Saving for retirement as a freelancer

Being your own boss implies much more expenses, responsibilities and discipline than working for a company. The freedom to choose the projects you prefer, having a flexible schedule and working from anywhere you like, are advantages you can only achieve as a freelance but they come with a price.

First, you need to have more structure and self-motivation, because as anemployee you just follow the organization´s rules, but as a self-employer, you have to inject yourself with enthusiasm, energy and motivation. Second, you have to take into consideration the cost of liberty:

• Personal expenses & business expenses. Not all the money will be for you. You’ll have to invest in equipment, possible rent of an office, stationery, the bill for electricity, etc.
• Taxes & deductions.You’ll pay plenty of taxes now. But, if you’re organized regarding your deductions, it’ll be fine. Don’t forget to consider your voluntary contribution to retirement saving.
• Medical & social security. To take care of your health, you’ll have to affiliate as a freelancer in your country’s system or hire an insurance of major medical expenses.
• Emergency saving. Always save for the periods when everybody is on vacations and you already know there won’t be enough projects for you. Also, if you plan ahead your own vacations, holidays and trips, this saving will be the ideal method to deal with your personal projects.

Someone working for a company will have the benefit of paid retirement or at least a good amount of money enough to open a store or little business. A freelancer, however, do not know about utilities, savings and retirement. Therefore, in the absence of these privileges, and independent worker must allocate a certain part of their income to hire, minimum, a savings fund.

For example, in Mexico, the National Commission for the Savings System for Retirement (Consar by its acronym in Spanish) revealed that in the first couple of months of 2018 a total of 3,188 independent workers opened a savings account in a Retirement Fund Administrator (Afore), more than double the number of registrations in the same months of last year. At the end of February, the number of freelancers with an Afore account were 292,462 (8.41% increase). Nevertheless, it is interesting to know that despite the growing trend that this segment represents, it is still only 0.49% of the total accounts in the Retirement Savings System (SA), which amounted 60.1 million at the end of that month. This data shows that there isn’t enough culture of savings among freelancers, a truly necessary step to successfully perform as one.

If you are a freelance translator, don’t wait more and start saving now!