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How to Make a Retirement Budget So You Don’t Outlive Your Savings

You’ve spent decades in the workforce earning a living, your schedule dictated by the demands of the job. All the while, you’ve been steadily adding to your savings so that one day you could get to this point. Retirement.

Now, there’s no alarm to wake you up in the mornings and no boss to answer to. You can finally get around to crossing items off your bucket list — or simply have the opportunity to catch a midweek matinee movie.

The world is your oyster.

Life may feel more relaxed and carefree, but that doesn’t mean you no longer have financial responsibilities. In fact, now’s the time you might need to be even more diligent about budgeting your money.

Living on What You Have Saved

When you say goodbye to your 9-to-5, you also say goodbye to your regular paycheck. You’ll rely on Social Security benefits, the money in your retirement accounts and any additional income, like a pension, to cover your expenses.

Sticking to a budget is vital so your retirement savings last. That money you’ve squirreled away in your working years has to stretch for decades. Remember, life on a fixed income means there are no bonuses, overtime or promotions to increase your cash flow.

How Much Should You Have Saved?

If you’re already retired or nearing retirement age, hopefully you’ve done the math to determine whether you’ll have enough money to keep you afloat.

One popular rule of thumb is to have 25 times your average annual expenses saved up. But how much money you need in retirement depends on many factors, like your age, where you live and the type of retirement you want to enjoy.

If you want to retire at 60, rent a highrise in New York City and travel every couple of months, you’ll need considerably more money than a retiree who leaves the workforce at 70, lives in a paid-off home in rural North Dakota and just stays home and knits.

There are also a lot of unknowns in retirement — like what medical conditions you could develop and exactly how many years you’ll need your money to stretch.

That’s why it’s important to have robust retirement savings and be cognizant of your spending in your golden years.

How to Make the Most of Your Nest Egg

To make your savings last, you’ve got to be prudent about how much you withdraw each year.

“The gold standard has always been 4%, but new research has revealed a different number,” said Chuck Czajka, a certified estate planner and owner of Macro Money Concepts in Stuart, Florida.

He said withdrawing 3% a year instead gives you a 90% success rate to last through a 25-year retirement.

Keep in mind, once you’ve determined how much you can withdraw per year, you’ll want to divide that amount by 12 to come up with how much to withdraw each month. Czajka recommends withdrawing money from your retirement accounts on a monthly basis rather than taking out all you’d need for a whole year.

Meeting with a financial adviser can help you come up with a personalized plan to fit your individual situation.

“As people approach retirement, they should work with a retirement professional to determine their expected retirement income,” said Lisa Bamburg, a registered investment adviser and owner of Insurance Advantage in Jacksonville, Arkansas.

Two grandmothers dress in funky classes and brightly colored shirts.
Getty Images

Factoring in Income Beyond Your Savings

In addition to the money you’ve saved in your 401(k), individual retirement account (IRA) or other investment accounts, a portion of your retirement income will come from Social Security benefits.

You can start collecting Social Security benefits as early as age 62, but you’ll receive less money per month than if you waited until full retirement age — 66 or 67, depending on when you were born.

If you delay claiming Social Security benefits past your full retirement age, you’ll receive even more each month. However, there’s no additional increase once you’ve reached age 70.

Pro Tip

This calculator from the Social Security Administration gives you a rough idea of your retirement benefits. This retirement estimator is more accurate but requires plugging in your personal info.

In addition to Social Security, you might have other sources of retirement income, like money from a pension plan or an annuity.

A report from the National Institute on Retirement Security found that many retirees don’t have a great diversity in their retirement income, though more income sources provide for a more secure retirement.

The report found less than 7% of older Americans have retirement income that’s made up of a combination of Social Security, a pension plan and a retirement contribution plan like a 401(k). About 40% rely on Social Security alone.

“Social Security benefits typically are not the equivalent of what it takes for most people to maintain their standard of living,” Bamburg said.

The Social Security Administration states its retirement benefits only replace about 40% of earnings for people with average wages — more for low-income workers and less for those in higher income brackets.

How to Create a Retirement Budget

Once you determine what your retirement income will be, it’s time to make your retirement budget.

If you’ve already been budgeting, you’re off to a great start, though your new budget will likely differ from that of your working days.

Take Stock of Your Essential Expenses

First you’ve got to get an overall look at your current spending. If you don’t already have a budget or track your spending, pull out the past several months of bank or credit card statements. Dig up old receipts if you tend to pay in cash.

Reviewing the past three months will help you find what you spend on average, but an even deeper dive — looking at the last six to 12 months — will give you a more accurate picture and will reveal things like your annual car insurance bill and holiday spending.

Group your spending into categories to get a good picture of where your money’s going. You’ll have fixed expenses, like your mortgage, where the cost stays the same each month. Other expenses, like groceries or utilities, will vary. For those, you should calculate your average monthly spend.

Account for Changes

After leaving the workforce, you’ll probably notice some differences in your spending. You’ll no longer have to pay for downtown parking near the office, dry cleaning your suits or pricey lunches with coworkers. Your monthly retirement contributions will be a thing of the past.

However, not everything will be budget cuts. You’ll have to account for new retirement expenses, like health care premiums your employer previously covered. If you’re 65, you can get health insurance through Medicare, but it’s likely you’ll have increased out-of-pocket medical costs as you age.

And of course, now that you have an influx in free time, you can pursue the things you’ve always wanted to do — which means more new expenses.

A group of retired women have fun.
Getty Images

Make Room for Fun in Your Retirement Budget

A big part of retirement planning is determining what type of lifestyle you want to have when you’re no longer at work 40 hours a week.

Do you want to travel? Spend more time with your grandkids? Explore a new hobby? After you’ve covered your essential expenses, how you spend what’s left in your budget is totally up to you.

Don’t forget to include run-of-the-mill discretionary expenses, like cable, magazine subscriptions and dining out. It won’t all be cruise ships and Broadway plays.

If you’re married, be sure to share your vision for retirement with your partner, so you’re both on the same page about how you’ll spend your time and money.

Adjusting Expectations to Reality

As you create your monthly budget, you may discover you don’t have nearly as much money as you thought you’d have in retirement. That doesn’t mean you have to live out the rest of your life kicking yourself for not saving more. You have a few options to get by.

Take another look at your living expenses. Are there any ways you can cut costs? Slash your food spending with these tips to save money on groceries. Consider downsizing to a smaller home.

When it comes to your discretionary spending, look for ways to enjoy a more frugal retirement. Take advantage of senior discounts. Check out free activities at your local community center. Find ways to save money on traveling.

Although retirement means leaving your working days behind, you may find it necessary to pick up a side gig or part-time job to supplement your income. Seek out opportunities that match your interests so it doesn’t feel like work.

Don’t forget to enjoy this new stage of life. You worked hard — you deserve it.

Nicole Dow is a senior writer at The Penny Hoarder.

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Tips to Troubleshoot Slow Internet Speed

For apartment dwellers who depend on their connection to the Web, it’s a drag when a slow one seems to stop time online.

With a little bit of know-how, you can troubleshoot a solution when the information superhighway leaves you on the side of the road. Keep these details in mind.

Consider the time of day

Time of day is a typical culprit – one that you might be able to avoid. Joining a lot of people online at once can tax servers and slow down overall response time. If you happen to be connecting at a peak hour – say, in the early evening – you can expect slower loading. Consider what you are doing online, as well. Streaming video or music is more of a burden for the connection than sending an email.

Consider your computer

Maybe your own machine is contributing to the frustration. An older machine, especially one with less memory or a slower chipset, might not play well with the Web. Or perhaps your computer is not optimally set to connect with the Net. Too many open programs, large active downloads, or even virus activity could slow you up significantly.

Wireless woes

For all its convenience, connecting wirelessly can pose its own set of challenges. For one, many devices in the typical household operate on wireless frequencies, and these devices compete with each other over airwaves. (When you live in an apartment community, you may even see several of your neighbors’ networks listed on your device. The walls aren’t keeping all these wireless signals from intermingling!) One simple thing you might try is moving your router to sniff out a better signal.

More tips regarding your apartment utilities:
Ready to Ditch the Landline and Go Cell Phone Only?How to Transfer Utility Services When You MoveTune In with These Budget-Friendly Alternatives to Cable

Consider your hardware set-up

If you find you cannot connect at all, ask yourself the basic questions: Is everything plugged in and turned on? Are your electrical outlets in working order? A bad modem or out-of-date router software or firmware all might contribute to connection problems. If you suspect one of these culprits, contact your service provider for specific advice regarding your particular set-up.

Possible solutions for a crawling Web

Before you give up and read a book, there are a few fairly straightforward things you might try to stoke your time online.

  • Try another browser. If the particular browser you’re using seems slow, try a different one. Firefox and Google Chrome are good choices.
  • Simplify what you’re doing online. Close extra, unneeded programs or tabs, or avoid streaming or downloading if these activities are especially slow.
  • Start a virus check. It never hurts to run your virus protection program to search for any unwanted virus visitors which may be clogging up your connection.
  • But don’t be afraid of harmless cookies! Set your browser preferences to enable cookies. The computer kind won’t add to your waistline, and they just might speed up your computing experience by helping your machine remember your personal preferences on various websites.  (You should, however, be wary about the sites you visit!)
  • Check your browser toolbar. An unexpected change in the look of your browser might mean you have inadvertently downloaded a piece of software which has changed your interface, like a new toolbar. While the change may not be malicious, tracking still might slow your computer’s performance.

Photo credit: Shutterstock / Zurijeta




Dear Penny: Am I Wrong to Make My Unemployed Niece Pay Rent?

Dear Penny,

Recently, we had to move our mom to a nursing home. Prior to the move, my niece had moved in with her. My mom has dementia and is not likely to return to living at home. 

The niece was living rent-free when Mom was here. She is still staying here and still not paying. She is unemployed but has been getting unemployment. She has been there since last September. Mom went to the nursing home in February.

My brother is the durable power of attorney and in charge of expenses. We are hoping to hang onto the house. There are some savings to pay for the nursing home for a few years. When the savings are gone, we will have no choice but to sell the house.

My niece was paying a roommate a substantial sum before she moved in with Mom. She has had many months to save, and her expenses are low since she pays no rent or utilities. My brother turned off the cable, but the internet is still on. Plus there are expenses for gas, oil, electric, property taxes and maintenance. I live out of state but come back for extended visits and work remotely while I am there. I plan to send a check for the internet, electric etc. to my brother. I usually stay for three weeks or so.

Someone needs to tell the niece she needs to start paying for some of the expenses. I don’t quite know how to bring it up to her. When I mentioned it to my sister (the niece’s mother’s twin), she seemed indignant that we would expect money from an unemployed person. 

I guess I need to figure out how to bring it up to her. Before Mom went to the nursing home, there was a big argument because after Mom said she could move in, Mom then decided she didn’t want her here. After Mom was moved to the nursing home, it was my idea for the niece to be able to stay. So, I feel like I should be the one to tell her the free ride is over.


Dear L.,

When you offered to let your niece stay in your mom’s home, you didn’t absolve her of rent for life. The conversation you’re about to have shouldn’t come as a shock. Note that I say “shouldn’t” rather than “won’t” here. I suspect shock is exactly the reaction you’ll get.

Think about it from your niece’s perspective. After eight months of living rent-free, why should she have different expectations for months nine or 10?

I do think that since this arrangement was your idea, you should be part of this conversation. But as durable power of attorney, your brother is the one making the decisions. So I think the two of you should talk to your niece together.

What’s good is that you seem to be feeling moderate frustration, rather than full-blown rage at this point. Don’t let things reach a boiling point with your niece. This conversation needs to happen soon.

First, talk with your brother on what a good outcome looks like. Do you want your niece out altogether? Are you OK with her staying if she pays for upkeep and utilities, even if she wouldn’t pay rent? Or are you hoping she’ll stay and eventually pay rent at fair market value?

I’m guessing the ideal scenario is somewhere between the second and third options. It’s reasonable to expect her to pay something for rent but probably not what you’d charge a stranger, especially since you stay at the home on occasion. You and your brother should agree on a dollar amount that she’ll be responsible for and any other duties you need her to take on.

Regardless of your ideal outcome, give her a heads-up that this discussion is coming. Schedule a time to talk about how to handle expenses moving forward so that she doesn’t feel blindsided.

Try not to lecture her about all the money she should have been saving since September. I get your frustrations. But really, it’s irrelevant at this point.

Keep the conversation forward looking. Show your niece what it’s costing to maintain the home and ask her what she can afford to contribute. She’s getting unemployment, so she should be able to kick in something, even after groceries and other expenses. You can offer to help her make a budget or revamp her resume. But ultimately, you need to set a very clear expectation for what you need from her going forward.

What I’m hoping is that a little pressure will give your niece some much-needed motivation and that more extreme measures, like eviction, won’t be necessary. Sometimes a looming deadline forces us to act.

This will be a tough conversation. You had good intentions, but now you have to be the bad guy. Please don’t kid yourself by thinking this situation will change on its own.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to

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Chase Cards: Get $10 Bonus with Select $20 Spend (Check If You Are Targeted)

The Offer

Check here to see if you are targeted (also check email subject: Use your card for monthly bills and get a bonus)

Chase is sending out a targeted offer on some cards such as Freedom and Sapphire Preferred:

  • Pay $20 or more toward at least one of your phone service, internet, cable, utilities and insurance bills with your Chase Credit Card by July 31, 2021, to earn a $10 statement credit.
  • Pay $20 or more toward online or in-app your Chase Credit Card by July 31, 2021, to earn a $10 statement credit.

Our Verdict

The online offer is a easier to use, but both are good deals. Hopefully this $10 will be counted as a rebate and won’t get a Form 1099 at the end of the year.

Hat tip to reader Ken Dano and to YumYum57


Portable Washing Machines: No Laundry Room Required

The saying goes that the only two things in life that are certain are death and taxes. They forgot about laundry.

Whether you’re sending it out or doing it yourself, laundry happens. Even if you end up buying a few extra pairs of socks to extend the inevitable, laundry will still be there. What isn’t certain, is exactly where you’ll have to do it.

Cleaning clothes can quickly become a huge pain if you’re unable to do your laundry at home. Lugging a full hamper down to a laundry room, hoping machines are available, digging in your pockets for quarters, all to scurry back and forth in time to save your machine from someone else stealing it. It’s a process many of us like to avoid but can find it hard without washer and dryer hookups in the apartment.

There’s a solution. Go portable.

The portable washing machine

Full washing machine running with a wicker hamper beside itFull washing machine running with a wicker hamper beside it

You’re not going to get a full load of laundry into a portable washing machine, but it will do the trick when it comes to giving you in-unit laundry when you don’t have washer-dryer hookups.

Portable washers stand around three feet high and are about two feet wide. They’re lighter than a full-sized machine by a significant amount, making them easy to move around.

Using a portable washing machine is easy, but it does need access to a sink. For that reason, you’ll want to put the machine in either your kitchen or bathroom. They may be in the way while running, but don’t worry about them having to stay in the middle of a room. Because they’re easy to move, you can store portable washers somewhere else between laundry loads.

Deirdre Sullivan of The Spruce suggests you invest in a special dolly to make moving your portable washing machine even easier. She says:

“While portable washers are movable, their size and weight can make them pretty unwieldy. A telescopic furniture dolly designed to double as an appliance base will make moving your machine a breeze.”

Setting things up

With an outlet and a sink close by, you have all you need to get a portable washing machine up and running. There may be a lot of steps, but the basic setup involves a faucet to attach a hose to for the water to go into the machine and a sink for another hose go into to drain the water out.

Next, plug in the machine to get it up and running. Once the setup is complete, you add detergent and run it like a normal washing machine. For any other specific instructions, consult the manual that comes with your particular model of machine.

Lightening the load

Because of its size, it will take more loads to do your laundry with a portable washer than if you used your laundry room. If you typically broke your laundry up into four loads: lights, darks, delicates and sheets and towels, you’ll most likely have to double your loads.

A good strategy is to plan on doing laundry more often. Having a unit in your apartment makes this easy. Rather than running back and forth to the laundry room, giving up an entire day of the weekend, you can now throw a small load in when you get home from work each night.

Picking the right machine

There are two primary types of portable washing machines. Top-loading, single-stream machines will “fit in more places and run through the entire wash-rinse-drain-spin-dry cycle without having to do anything,” says Dan Nosowitz from the Strategist.

Side-by-side portable washing machines have two compartments and require an extra step to go from wash to spin. The spinner compartment can also sometimes be smaller than the washer, meaning you can only wash as much as fits in the spin compartment unless you want part of the load to sit wet while the other finishes a cycle. These machines can also be slightly larger.

Other features unique to each portable washing machine can help narrow down your decision even more. It’s important to know what you’re looking for when you begin the search. According to Jody Healey from The Hunt Guides, a few things to think about before shopping around for a portable washing machine are:

  • Size of overall machine
  • Capacity of the washing tub
  • Cost
  • Electric vs. manual power
  • Need for portability, based on how often you’ll move the machine around
  • Location of the spinner, and whether it should be separate from the washer

The cost of owning a portable washer

Person folding laundry on their deskPerson folding laundry on their desk

Basic portable washing machines start as low at $80 new, although it may be worthwhile to check for used machines in good condition online first. You may find a machine with a few more features at an affordable cost.

Buying new machines above the basic level can cost up to a few hundred dollars. Machines at the top of the line, with more bells and whistles than you may actually need, can cost as much as $800. This is what the initial purchase will set you back, but the real cost comes from actually using the machine.

What you spend

Regular use of a new appliance in your home impacts utilities. Your water and electricity bills will increase, although probably not too much. You also lose access to your bathtub or sink while the portable washing machine is in use, so it costs you a little space.

A cycle does often take longer than a standard machine and the loads are smaller. This means it’s going to take longer to wash all your clothes using this method, so the biggest cost of using a portable washer may be time.

Another potential cost of a portable washing machine is the damage it can cause to your apartment’s floor. Machines can produce a lot of moisture on their underside. This can lead to floor damage you may end up paying for when you move out of your apartment. Make sure to keep the machine away from carpet and hardwood floors to cut risk.

What you save

On the flip side, what a portable washing machine can save you may make the costs worth it. This is a great option if your apartment doesn’t have hookups and you’re overusing the coin-operated laundry room in your building.

Save the stress of worrying about having access to a machine at the time that’s best for you to clean your clothes. Save the annoyance of clothing going missing or someone taking your clothes out of a machine, leaving them wet and at risk of getting dirty all over again.

A portable washing machine gives you the added security of doing your laundry in your own home. The machine is always available and nobody else can mess with your stuff.

The portable dryer decision

Woman using clips to hand wet clothing on a drying rackWoman using clips to hand wet clothing on a drying rack

To own or not to own a portable dryer, that is the question. While a portable washer is necessary to get your clothes clean, having a companion dryer isn’t always a must. If you’re interested though, they do exist.

They work like a full-sized dryer, tumbling your clothes with blown-in heat, but like a portable washing machine, these dryers are smaller. Basic models cost around $90 but can get as expensive as $600 based on the features you need.

“All that you have to do is pop your clothing into the dryer and allow it to dry the items completely, putting your mind at ease…” says the site, OMO, who also shares that using a dryer saves you from having drying clothes taking up space needed for other purposes.

Speaking of space, if you have enough of it to hang laundry to dry, you can save money on the added electricity costs from running a portable dryer. Remember, hanging clothes to dry means they’re going to drip. Aim for a spot over your bathtub or somewhere where a puddle won’t be damaging or dangerous if it forms.

Invest in some metal hook clips or something similar for a space-saving trick to get more drying space on your shower rod. You can also place a collapsible drying rack into your bathtub for clothing. If you decide air drying is best, consider doing laundry at night so clothes can dry while you sleep and get put away easily the next day.

Go for a combo

Woman dropping dirty socks into the washing machine from the perspective of the washerWoman dropping dirty socks into the washing machine from the perspective of the washer

Another portable option is a washer/dryer combo. These are slightly different than if you buy a portable washer and dryer separately. The dryer in a combo machine does not use heat to dry. Instead, it spins the clothes to wick the water away, which means clothing may come out a little damp.

Still, a compact and lightweight machine, some combo units can wash and dry at the same time, speeding along a complete laundry cycle. The cost is right around $100 on average, and the most frequent complaint is that the dryer doesn’t get lint off clothing (there’s no lint trap.)

Get the laundry clean

While it’s ultimately all about getting your clothes clean, having an alternative to using the building laundry room may sound appealing. Before deciding to go portable, make sure to check with your property manager that it’s OK to use this type of appliance in your apartment.

Your lease may prohibit them based on the age of your building and whether you have on-site laundry. Once you get the green light, it’s time to find the best portable washer, dryer or washer/dryer combo that works for your space.

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16 Hidden Freelancer Expenses & Costs That Contractors Have to Cover

Deciding to become a freelancer may seem as simple as choosing to make a go of it on your own and riding off into the freelance sunset. But there are a variety of factors you should consider before making it your full-time gig — not least of which are the expenses you have to cover out-of-pocket.

While employees don’t need to worry about calculating their taxes or budgeting for sick time, freelancers do. And they also have to cover office supplies, health care, and accounting fees as well as a variety of other business-related costs. All of these play into the hourly rate they charge their clients.

Before you make the decision to go from being an employee to a freelancer, here are some of the expenses and costs you should be aware of.

Freelancing Expenses Contractors Have to Cover

From basic office supplies to legal fees, freelancers have to cover a lot of different business expenses that employees don’t. Here are some of the most common costs to take note of before deciding whether the freelance life is for you.

1. Office Space

Many freelancers can work from home or even from a coffee shop, but those who don’t have room for a home office or who frequently need to meet with clients may need to rent out a commercial office space. The costs can vary greatly between cities and buildings, but some affordable options include:

  • Coworking spaces
  • Daily office rentals
  • Sharing a private office with another freelancer

The size, type, and location of the office space you choose will depend on your budget and needs. Unlike employees, you will be responsible for researching, negotiating, and paying for office space if you need it to provide your freelance work to clients and customers.

2. Office Supplies

Whether your office is in your home or in a commercial building, you’ll need to pay for supplies and furniture to fill it. Start with basics such as:

  • A comfortable office chair
  • A desk
  • Business cards
  • Pens, pencils, and notepads
  • A desk or floor lamp
  • A filing cabinet
  • Printer paper and ink

As you grow your business, you can upgrade items to better suit your needs and budget. For example, once you have a few contracts under your belt, you may consider purchasing a standing desk or an ergonomic chair.

3. Hardware and Electronics

One of the biggest costs freelancers have to cover is the hardware and electronics they need to do their jobs. Depending on the services you offer, you may need to purchase:

  • A desktop computer and monitor
  • A laptop
  • A tablet
  • A keyboard and mouse
  • Speakers
  • Headphones
  • A smartphone
  • A camera and microphone
  • A printer

Fortunately, many of these items last for at least a few years, so you won’t have to repurchase them on a regular basis. As an added bonus, they’re typically tax deductions, which means they can help to reduce the overall tax amount you have to pay the IRS.

4. Software, Licenses, and Subscriptions

Once you have hardware, you need to purchase any software required to provide your freelance services to clients and customers. For example, depending on what you do, you may need to purchases licenses or subscriptions for:

Keep in mind that most platforms offer discounted pricing to individuals, so do your research before committing to an annual subscription or license with a hefty price tag. Look for free alternatives to traditional platforms, like Word Online or Google Docs to cut costs while still benefiting from the tools you need to do your job.

5. Advertising

While employees don’t typically have to worry about paying for advertising costs, freelancers do. In order to get new clients and build up a full-time roster, freelancers have to spread the word about their services. You can do so by advertising your business through:

  • Social media ads on Facebook, Twitter, Instagram, or LinkedIn
  • Pay-per-click (PPC) ads on Google, Bing, or other search engines
  • Newspapers, magazines, and other print publications
  • Websites such as Craigslist
  • Professional associations

Before emptying your wallet for expensive ads and self-promotion, research the options available to you and select the method you think will get you the best return on your investment.

There are a number of free options you can choose from, such as joining a virtual or in-person networking group, posting in professional forums, or creating professional social media profiles and sharing information about your services and availability.

You can also post your services on freelancer websites such as Upwork, which typically allow freelancers to post their professional profiles at no cost.

6. Professional Website

Most freelancers need a professional website that prospective clients can visit to learn more about their skills, experience, and services. This could be a basic website similar to a digital portfolio, or it could include a number of additional features such as online booking and digital payments.

Whatever type of functionality you choose, your website will come with some standard costs, including:

  • Design
  • Development
  • Hosting
  • Domain name registration

Although you can reduce your expenses by choosing a free website building platform like WordPress or Wix, you’ll still have to pay for your domain and hosting at the very least. If you want to include a blog, you’ll also need to consider the costs associated with hiring a freelance writer or editor unless you plan to provide your own content.

7. Self-Employment Taxes

Because taxes don’t automatically come out of your freelance invoices, you are responsible for calculating and setting aside your self-employment taxes throughout the year, the current rate of which is 15.3%.

Thankfully, many of your expenses will count as write-offs, which you can include in your annual tax returns, reducing your total amount you owe. However, it’s still a good idea to calculate an approximate tax amount from each invoice and to keep the cash in a separate account, so you aren’t left owing an unexpected amount with no way to pay for it come tax time.

8. Health Benefits

From glasses and prescriptions to medical appointments and emergencies, freelancers are responsible for their own medical costs — either by securing their own health insurance or paying out of pocket.

Fortunately, you have options when it comes to self-employed health insurance that can save you money and stress. Be sure to do your research and choose an option that works for you both practically and financially to support personal and professional health.

9. Retirement Savings

As with taxes, freelancers don’t have the same retirement plans to contribute to as employees. Instead, freelancers must plan and save for retirement on their own. For example, you can choose to set up a solo 401(k) or an IRA, similar to how you would if you were working for a company.

Unfortunately, you won’t benefit from having an employer match your contributions, but you will be setting yourself up for future financial security while still owning your own business.

10. Professional Development

Seminars, conferences, courses, and certifications are all an important part of staying up-to-date in your profession. And they all cost money. Small-business owners like freelancers don’t have employers with perks like professional development budgets, so they have to cover these costs on their own.

But even though these endeavors come with upfront costs, they can end up providing you with a lot of long-term benefits. After all, the more you hone your skills, network with others, and expand the services you offer, the better chance your freelance business has to succeed.

While you may be more cost-conscious about how you approach professional development when you’re footing the bill, it should still be something you budget for and make a point of pursuing. Some professional development options are relatively low-cost or even free, but still offer new information that can help you to learn more about industry trends and best practices.

11. Vacation and Sick Time

One of the biggest hidden costs of freelancing is budgeting for time off. Many freelancers inadvertently overlook the fact that they have to set aside money to cover any vacation or sick time they take throughout the year. Because they don’t have an employer paying for time off, it’s up to them to calculate and set aside the appropriate amount.

You have a couple of options when it comes to saving up for sick time and vacation days. For example, you can:

  • Take a small amount from each freelance job you complete and save it in a separate account
  • Calculate the amount you need to make to live and then use extra income as vacation pay
  • Work additional hours to cover the amount of time you want to take off each year

As a new freelancer, you’ll probably be starting out with no vacation or sick time, but as you get more clients and start to build up your average monthly income, you’ll have a better idea of how to start banking extra hours and saving for some well-deserved time off.

12. Accounting and Legal Costs

When you’re an employee, it’s easy to take your accounting and legal departments for granted. They track your hours, deposit your paychecks, and provide your employment contract, all without you having to lift a finger. Freelancers have to handle their own accounting, develop their own contracts, and keep track of their own records — or else pay someone to do it for them.

If you aren’t comfortable managing the financial and legal aspects of your freelance business alone, you may want to hire someone to do it for you or, at the very least, purchase software that will help you to do accounting tasks like:

  • Invoicing
  • Drafting quotes and contracts
  • Tracking your billable hours
  • Monitoring payment statuses
  • Documenting business expenses

13. Administrative Tasks

Freelancers don’t typically get paid for the time they spend completing the routine administrative tasks that come with doing business like responding to emails, listening to voicemails, or talking to customer service about a technical issue. That means they need to consider how to cover their non-billable hours so they don’t end up working for free.

The best way to do this is to calculate non-billable work into your hourly rate. That way, you don’t get paid directly for your administrative tasks, but you still make enough money to cover the time you spend doing them.

14. Business-Related Bills

Whether you have a home office or you rent an office space somewhere else, you still have to pay for utilities, Internet, and a phone to run your business. Even if you decide to freelance from home, you could be looking at higher bills due to:

  • Being at home more often
  • Needing an upgraded Internet connection speed or data plan
  • Using more cellphone data at coffee shops or other remote workplaces

Expect an increase in any business-related bills when you start freelancing, regardless of whether you choose to work from a home office, rent a space, or take advantage of a public workspace.

15. Travel

Business travel is expensive but sometimes necessary. From transportation and event tickets to meals and lodging, making a trip to attend a conference or to meet a client can be a pricey undertaking that freelancers typically have to cover on their own.

Occasionally, clients may pitch in or even pay for costs if they require the freelancer to travel specifically for their project. Depending on the freelance work that you offer, you may not have to travel at all. However, if your services require you to fly or drive to meet clients, don’t be surprised if you have to pay your own way.

When possible, take advantage of video conferences and phone calls to get some of the benefits of face-to-face meetings without the associated costs.

16. Transportation

If your freelance business requires you to visit client homes or businesses on a frequent basis, you’ll need to pay for your own transportation costs. For example, you’ll need to have enough to cover your:

  • Vehicle payments
  • Fuel
  • Insurance
  • Bus or transit pass
  • Parking fees
  • Repairs and maintenance

If you’re used to having a company vehicle and credit card to cover gas expenses as an employee, having to pay for these yourself can be a tough pill to swallow — especially if you’re new to freelancing. But these are important costs to include in your pricing calculations and quotes to help you avoid losing money on your freelance jobs.

Final Word

Before making the decision to go from being a full-time employee to pursuing a freelance career, it’s important to understand exactly what you’re getting into. There’s a big difference between taking advantage of the gig economy and starting a sustainable and profitable freelance business of your own.

Consider all the expenses you will have to pay and whether you can afford to cover them based on the clients and contracts you have lined up. If you can’t, don’t give up hope. You can always start by offering your services on the side and gradually move toward a full-time freelance career in the future.