Despite financial literacy finally reaching the curriculum, those already in the working world are the most disadvantaged in financial matters.
According to theHRD, freelancing will define the future of work. As the number of people freelancing continues to rise year-on-year, we wondered just why the industry is so attractive.
A recent survey found that 71% of UK Gen Z are planning to, or already, freelance, as they highlight flexible working hours as their top priority. 38% of that figure view freelancing as an excellent way to make money during rising inflation, yet we are currently witnessing freelancers increasing their transparency around the cons of self-employment.
Katie Mortimer spoke with freelancers Amy Bennett and Hannah Lodge to discuss some frequently asked questions.
Amy, a wedding photographer based in Warwickshire, has been in her role for almost ten years and noted the impact of COVID-19 and the cost-of-living crisis as damaging to her experiences as a freelancer:
“Something we [photographers] have noticed is that, because of the cost-of-living crisis and covid-19, people are scared to book because of the uncertainty of it not happening.”
Hannah, a personal trainer and dance fitness instructor, also struggles with the often-ignored negatives of freelancing, stating that the role can be stressful:
“It’s hard not having a fixed income. It puts a lot of pressure on yourself, and it makes it quite hard to ‘switch off’.”
Both freelancers get paid through internet banking, meaning invoicing is at the top of their priorities. While deciding your terms has benefits, Amy states that sporadic payments can mess up cash flow. Similarly, as both roles are relatively seasonal and vary from month-to-month, they’ve noticed that careful consideration must be given to money management throughout the year.
“It messes up your tax year if people pay ahead,” says Amy. Whereas for Hannah, chasing payments leads to problems: “When people don’t turn up and want a refund, I have to explain that I could’ve filled that space and earned money if I’d have had notice. It’s a little bit awkward. I think sometimes people forget that this isn’t a hobby; it’s my livelihood.”
The solitary nature of freelancing is becoming more notable, with 65% of freelancers saying that they regularly felt lonely. Amy and Hannah mentioned isolation alongside difficulty switching off and finding a balance. “It can feel quite lonely not having a manager, colleagues, co-workers etc. When you’re struggling, there’s no one to share the workload or ask advice either,” says Hannah.
As control and flexibility become more sought requirements within a role, it’s supplemented the economic uncertainty we find ourselves in. But just what are the government doing to combat this?
“I think, in general, the government probably could do better to support small businesses and self-employed people,” says Amy. The need for government-backed advice couldn’t be more apparent, adds Hannah: “It’s so stressful when you’re poorly. You lose a big percentage of your income by having a day off. I had the flu a couple of weeks ago, and I lost so much money, which brought me to tears and caused me a lot of anxiety.”
But this isn’t the only concern. Questions around mortgages and pension contributions are still a significant issue for self-employed people.
“Getting a mortgage as a self-employed freelancer – it has its hurdles. It’s doable, but you do have to jump through hoops. It’s really good if you get a mortgage advisor that specialises in helping self-employed people, “ says Amy. Hannah adds that there are differences between self-employed and employed people when applying for a mortgage: “I had to provide 3-years-worth of my accounts in order to get a mortgage when employed people only have to show 3 months.”
For Amy, a mother of two, the difficulty of the process was amplified when her maternity leave was taken into consideration when previously applying for her mortgage: “I feel like with my current situation, I wouldn’t be considered for a mortgage because it would take into consideration my covid tax years and maternity leave.”
For Hannah, the ambiguity and unclear discourse surrounding taxes also threaten her ability to handle finances as a freelancer. “I employ an accountant because I work so many hours. I am also so nervous about making a mistake and getting a fine for doing it incorrectly,” she says.
Despite both freelancers being well-equipped with the self-employed world, pensions are still out of the picture, with the status of freelance pensions still unclear. “It’s one of those annoying things about being self-employed. You’re entitled to a state pension, but it would be difficult to live off of this alone,” says Amy. “If I’m honest, I have no idea [about pensions]. I really should look into this, but I have no idea who to ask for help?” adds Hannah.
As the media continues highlighting the pros of freelancing, we urge you to weigh up the cons, too, ensuring that you’ve spoken with the appropriate advisors.
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