020.
Here's some inspiration:
DHH Startup School https://www.youtube.com/watch?v=0CDXJ6bMkMY
https://www.indiehackers.com/podcast/098-adam-wathan-of-refa...
https://www.startupsfortherestofus.com/archives
https://saas.transistor.fm/
I know success stories are probably few and far between but this is doable. Having revenue coming in that isn't tied to the hours you work is a game changer.
Right now you have to sell your time for money, but build something that earns you money while you sleep.
Charge for hosting and maintenance, automate something valuable to your clients. Sell info products/courses. Create a SaaS.
Check out Rob Walling's stair step approach, in startupsfortherestofus.com
Good luck in 2020.
One day a week is an awesome idea. I've been trying to work on one of my projects more often, and I think I'll start giving this a shot.
I think freelancing can be a good way to achieve financial freedom and I'm considering doubling down on this approach. However I think an essential element is using geographical arbitrage. So while continue working for western wages you move to a country with a low cost of living. If I want to work in Europe I might consider Egypt or Morocco, or if time differences aren't a problem, probably SE Asia. Achieving FI through work requires you to be really thrifty, I think you should be saving 60-80% of your income to reach FI in a reasonable timeframe. [1]
The other thing is that I think you should look at more advantageous tax setups. Look into flag theory. With it you can reduce your tax substantially. In Sweden, where I live, I have to pay about 50% of what I invoice in taxes. So by not paying taxes and keeping living expenses the same I would automatically save 50% of my income.
For me personally, I "like" paying taxes, so I probably wouldn't be looking at the most extreme setups. What I would consider is running my business through an Estonian company as a way to defer taxes. In Estonia the company tax is 0% on profits you leave in the company and reinvest, on profits that you take out as dividend the company has to pay a 20% tax. So you can say that the company tax is deferred and instead of paying it the same year as earning the money, you pay the tax when you take the money out of the company. I would take out as little money as possible from the company keeping most of the money in the company, un-taxed. Investing money pre-tax compared to post-tax makes a huge difference on return. Once I had built up enough invested capital in the company I would over time stop working and take out the profits from my investments as dividend. Then I would of course have to pay taxes, but at that point I think it's something that I can afford. So it's more of a tax deference scheme than a tax planning scheme. Also, an Estonian company is super easy to setup, and to many it doesn't feel as shady as BVI, Cayman or UAE.
Of course, IANAL, and this is stuff I read on the internet from people that may be just as misinformed as me, and which country you're a citizen of plays a huge role. For example, for a Swede it's very important to found the Estonian company after moving out of the country, otherwise you could have to pay taxes to Sweden on all dividend from the Estonian company for the next 10 years, no matter where you live.
[1] https://networthify.com/calculator/earlyretirement?income=50...
The other thing is that I think you should look at more advantageous tax setups. Look into flag theory. With it you can reduce your tax substantially. In Sweden, where I live, I have to pay about 50% of what I invoice in taxes. So by not paying taxes and keeping living expenses the same I would automatically save 50% of my income.
For me personally, I "like" paying taxes, so I probably wouldn't be looking at the most extreme setups. What I would consider is running my business through an Estonian company as a way to defer taxes. In Estonia the company tax is 0% on profits you leave in the company and reinvest, on profits that you take out as dividend the company has to pay a 20% tax. So you can say that the company tax is deferred and instead of paying it the same year as earning the money, you pay the tax when you take the money out of the company. I would take out as little money as possible from the company keeping most of the money in the company, un-taxed. Investing money pre-tax compared to post-tax makes a huge difference on return. Once I had built up enough invested capital in the company I would over time stop working and take out the profits from my investments as dividend. Then I would of course have to pay taxes, but at that point I think it's something that I can afford. So it's more of a tax deference scheme than a tax planning scheme. Also, an Estonian company is super easy to setup, and to many it doesn't feel as shady as BVI, Cayman or UAE.
Of course, IANAL, and this is stuff I read on the internet from people that may be just as misinformed as me, and which country you're a citizen of plays a huge role. For example, for a Swede it's very important to found the Estonian company after moving out of the country, otherwise you could have to pay taxes to Sweden on all dividend from the Estonian company for the next 10 years, no matter where you live.
[1] https://networthify.com/calculator/earlyretirement?income=50...
Though, even for a company you do pay taxes where you spend most of the time. So if your main presence is in Sweden you would pay taxes in Sweden. On the other hand, if your main presence is in estonia you would pay taxes there, irrespective of whether it is a Estonian company or a Swedish company.
You're right that my answer is incomplete. In these matters the devil is truly in the details. And my answer to your point is: yes, but it depends. And you have to look up the local tax laws to see if the company could be said to have a presence in your country of habitation. And whether that presence comes with any taxes.
In Sweden there are specific criteria that have to be met in order for the company's income to be taxable in Sweden. So if you don't meet those criteria you shouldn't have a problem. Those criteria are quite narrow, so this setup would not work in Sweden.
In Sweden there are specific criteria that have to be met in order for the company's income to be taxable in Sweden. So if you don't meet those criteria you shouldn't have a problem. Those criteria are quite narrow, so this setup would not work in Sweden.
Is there a good way to earn good amount and achieve financial freedom?