How to Become a (Financially Prepared) Freelancer in Singapore

It will take 3 months for you to break even as a freelancer in Singapore. Make these financial preparations before you start.

Freelancing is a dream if done right. You can work from where you want, when you want. You can pick your bosses, and in some cases you earn more than you would as a regular employee.

The trouble is getting started. Freelancing poses massive challenges that are hard to prepare for, both financially and mentally.

If you want to go down this road, make these financial preparations first:

1. Save Enough Money to Sustain Losses for 3 Months

Most freelancers will take at least three months to start breaking even. There are a few exceptions to this rule, but you should never count on being one of them.

Even if you previously worked in your industry for 10 or 15 years, or have promises of jobs, never count on them to see your through the first three months.

You should have enough to cover the following expenses, assuming you earn no income:

• Basic food and lodging (if you don’t live with your parents)
• Enough to cover operating expenses (e.g. If you are a freelance photographer and you rent the equipment, you must have enough set aside to take on new projects)
• Travel expenses
• Enough to pay insurance premiums and any outstanding bills

If you cannot pay for all these for at least three months, save up before trying to go freelance.

See Also: How to Save Money for a Flat Before Your 35th Birthday

2. Save Enough Money for Rent or Starting Equipment

Do not assume your client will provide the necessary equipment, or even know what the required equipment is. Your client may not have the right software for the app they want you to develop, or the right sound system for their events.

Of course, you can choose to turn down any client who does not have the equipment on hand, or that refuses to pay for it. But you could have precious few opportunities at the beginning, and you will need at least one or two successful projects for your portfolio. Also, it looks more professional if you turn up with the right equipment.

It’s your call, but if you can save up for it, we suggest you get your own tools. You’ll be using them for a long time anyway.

On a related note: do not buy or rent the equipment with a credit card. The high interest rate is not affordable, at a time when you will be cash strapped.

Instead, look for the cheapest personal instalment loan you can find - something at 6% per annum or under, like the HSBC Personal Loan. Unlike a credit card, you can repay a personal loan in monthly installments, which make them easy to budget for.

3. Decide if an Office is Needed, and Save Money for Those Costs

This is not about whether you “can work” without an office. Most people can. The problem is that some clients will not hire freelancers without a registered business address.

If you want to provide SEO services for an ecommerce company, they may frown on your lack of a business address. Some accounting departments dislike mailing cheques to private home addresses (it can raise questions during audits). It’s also presentable to have a proper business address to put on your name card.

This doesn’t mean you need to book a $10,000 a month unit at Suntec City. You can go for cheaper options, such as open office spaces (e.g. The Hub, The Working Capitol). Factor in the costs in your budget, and save up for it.

4. Save Enough Money for Marketing

At the most basic level, you will want enough money to register a domain. You may be faced with other costs, such as images (unless every picture on your website is going to be a free stock photo), printing costs for flyers and name cards, and advertising methods.

Work out your marketing strategy before budgeting for it. Do not be haphazard, and buy ad space or give out promotions when the whim takes you.

5. Save Enough Money to Survive Late Payments

Some clients will exhibit the nasty tendency to pay you late. Don’t be surprised if you end up chasing a big company for a year, for a payment that was due in 90 days.

Even if you want to go to the authorities, you will face a lengthy time lag. Unlike a regular employee, the Ministry of Manpower will not enforce your payment. You will have to face non-paying clients in a small claims court, which will take time.

Alternatively, you may have to resort to factoring, or selling accounts receivables. This is when you approach a factoring company to sell your client’s bill.

For example, if your client owes you S$10,000 and pays late, you can sell this account receivable to a factoring agency. The agency will take over chasing payment from then on, but immediately pay you a smaller amount - say S$8,000.

Factoring speeds up repayment, but you will lose about 20% - 30% in the process. You will also need proper invoicing and legal paperwork to do this; a client’s verbal agreement to pay you is worthless.

6. Save Enough Money to Get Proper Contracts Drafted

Some clients will ask that you sign a contract (if you sign their contract, it will often be in their favour). But sometimes you are asked to offer them a contract instead, or want different terms.

This leaves you with two options: the first is to get a template document off the Internet. This can be playing with fire, if you don’t understand the terms and conditions in it. It is free, however.

The other alternative is to pay a lawyer to draft the contracts for you - costs can range from $150 to over $300, depending on what’s involved.

In addition to legal concerns, remember that appearing professional is part of being a freelancer. You should be able to offer a contract when asked.

can pile up. These can partially fund your future trips.

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