Money Management

It’s important to approach this life change in a sensible way. 

New year, new you, right? If 2023 is the year you’re finally ready to quit your salaried job to become your own boss, congratulations! This is a huge step, and could result in greater happiness with your working life. However, quitting your “sure thing” job for uncertain income potential as a freelancer can be dangerous, depending on your circumstances and how prepared you are ahead of time.

To that end, make sure you accomplish the following tasks to set yourself up for financial success as a freelancer — and get the most value from your transition away from being someone else’s employee.

1. Save some cushion money

One of the hallmarks of being a freelancer is no longer having a predictable amount of money coming in. This can be good (you’ll be paid more for doing more work) or bad (if it’s a slow period for your clients, you’ll get paid less). But if you’re going freelance, you’ll have to get used to this uncertainty. Luckily, you can plan for it by boosting your savings account ahead of quitting your salaried job.

Sit down with your budget and figure out your non-negotiable monthly expenses. Having a three- to six-month emergency fund is the commonly held wisdom, but during a career change, you may want even more. Starting a new life is stressful enough without worrying about paying your bills at the same time, especially if your freelance work is slow to ramp up.

2. Whip your finances into shape overall, if you can

On a related note, it’s a good idea to get your finances in the best shape you can before you lose the safety net of steady income. This means paying down high-interest debt (such as credit card debt) and picking through your credit report to ensure there are no errors or discrepancies.

Remember, you may be facing more hoops to jump through if you’re hoping to get a mortgage loan or finance a car as a freelancer, due to having a variable income and no traditional employer. So if a home purchase is in your future, you want your credit score to be in good shape to help you get that lender approval.

3. Plan for taxes

Freelance life comes with many benefits — and a few potential challenges. You’ll have to stay on top of your taxes in the form of quarterly estimated payments you’ll make to the IRS (and your state, unless you live in a state without income taxes). If you miss these, you’ll be assessed a penalty, and not paying your taxes is a terrible idea anyway.

So mark your calendar (in 2023, the dates you need to know are April 18, June 15, and September 15, and taxes on Q4 for 2023 are due Jan. 15, 2024). You might also consider working with an accountant, as figuring out what you need to pay and what you can deduct will be more complicated than when you were a W-2 employee.

4. Use your insurance benefits one last time

Another drawback of going freelance is that you’ll be losing that sweet employer-subsidized health insurance. If you’re going to be joining a spouse’s plan, this tip may not be as crucial for you, but if you’re going to be self-funding your health insurance, make sure you get in for last-minute appointments under the plan you’re leaving.

For example, if you have vision insurance through your W-2 employer, get in for an eye exam and consider picking up a new pair of glasses while you can still get a good deal on them.

5. Get your 401(k) match — and roll it over

While freelancers have options to save for retirement, if you’ve been working for someone else, you may have a 401(k) account through that employer. Before you leave your job, make sure you have a plan for that account, such as rolling it over into a new IRA account. And if you can contribute enough to the 401(k) to get the full employer match on your money, do it. Why leave free money on the table?

As you can see, there’s a lot to think about when it comes to freelance finances and wrapping up your employee days. Take a deep breath, make a to-do list featuring the items above, and good luck. You got this.

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It may be time to pursue a different gig. 

There’s a reason side hustles have become a popular thing in recent years. Working a second job could make it possible to meet a host of financial goals, whether it’s building savings, paying off credit cards, or having funds to put down on a home.

But just because you have a side hustle doesn’t mean it’s the right one for you. In fact, now that a new year has kicked off, it may be time to abandon your current gig and find yourself a new one. And you can run through these questions to see if that makes sense.

1. Am I enjoying the work?

It’s one thing to sit through boring meetings at your main job and spend hours poring over the same old data to bring home a steady paycheck and snag benefits like health insurance. But your side gig shouldn’t be boring and miserable.

Remember, you’re giving up downtime to take on that extra work, and you’re going beyond a regular workweek. So the work you do on the side should be somewhat fulfilling. Or, at the very least, you shouldn’t hate it. If you do, it’s probably time to make a change.

2. Is the gig as flexible as I need it to be?

Some side hustles are more flexible than others. If you’re tired of having to commit to a preset schedule, then it may be time to pursue a gig that allows you to set your own hours and work at your own pace.

Let’s say your current side hustle has you waiting tables at a local restaurant every Tuesday, Wednesday, and Thursday night from 6:00 p.m. to midnight. That means you can’t say yes to social plans those nights, and you can’t schedule medical appointments or run errands during those times.

You may be able to deal with that. But if it’s becoming a problem, you can try to find a gig whose hours aren’t preset, like driving for a ride-hailing company or doing content editing or writing from home.

3. Am I happy with my earnings?

If you’re going to be giving up what could be hours of free time every week, then it should be worth your while. And if you’re not happy with your side hustle earnings, then that’s reason enough to go after a more lucrative gig.

Before you ditch your side hustle due to dissatisfaction with your earnings, though, ask yourself whether it’s possible to make it more profitable. You may, for example, be able to raise your rates or employ different tricks to get more efficient at the job at hand. But if you don’t see your earnings budging, then it pays to look for a gig that will put more cash in your pocket.

Working a side hustle means making sacrifices. So it’s important to land on a gig you find interesting, reasonably lucrative, and easy enough to fit into your schedule. If your current side hustle doesn’t fit that bill, then it may be time to go out and explore different opportunities.

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You’re not doomed to financial failure if you ditch your budget this year. 

The start of a new year is a great time to form positive financial habits. And that’s why people are often advised to set up a budget and start following one, or to update an existing budget and give it a refresh.

That’s certainly not bad advice. But it may not work for you. And if you decide to ditch your budget in 2023, you’re not necessarily resigning yourself to financial ruin.

Why budgeting doesn’t always work

The concept of a budget is simple. Figure out what you spend money on each month and how much you spend, and then compare your total spending to your take-home pay. If those numbers don’t seem to play nice with each other, it’s a sign that you should cut your spending or eliminate certain expense categories.

But there are several problems with budgeting you might encounter. For one thing, it can be time-consuming, and also, let’s face it — a little boring.

Plus, it’s not as if budgeting is a one-time thing you do. Rather, you’re supposed to set up a budget but then check in every month to make sure you’re following it. That can get cumbersome.

Another issue with budgeting? Sometimes, bills can fluctuate, and that can be hard to account for. Many consumers, for example, saw their food costs rise in 2022 as inflation reared its ugly head.

So, let’s say you’ve budgeted $500 a month for food, only due to a factor outside your control, like inflation, that isn’t enough to fully feed your family. Should you feel bad about going over budget? That would be a firm “no.” You need to eat, and sometimes, all of the coupon-clipping in the world won’t be enough to bring your food costs down.

Also, budgeting can feel like you’re backed into a wall. Say you have $100 a month budgeted for entertainment but you really want to see a concert that will cost you $120 for a pair of tickets. Suddenly, you have to scramble to free up $20 from another expense category. That can add an element of stress to your plate — and make you feel like you shouldn’t treat yourself to a show you’ll really enjoy.

That’s why budgeting isn’t the right solution for everyone. And if you’ve tried it before and failed at it, you may want to try a different tactic in 2023.

Automate your savings instead

The main purpose of a budget is to give you a sense of where your money goes so you can meet your financial goals. But it may be possible to do that with having to refer to a spreadsheet all the time.

Let’s say your goal is to add $6,000 to your savings account in 2023. If you arrange for $500 to leave your checking account at the start of each month and land in your savings account automatically, you can meet that goal. And if you can do so while managing to cover your remaining expenses (essential and otherwise) without racking up debt, then maybe you don’t need to stress over the smaller details of a budget, and maybe you don’t have to grapple with feelings of guilt because you spent $542 on groceries one month instead of the $500 you were hoping to spend.

Budgeting should improve your financial picture. But it’s not your only option for doing so. And if it just doesn’t work for you, there are other routes you can take to work toward your financial goals and objectives.

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Another stimulus check may be out of reach after this Biden tweet. 

Anyone who is hoping for more stimulus money in their bank account may be eagerly watching for news from President Joe Biden that could suggest an additional payment is on the way.

In fact, earlier this month, Biden tweeted out that there was more work to do, which gave hope to some that he would push for an expanded Child Tax Credit that would offer more financial relief to parents.

One of the president’s more recent tweets, however, shared some good news — but it also dampened the prospects of any type of stimulus check in 2023. Here’s why.

Why this tweet from Biden means more stimulus isn’t likely

Biden recently sent out a tweet touting the success of his economic plan — and sharing an important milestone.

“My economic plan has always been to grow our economy from the bottom up and the middle out,” the tweet said. “Today we learned that unemployment is at a 50-year low after the two strongest years of job growth ever.”

This is great news that more people are back in the workforce and earning a paycheck again — especially after the COVID-19 pandemic sent jobless rates skyrocketing when the economy was shut down and businesses could not operate.

However, with the president touting the great economy and the fact that many people are back to work, there’s not much justification for an additional stimulus check. Direct payments are necessary to improve the economy when things are going badly, and if all is going well as Biden’s tweet indicates, there’s very unlikely to be bipartisan support for more financial help.

Does this mean a stimulus check is off the table?

Although the president’s tweet isn’t encouraging to those wishing for more stimulus relief, it does not necessarily mean there’s no chance of additional payments coming in 2023 or beyond.

Many experts are predicting the country will enter a recession. If that happens, then things could turn around quickly in Washington, D.C. Both Republican and Democratic presidents have authorized stimulus payments during times of economic slowdown and it’s possible that could happen again if the economy goes south.

Biden also campaigned on the idea of providing more help for families, and an expanded Child Tax Credit has long been a priority for Democrats. In fact, those on the left tried to include an expanded credit in the proposed Build Back Better legislation that Biden aimed to get passed during much of the first two years of his term. And some Republicans have also voiced their support for expanding this credit, albeit in different ways.

Since there are few areas of agreement, it’s still possible lawmakers will come together to try to work out a deal that would result in parents getting more financial support even if others don’t.

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The type of life insurance a person has can make a big difference. 

My husband has had a large life insurance policy in place since we got married. I will receive the death benefit if something happens. Since the policy provides for $1 million in coverage, I have the peace of mind of knowing that our family, including our children, will be taken care of financially in the event of tragedy.

Despite the fact that I appreciate my husband’s efforts to make sure our family is provided for, I’m not actually thrilled with the coverage he has. And there’s a very important reason why that is the case.

This is why I don’t like my husband’s life insurance policy

The big reason why I don’t like my husband’s life insurance policy is because of the kind of policy he selected. Specifically, he has a whole life policy. A whole life policy provides coverage indefinitely, as opposed to a term life policy that offers coverage for a limited period of time such as 20 years or 30 years.

My husband did not purchase a whole life policy because we have a need for lifetime coverage. We don’t, as we are saving diligently for retirement and for our kids’ education, and someday no one will be depending on his income and we will have all of our debts paid down so a death benefit won’t be necessary to help our family out far into the future. If we did need ongoing support, then it would be a different story as whole life policies can make sense in this situation.

Instead, my husband bought the whole life policy because he believes doing so is a good way to invest. Whole life policies do have an investment component, and some of the money can be accessed tax free, so he thinks that buying whole life coverage is a good way to be prepared for retirement.

The issue is, though, that I know whole life policies are much more expensive than term life coverage — and that it’s typically possible to get a better return on investment from other investments rather than life insurance.

We end up paying a lot more money for his whole life policy than we would if he had a comparable term life policy that offered the same death benefit but paid out only if he dies at a younger age when we need the money. And we’ll end up with less cash over time than if he bought the cheaper term life policy and invested the difference.

Unfortunately, my husband won’t be convinced of the downsides of his policy and it’s not worth a big money fight since we tend to be on the same page about a lot of other financial decisions.

Buying the right type of insurance offers protection with affordable premiums

Ultimately, it’s important to have life insurance protection in place. Buying the right type of coverage that makes sense is ideal, but it can be better to have the “wrong” coverage rather than none at all, which could create a disaster for loved ones.

Still, a term life policy is the better option for most people due to the lower costs. Anyone who is thinking about whole life insurance should be sure to consider the downsides before making their choice.

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Like a dating profile, your home’s listing should focus on the best things about it. 

It’s too soon to tell what kind of housing market we’ll be looking at overall this year. 2022 rapidly got worse for buyers, as inventory remained low and mortgage loan interest rates ended up more than doubling between the beginning and the end of the year. And that interest rate spike negatively impacted sellers too. It was bad enough that home prices were elevated thanks to low inventory, higher prices, and lots of competition, but tacking on a mortgage rate of more than 6% was a bridge too far for many potential buyers.

The biggest housing buzzwords of 2022

If you’re looking at selling your home this year and wondering how best to market it in these conditions, we’ve got you covered. Point2 recently released a report on the biggest housing buzzwords of 2022, and there’s a lot of great takeaways for home sellers. Vague descriptions of a home for sale no longer cut it, as digital home shopping has taken over and potential buyers want to view a comprehensive listing before they take the time to see your home in person.

If your home has any of these features, it could work to your advantage to offer detailed descriptions and clear photos of them when you work with your real estate agent to craft your listing.

Patio/porch

Outdoor spaces where you can entertain or just hang out with your family initially gained great importance during the early stages of the COVID-19 pandemic, and as we still cope with the virus, they retain that popularity.

Yard

Got a great front or backyard at home? Consider spending some money on improving your landscaping and make sure your home’s photos include shots of it. Investing in your yard could also net you potential buyers who are just out walking or driving around your neighborhood — curb appeal is everything.

Storage

“Storage” appears on the list both as itself and in the form of the next two sections, so it might pay to really emphasize whatever storage space your home has. Buyers crave space to keep their stuff. For example, my current rental is lacking in decent closets, and when I start looking for a home to buy, I’ll be looking for homes that have a coat closet, linen closet, and perhaps a walk-in closet in at least one bedroom.

Walk-in closet

Yes, “walk-in closet” specifically is on the list of top buzzwords, so if you’ve got them, definitely include photos. If you’ve made improvements to closet spaces (such as by adding built-in organization systems), this will certainly be attractive to buyers as well.

Garage

“Parking” was a major buzzword for condo listings, and for houses, buyers were seeking garages. It makes sense — a garage can represent extra storage for your belongings as well as a place to keep your car out of the weather.

Fireplace

Some home features just never go out of style, and on a cold winter’s day, there’s nothing better than cozying up in front of a fireplace. While this may only be considered a “nice-to-have” feature, rather than a “must have,” if your home has it, make sure potential buyers know about it.

Hardwood floors

Finally, buyers are looking for homes with floors that are easy to clean and care for, and for many people, hardwood fits the bill, especially if you have pets or kids. Carpet gets stained and worn out, and for people with allergies, it can be an absolute nightmare, as it holds onto allergens. If you’ve got beautiful hardwood floors in your home, include a mention of them.

You may be feeling pessimistic about your chances of selling your home for a good price in 2023, but don’t lose hope. While you may not be able to command the inflated sale prices of 2020 or 2021, if you price your home fairly, ensure it’s in good condition, and work with the right real estate agent to create a compelling listing, you’ll be positioned for home-selling success this year.

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