How Tax on Mutual Funds Works

For a long time, mutual funds have been a popular investment vehicle for millions of investors, largely because they offer an easy way to purchase no-fuss, diversified assets with relative ease. This out-of-the-box diversification and risk-mitigation is something that individual stocks can’t match.

Though technology has made it easier than ever to buy securities like mutual funds online, one area of confusion persists. When it comes to tax on mutual funds, and calculating capital gains on mutual funds, many investors don’t know where to start.

Discussing tax on mutual funds and other investments can be tricky, but it doesn’t have to be. Read on to learn how tax on mutual funds works, what investors should expect or anticipate when it comes to dealing with mutual funds and the IRS, and some simple strategies for tax-efficient investing.

Quick Mutual Fund Overview

First, it makes sense to review the basics. Mutual funds are similar to exchange-traded funds (ETFs) in that they’re not singular investments. Instead, they’re a collection (or a “basket”) of many different investments like stocks, bonds, and short-term debt. When an investor buys into a mutual fund, they’re essentially purchasing a spectrum of assets all at once.

Paying Tax on Mutual Funds

Like other types of investments, investors must pay tax on any income or profits they realize from their mutual fund holdings. Not every fund is the same, so it follows that the taxable income shareholders receive (or don’t receive) from a fund isn’t the same.

Since it’s up to investors to know when to pay taxes on stocks and report the amount of taxable income they’ve received from the sales of their investments and distributions (on IRS Form 1099-DIV) the most proactive thing an investor can do to get an idea of what type of tax liability a specific mutual fund may present is to research the fund before any shares are purchased. In other words, do your homework.

There are a number of online resources—including but not limited to Morningstar and Kiplinger Mutual Fund Finder —that allow investors to conduct that research, with some also providing rating systems to help streamline the process.

Paying Tax on “Realized Gains” from a Mutual Fund

capital gains taxation rate will vary.

Because funds contain investments that may be sold during the year, thereby netting capital gains, investors may be on the hook for capital gains taxes on their mutual fund distributions. As each fund is different, so are the taxes associated with their distributions. So reading through the fund’s prospectus and any other available documentation can help investors figure out what, if anything, they owe.

How to Minimize Taxes on Mutual Funds

When it comes to mutual funds, taxes are going to be a part of the equation for investors—there’s no way around it. But that doesn’t mean that investors can’t make some smart moves to minimize what they owe. Here are a handful of ways to potentially lower taxable income associated with mutual funds:

Know the Details Before You Invest

IRAs and 401(k)s—are tax-deferred. That means that they grow tax-free until the money contained in them is withdrawn. In the short-term, using these types of accounts to invest in mutual funds can help investors avoid any immediate tax liabilities that those mutual funds impose.

Hang Onto Your Funds to Avoid Short-term Capital Gains

If the goal is to minimize an investor’s tax liability, avoiding short-term capital gains tax is important. That’s because short-term capital gains taxes are steeper than the long-term variety. An easy way to make sure that an investor is rarely or never on the hook for those short-term rates is to subscribe to a buy-and-hold investment strategy.

This can be applied as an overall investing strategy in addition to one tailor-made for avoiding additional tax liabilities on mutual fund holdings.

Talk to a Financial Professional

Of course, not every investor has the same resources, including time, available to them. That’s why some investors may choose to consult a financial advisor who specializes in these types of services. They usually charge a fee, but some may offer free consultations. For some investors, the cost savings associated with solid financial advice can outweigh the initial costs of securing that advice.

The Takeaway

Getting taxed on capital gain on a mutual fund is unavoidable, but with a little help from a tax professional, you can minimize the amount you get taxed.

Some of the above strategies can work in concert: Investors who are investing for long-term financial goals, like retirement, can use tax-deferred accounts as their primary investing vehicles. And by using those accounts to invest in mutual funds and other assets, they can help offset their short-term tax liabilities.

While it’s possible to buy some mutual funds with an online brokerage account, many have restrictions on the types of funds investors can buy, as they’re specially-tailored toward specific financial goals, like retirement. With a SoFi Invest® account, investors can get started building a portfolio, and even gain access to complimentary advice.

Find out how SoFi Invest can help you get your money in the market.


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The post How Tax on Mutual Funds Works appeared first on SoFi.

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New PUA Rules: Don’t Miss These Unemployment Deadlines

“I think they are a real pain,” said Michele Evermore, an unemployment policy analyst for the National Employment Law Project, regarding the new PUA filing rules. “Not just for recipients, but for state agencies to collect. Every burden we add to state agencies slows benefit processing for everyone.”
Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.
Here are some examples of documents your state may ask you to file:
The new requirements are intended to combat fraud. According to the Department of Labor, more than 7.4 million people are relying on PUA and are subject to the changes.
If you’re qualifying for PUA because you were about to start a job but the offer was rescinded due to COVID-19 related reasons, you may be asked to submit an offer letter, details about the employer and other information related to the job to verify your claim.

New Pandemic Unemployment Assistance Rules and Deadlines

On Dec. 27, the 0 billion stimulus package extended Pandemic Unemployment Assistance, a critical benefits program for folks who don’t typically qualify for regular unemployment aid. The deal lengthened PUA benefits for at least 11 weeks, but it also created new filing rules that affect current recipients and new applicants alike.
Need to apply? Our 50-state Pandemic Unemployment Assistance filing guide includes an interactive map and the latest information from the second stimulus deal.
The new deadlines established by the second stimulus package are different for current PUA recipients and new applicants.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

The good news, Evermore says, is that states have leniency to waive some of these requirements if you can demonstrate “good cause” for not being able to submit the requested documents. What’s considered “good cause” is also determined on a state-by-state basis.
Evermore says that since current PUA recipients weren’t asked to submit all this information when they were first approved, they might no longer have access to the requested documents.

  • Tax forms such as 1099s and W-2s.
  • Ledgers, recent pay stubs and earnings statements from gig apps.
  • Recent bank statements showing direct deposits.

“People who got approved for benefits in the past won’t necessarily get cut off from benefits simply because they are unable to produce the requested documentation,” Evermore said. “Just follow all of the agency’s instructions carefully.”

  • Federal or state income tax documents.
  • A business license.
  • A 1040 tax form along with a Schedule C, F, SE or K.
  • Additional records that prove you’re self employed, such as utility bills, rental agreements or checks.

Self-certification means that you swear the reason(s) you are on PUA is or are true at the risk of perjury. Previously, PUA applicants had to self-certify only once at the time of their initial application.
If you’re self-employed, you may be required to submit:

  • You have been diagnosed with COVID-19 or have symptoms and are seeking diagnosis.
  • A member of your household has COVID-19.
  • You are taking care of someone with COVID-19.
  • You are caring for a child or other household member who can’t attend school or work because it is closed due to the pandemic.
  • You are quarantined by order of a doctor or health official.
  • You were scheduled to start employment and don’t have a job or can’t reach your workplace as a result of the pandemic.
  • You have become the breadwinner for a household because the head of household died due to COVID-19.
  • You had to quit your job as a direct result of COVID-19.
  • Your workplace is closed as a direct result of COVID-19.

Source: thepennyhoarder.com

FROM THE MAKE MONEY FORUM

Chief among the new rules: You will need to submit income documentation to your state’s unemployment agency if you are a gig worker or self-employed worker — or risk losing future benefits and having to return any benefits collected after Dec. 27.
Another new rule is that you will have to self-certify that you meet one or more of the following PUA eligibility requirements on a weekly basis:
The Department of Labor requires each state to notify you of your state-specific rules. Your state may have different deadlines. In that case, refer to your state’s instructions. The DOL is also leaving it to each state to determine exactly what documents are required to prove your eligibility.
The second stimulus package is tightening the rules for millions of gig workers, independent contractors and self-employed workers receiving unemployment aid.
If you apply for PUA Jan. 31 or later, you will have 21 days from the date of your application to submit income-related documents.
As a current PUA recipient, you have until March 27 to submit income-related documents to prove your PUA eligibility. If you apply for PUA before Jan. 31, you also have until March 27.
“People who were told they don’t need documentation may have lost it, and this will create panic resulting in more stress on people who have already had an unimaginably bad year,” she said.

DoorDash vs. UberEats: Which App Is Right For Your Next Side Gig?

For better or worse, apps like DoorDash and Uber Eats have disrupted the food-delivery industry. Since their launch in 2013 and 2014 respectively, restaurants across the country have outsourced delivery services to independent drivers who use the apps to make extra cash.

During the pandemic, these services have seen demand like never before. For customers, the apps make ordering food from just about any restaurant as easy as opening their smartphones. For drivers, it’s almost as easy to land a delivery job hawking food from local eateries.

But before you download your next job, take some time to review the key differences between DoorDash and Uber Eats so that you can make the most of your delivery gig.

DoorDash vs Uber Eats: The Top Food Delivery Apps Duke It Out

The general premise of the two apps is almost identical: Customers place food orders at local restaurants. The apps alert drivers in the area with the order details. The first driver to accept the order picks up the food and drops it off to the customer. Simple enough, right?

Several differences are worth noting, though. Some minor and some major. We took a deep dive into those differences, looking at pay, vehicle and job requirements, available locations, driver reviews and more to help you make an informed decision before you start delivering.

And if it’s too close to call, you can always sign up for both to see which one suits you better.

Round 1: App Reviews

A woman looks at what's offered on Uber Eats.

Because the apps are so popular, they’ve amassed more than 4.1 million driver reviews. Both companies require their drivers to use different apps than customers, a huge perk when trying to get a sense of drivers’ perspective. Worker reviews from Glassdoor are also included.

DoorDash Driver (Dasher) Reviews

Feedback from Dashers is overall mixed, but there’s a clear preference for the iOS version of the app. Trends in negative reviews across all platforms show that many drivers have trouble with glitches and crashes, especially Android users, and that the nature of the work takes a toll on their vehicles. Many negative reviews mention that DoorDash’s strict performance metrics are a hassle.

Workers reviewed DoorDash more than 760,000 times.

App Store (iOS) review: 4.7 out of 5.
Google Play (Android) review: 3.3 out of 5.

Glassdoor review: 3.7 out of 5.

Uber Driver Reviews

More than 3 million drivers reviewed Uber. A caveat worth noting is that Uber has one driver app. That means it’s hard to get the opinions of only Uber Eats drivers because general Uber app reviews are mixed in. Overall, reviews are positive.

Trends in negative delivery reviews on Glassdoor indicate GPS issues and trouble contacting customer service. Several drivers mentioned problems with promotion and surge pay (bonus pay during in-demand times). Negative reviews regarding vehicle wear-and-tear are common.

App Store (iOS) review: 4.6 out of 5.

Google Play (Android) review: 3.8 out of 5.

Glassdoor review: 3.9 out of 5.

Round 2: Job and Vehicle Requirements

A woman drives for Uber.

To become a Dasher or Uber Eats driver, you have to meet a baseline of requirements. Some are vehicle related and some are age and experience related.

DoorDash

To qualify as a Dasher you must be at least 18. Dashers need to have a valid driver’s license. There are no car requirements, but auto insurance is required. In some markets you can make deliveries on scooters, bicycles and motorcycles.

Uber Eats

To make automobile deliveries, the minimum age requirement is based on your local jurisdiction, plus at least one year of driving experience. Vehicles must be no more than 20 years old. Drivers must be properly insured and can use bikes and scooters in certain markets. The age requirements are higher for those who prefer two wheels — 18 for bicycles and 19 for scooters.

Round 3: Sign-Up Process

Becoming a delivery driver for DoorDash and Uber Eats is simpler than landing a part-time job. You can complete the entire process from your smartphone or computer.

DoorDash

You can sign up to become a Dasher on the driver app. You’ll have to consent to a background and motor vehicle check (and pass both). They could take as little as a few days, but err on the side of a week or two.

After passing the checks, you’ll need to select what type of “orientation” you want. The pandemic paused in-person orientations. Depending on your market you may need to request an “activation kit” instead. Receiving your activation kit may take an extra couple of weeks, according to driver reviews.

The activation kit includes a Dasher manual, a hot bag and a credit card, which is used to pay for orders. Once you receive and set up the card through the app, you can start accepting orders.

Uber Eats

For drivers new to Uber, you can sign up on the website or through the driver app. Because of the stricter vehicle requirements, the application requires more detailed information on your ride. A background check is also required, which may take three to five business days to process.

After the background check clears and your application is approved, you’re free to start taking orders. No orientation or additional equipment is needed.

If you’re a current rideshare driver for Uber, it’s easy to start delivering with Uber Eats. You simply opt in to Uber Eats orders through the driver app and start delivering without any additional screening.

Round 4: Pay and Tipping

The two apps handle pay a little differently, both in how you get paid and how you pay for customers’ orders when you pick them up. Neither company offers guaranteed wages (unless you live in California).

DoorDash

As of Fall 2019, the company switched to a payment model where Dashers earn a higher base pay per order in addition to keeping 100% of their tips. Previously, a customer’s tip would subsidize the Dasher’s base pay.

Check out how this food delivery driver may $8,000 in one month.

Dashers report earning between $11 and $15 an hour depending on location, but those earnings aren’t guaranteed. Pay is based on how many orders you accept per hour and how much customers tip you. DoorDash pays weekly through direct deposit, or you can access your earnings early through Fast Pay, for $1.99.

When picking up orders, you may be required to pay for the order using the company red card from your activation kit.

Uber Eats

Depending on your location, you can expect to earn $11 to $14 an hour on average. Again, those wages aren’t guaranteed because your earnings are based on orders and tips. With Uber Eats, you pocket 100% of your customers’ tips. You get paid weekly via direct deposit, or you can pay a fee to access your earnings early through Instant Pay for 50 cents.

You won’t be involved in the payment process for food orders. Partner restaurants are reimbursed directly by Uber.

Round 5: Available Locations

People walk alongside a lake and tall buildings.

This one’s easy. Both services are available in most big cities in all 50 states.

Previously, DoorDash and Uber Eats ran driver support centers in major metro areas of most states. In 2020, many of these centers closed due to the coronavirus. Some still exist, but neither company offers a comprehensive, public list of remaining locations.

Final Round: Additional Perks

Promotional offers are popular with both DoorDash and Uber, but they’re temporary and vary by location. Aside from sign-up bonuses and referral codes, here are a couple perks that are here to stay.

DoorDash

A few perks unique to DoorDash include grocery delivery options, automatic insurance coverage and health care services.

After you’re screened and accepted as a Dasher, you can choose to deliver food in any city where DoorDash operates, meaning there are no hard location requirements. The company also launched grocery delivery services in some Midwest and West Coast areas.

Dashers also get supplemental auto insurance and occupational accident insurance for accidents or injuries that fall outside your current auto insurance. The insurance plan covers up to $1 million in medical costs, a weekly payment of $500 for disabilities and $150,000 to dependents for fatal accidents. Coverage is automatic. There are no deductibles or premiums.

While DoorDash doesn’t offer health insurance, the company does partner with Stride Health, which provides free health care advising and assistance to Dashers who need help finding affordable insurance plans.

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Uber Eats

Uber Eats drivers get a variety of discounts and may be eligible for Uber Pro perks.

All Uber drivers receive discounts for vehicle maintenance and phone service plans. Uber also partners with Stride Health to provide health plans and tax advice. Drivers automatically receive supplemental auto insurance, which covers up to $1 million in damages. There’s a $1,000 deductible before benefits pay out.

Uber Pro perks have recently expanded to all of Uber’s markets across the U.S. Only top-rated drivers receive Pro perks like tuition and gas reimbursement, and the program is designed for Uber drivers primarily, not Uber Eats drivers.

If you drive for both Uber and Uber Eats, your food deliveries may apply to Uber Pro, but Uber-Eats-only drivers aren’t eligible.

Final Decision in DoorDash vs Uber Eats

Ding! Ding! It was an even match-up. Uber Eats and DoorDash were neck and neck throughout. No knockout punches. A good few jabs by DoorDash’s insurance coverage and grocery options and a couple of hooks by Uber’s overall ratings and ability to switch to ridesharing.

The decision goes to our judges. (That’s you.)

There are a lot more delivery options out there. Here’s how the top 10 delivery apps stack up.

Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

Former OPI Exec Lists Italian-Style Villa in Beverly Hills for $33 Million

Miriam Schaeffer, a former executive at nail polish giant OPI Products, is looking to sell her Italian-style villa in Beverly Hills, CA — and won’t settle for just any amount.

The nail polish mogul — who is also the former wife of George Schaeffer, founder of the popular nail polish brand — is asking a hefty $33 million for her opulent home set in one of the most sough-after streets in the area, Roxbury Drive, a historically popular address among celebrities.

Located on N. Roxbury Drive, the property has a rich history and has been considerably upgraded and expanded in recent years. In fact, Schaeffer invested heavily in the property, expanding its footprint by roughly 40% and significantly boosting the amenity roster.

Originally built in 1926 by the architectural firm Camduff and Camduff as one of the partners’ own homes, the architectural masterpiece was revamped by renowned architect Richard Manion in 2016. The current owner worked alongside the architect to add amenities like a media room and a wine cellar, and to expand the beautiful grounds. 

Ultra-luxurious villa on N. Roxbury Drive
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency

The combination of Spanish, Italian, and Mediterranean revival architecture is probably why this property is also known as Casa California. It’s a perfect representation of relaxed California living, featuring a long list of fun amenities that includes a fitness studio, a media room, a spa, and a swimming pool. 

The property offers roughly 210 feet of frontage along N. Roxbury Drive, also known as ‘street of the stars’ (a highly popular destination for celebrities living in Beverly Hills), but it also offers privacy from prying eyes via a gated and hedged entrance.

The mansion has 7 bedrooms, 13 bathrooms, and an impressive total of 13,765 square feet of living space. The rear grounds are home to the pool, the spa, a guest house, and a fitness studio, all surrounded by complete privacy and tranquility.

Inside, a two-story entry greets visitors, leading to a living room with a stunning fireplace and doors that open to the front grounds. There is also a state-of-the-art chef’s kitchen, complete with a breakfast room and a wood-paneled family room that opens to the pool. 

Living room of ultra-luxurious villa on N. Roxbury Drive
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency
Kitchen of ultra-luxurious villa on N. Roxbury Drive
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency
Ultra-luxurious villa on N. Roxbury Drive
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency
Ultra-luxurious villa on N. Roxbury Drive.
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency

Upstairs, there is a gorgeous master suite that incorporates a sitting room, custom-made closets, and a terrace with fabulous views. There’s no shortage of space for family or friends, as the upper levels also include no less than 5 guest suites. 

Bedroom of an ultra-luxurious villa on N. Roxbury Drive.
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency

Additional amenities include a wine cellar, an elevator, an entertainment room, and a bar, making this house perfect for any type of entertaining. 

Entertainment room of an ultra-luxurious villa on N. Roxbury Drive.
Ultra-luxurious villa on N. Roxbury Drive. Image credit: Simon Berlyn courtesy of The Agency

This luxurious N. Roxbury Drive property is marketed by The Agency, with Jacob Dadon handling the listing. The current owner is Miriam Schaeffer, the former wife of George Schaeffer, who founded the popular nail polish brand OPI. 

Schaeffer bought OPI (then Odontorium Products Inc.) in 1981 in Calabasas. At the time, the company was in the dental supply business, but Schaeffer and partner Suzi Weiss-Fischmann turned the brand into a global nail polish giant. The brand’s products were used in movies like Legally Blonde 2 and Alice in Wonderland, and they are known for their chip-resistant formula and bright colours. The company was acquired by Coty, Inc. in 2010, and Schaeffer stepped down as CEO in 2013. 

Miriam Schaeffer, George Schaeffer’s ex-wife, once worked as an executive and treasurer for the brand. She reportedly purchased the opulent house in 2012 for $14 million, according to Mansion Global, and invested in expanding its footprint by nearly 40%, alongside architect Richard Manion. 

More beautiful homes with famous owners

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The post Former OPI Exec Lists Italian-Style Villa in Beverly Hills for $33 Million appeared first on Fancy Pants Homes.

Source: fancypantshomes.com

How To Become a Freelancer and Make a Full-Time Income

Today, I have a fun interview to share with you that will show you how to become a freelancer.

I recently had the chance to interview Ben Taylor. Ben has been freelancing since 2004, and he has worked for dozens of companies.

Yes, this is a career path that you can learn!

As Ben will tell you in the interview below, a freelancer can be anything. You can be a freelance designer, personal trainer, nutrition coach, online teacher, virtual assistant, writer, and more.

If you are looking for a new business or even just a side hustle so that you can learn how to make extra money, learning how to become a freelancer may be something that you want to look into.

In this interview, you will learn:

  • What a freelancer is, who they work for, what they do, etc.
  • How much a new freelancer should expect to earn
  • How a person can find their first freelancing job
  • The steps needed to take to make money as a freelancer

And much more!

He also has an informative course called Freelance Kickstarter. This course takes you through the step by step process of creating your own freelance business.

Check out the interview below for more information.

How to become a freelancer.

 

1. Please give us a background on yourself and how you started as a freelancer.

I’m Ben, and I live by the sea in England with my wife and two young sons.

I started a career in tech back in 1998, and by 2004 was Head of IT for a government department. It didn’t take long for me to tire of company politics, and the endless meetings that were more about displays of ego than really getting anything done.

I came from an entrepreneurial family and my parents both had businesses rather than jobs. The businesses weren’t always successful, and there were definitely periods of “feast and famine.” However, I was well used to that and I think that branching out on my own was something I was destined to do.

My move into freelancing splits into a couple of clear phases:

Initially, in 2004, I quit my IT job, walking away from business class travel and a gold-plated pension with nothing more than a vague plan to begin to work as a freelancer!

I started to provide IT support and consultancy to both businesses and individuals. I do actually still do some of that work for a select group of long-term clients, but by 2009 I had managed to burn myself out with it. The business was going well, but I was working ridiculously long days and every holiday I tried to take was interrupted by constant phone calls and emails.

So phase two began when I sold off most of my client-base and moved to Portugal! That’s when I really started to broaden my freelance horizons. I had to start from scratch, with an unclear intention to start writing for a living, and no real plan for how to do it.

I did lots of things, including wasting a LOT of time down fruitless blind alleys. I wrote for content mills, started blogs, found clients on freelance job boards, and – slowly and steadily – started to build my income back up. The difference was that I was doing it all completely on my terms with work I really enjoyed. 

I was also living in a dream destination whilst doing it.

 

2. Can you explain what exactly a freelancer is, who they work for, what they do, etc.?

This seems like a basic question, but it’s very worthwhile. There’s a considerable difference between freelancing and remote working that not everybody appreciates.

First off, a freelancer can be anything. For some reason many people immediately think of writing when they think about freelancing. But you can be a freelancer designer, personal trainer, nutrition coach, online teacher, virtual assistant, and dozens of other things.

It’s also worth noting you don’t only have to be one of those things. I AM a freelancer writer, but I also still dabble in IT consultancy, run my own blogs, provide coaching, and even build websites for people (if they ask nicely and the price is right!)

Regardless of what you do as a freelancer, the important thing to realise is that you are running your own business. The big plus of this is that you are in total charge. But the big negative is that you don’t have any of the safety nets you have if you are employed by a single company. This means you’re responsible for everything from your own insurance and healthcare to your own technical support!

Freelancers typically work for several different clients. There are myriad places to find those clients. It’s quite common for freelancers to find clients within their existing professional networks, and not at all unusual for ex-employers to be among them. Then there are freelance job boards like Upwork and PeoplePerHour, which provide an endless stream of new opportunities.

 

3. How much should a new/beginner freelancer expect to earn?

This is an incredibly difficult question to answer! I can think of one freelancer I coached who’s in a very specific writing niche. He went onto Upwork with an initial rate of $100 per hour and found lots of work. I started out in IT consultancy charging a similar rate and was quickly earning more than I did in my full-time job.   

However, at the other end of the scale there are people with limited experience or specialist skills who will need to pay their dues. This means building the foundations of a freelance career by proving yourself and taking low paying jobs to build up examples of work and positive feedback. My move into writing was much more like this!

I think “job replacement income” is a useful target for new freelancers to keep in mind. That can vary vastly from individual to individual. Obviously replacing and exceeding a corporate-level income takes much more than freelancing as an alternative to a part-time, entry-level job. That said, people with senior-level experience command much higher freelance rates.

Related content: 20 Of The Best Entry Level Work From Home Jobs

 

4. What do you like about being a freelancer?

Not having a boss!

The difference in lifestyle is massive when you work for yourself. This is always brought home to me when I’m making plans with friends and family, and people say “I’ll see if I can get the time off.”

This makes me shudder, because it’s SO alien to me now. The example I always use is that I never have to ask anybody before I can tell my children I’ll be at their sports day or nativity play.

When you have what I call a “traditional job,” you DO have the security of healthcare, and perhaps things like holiday and sick pay. But you give up a tremendous amount of freedom in return. Freelancing is profoundly different, and it’s rare to find people who’ve given it a go that would ever choose to go back to full-time employment.

So that’s a huge thing for me, but there are other huge benefits too. I love the fact I can pivot into different things, which always allows me to keep things fresh.

About four times a year I reassess my priorities and lay out new goals for the short, medium and long term. They might involve starting a new blog, writing another book, learning a new marketable skill. For somebody like me who relishes variety, I love having total control of this.

 

5. How can a person find their first freelancing job?

There are SO many ways to find freelance jobs. I have an article listing 50 different options!

However, they broadly split into two categories that I call “real world” and “online world.”

It’s always worth starting out by thinking of your real life networks. As I’ve said, many freelancers do their first self-employed work for people who already know them. I’d advise people to think about any contacts who’ve already seen the kind of work they’re capable of. These are “warm leads” that are well worth perusing.

It makes sense to think about personal contacts as well as business contacts, too. Plenty of freelancers find clients who are their “wife’s best friend’s brother” or something like that!

Remaining in the “real world,” there are also options like local business groups and networking events – although they are obviously far less accessible at the present time.

Moving to the online world, the freelance job boards are the place to be. They can be intimidating places initially, and it’s crucial to learn how to use them and how to avoid scammers and low paying clients. But there are plenty of great clients out there, including many household name companies who use those boards to hire freelancers.

Often, a quick one-off $50 job can evolve into a long and lucrative client relationship. My wife and I both have clients who we first met on the freelance boards years ago. We still work with them now.

There’s no one-size-fits-all answer to where to find the first client, but there are options for everybody.

 

setting rates when learning how to become a freelancer

6. How does a freelancer decide what to set their rates at?

This is a question I’m asked a LOT! The answer leads to lots more questions, and I think many of my readers are disappointed when I don’t just give them an answer of “$x per hour” or “$x per article!”

It’s a subject I cover in my Freelance Kickstarter course, and I’m happy to share a slide from that particular lesson here. The factors to consider include tangible things like the “market rates” for specific types of work, and how each client’s geographical location could impact how much they expect to pay.

But there’s much more to consider beyond that: How much does the gig align with your long-term goals? Will the job produce a great example of work that will help you win more clients in the future? Is this a job that could lead to on-going, long-term work?

I guess a simpler answer is that your rate needs to be fair and competitive, and sufficient to make it worth your while to do the job. However, the rate for each job really needs to be assessed on a case-by-case basis.

The reality is that there are millions of freelancers out there charging vastly different rates, often for very similar services. There’s a bit of an art to working out where you sit on the pricing spectrum, but it’s an art you can learn, and it gets easier with experience.

 

7. What steps does a person need to take to make money as a freelancer?

The first and most important is working out what it is you actually want to do. That may seem obvious, but my inbox is full of emails from people asking what they should do, without telling me what they’re capable of and what kind of work would make them happy.

I will attempt to lay it out in a fairly simple series of steps:

  1. Work out what skills you have and what market there is for them.
  2. Look at who else is providing those services, what they charge, and what you can provide that will make you stand out and appeal to clients.
  3. Identify any gaps in your knowledge and experience, and work to fill them. This could mean doing some training, or doing some voluntary jobs to bulk out your portfolio.
  4. Establish a personal brand. This isn’t as big a deal as it sounds, but does mean having a solid resumé and LinkedIn profile, and sometimes some other ways to demonstrate your expertise.
  5. Learn how the freelance job boards work. Even if you have a rich personal network to draw on, it’s wise to understand the wider world of freelancing.
  6. Put yourself out there, and start pitching and applying for things.
  7. Make sure you provide perfect work and delight your clients, so that they want to work with you again and recommend you to others.

Repeating and refining these steps is the essence of becoming a successful freelancer.

 

8. How much does it cost to start this type of business and how much on a monthly basis to maintain it?

Freelancing is generally a low-cost venture, but that’s not to say it’s free. Depending on what you do, you may need specialist equipment and / or software. And if you’re switching from an employed position, you may have to buy things like this yourself for the first time.

A good computer is a must, as it’s often the key tool of your trade. You may also need to budget for things like insurance, possibly including healthcare cover if you are somewhere like the US where this isn’t covered by tax payments.

When it comes to monthly costs, the main things I pay for include software subscriptions and insurance policies. Thankfully these tend to build over time and no individual thing is particularly expensive. You can start out as an online freelancer without even having a personal website, and add things like that once you gain some momentum.

I also recommend budgeting for ongoing training and learning. Thankfully there are all kinds of ways to learn online inexpensively. Companies have training budgets, but when you’re a freelancer, keeping your skills on point is on you.

 

9. What kind of training is needed to become a freelancer?

I’d say the training splits into two: learning about freelancing itself, and building skills around the specific work you want to do.

Courses like my own Freelance Kickstarter cover the first part. Freelancing is a skill in itself, and we’ve covered some of the important areas in this interview already. Stuff like setting rates isn’t immediately obvious, so learning from those who have been there and done it already is very valuable.

When it comes to skills-specific training it depends what work you’re doing. Let’s say somebody wanted to work as a freelance social media manager. Not that long ago it would have been all about Twitter and Facebook. Nowadays Pinterest is a much bigger deal for many people, and TikTok is emerging as the latest trend.

So as that freelancer, you need to decide what you’re going to focus on. Do you want to be the “go-to guru” for TikTok, or be more of a generalist with social media in general?

It’s wonderful to have the choice.

 

10. Are there any other tips that you have for someone who wants to become a freelancer?

I have many!

The one I repeat over and over is that you have to eventually go for it and make the jump. I see a lot of people who never get past the “thinking about it” phase. Meanwhile the go-getters have taken the leap of faith and started to build success.

Moving to freelancing is one of those things where there may never be a perfect time to do it. Those who keep waiting for that time to arrive can easily find themselves looking back ten years later with the same commute and the same job.

Another thing I’m like a broken record about is the importance of “paying your dues.” There are often plenty of less-than-ideal gigs to finish successfully before you arrive at the amazing ones.

I wrote about some really dull topics in my early days of freelance writing, for example. But I had to wade through that stuff to build my reputation. It all felt thoroughly worth it a few years later when I was being well paid for travel articles and restaurant reviews!

You learn something from every job along the way: How to handle clients, renegotiate rates, refine your skills, and get work done more efficiently so that you’re boosting the value of your time. Freelancing isn’t supposed to be easy but it’s almost always challenging, interesting and rewarding.

And let’s face it, many people don’t feel that way about their jobs.

 

11. What can a person learn from your course? Can you tell us about some of the people who have successfully taken your course?

OK, so Freelance Kickstarter expands on all of the topics I’ve touched on here, and many others. It’s intended to remove confusion, and that feeling of overwhelm that often descends when researching this stuff online. It helps new freelancers make a clear plan for getting started. As the strapline goes, the idea is that people “stop wasting time, and start making money!”

I never intended to create a course, but after running the HomeWorkingClub website for several years, it became clear there was a space for something like this. I make it very clear that it’s not some kind of “get rich quick” scheme.

To be brutally honest, I don’t want students who are looking for shortcuts. There is real hard work involved in being a successful freelancer, but it’s a more than viable option for those willing to do what’s required.

The course starts with the basics of working out what you can do and want to do, and presents LOTS of different options. It then moves on to auditing your skills and experience, building your brand, and working out your own personal goals. I particularly like that section because it helps people learn the exact process I use myself every few months to keep things moving forward.

The next lessons cover finding clients, and there’s a big module on learning how to use freelance job boards like Upwork. Once people have completed this, they will know how to uncover the good and genuine jobs, and how to side-step the time-drains and scams.

Students also learn about setting rates, and all the other practicalities of running a freelance business, from getting the tech right to taking undisturbed holidays! We also cover side gigs, and long-term slow-burn projects like blogs and self-published books.

I provide personal support on the course, and people can ask me all the questions they need as they go along. There are also regular exclusive podcasts with extra advice and news of industry developments and new opportunities.

In terms of people who have already taken the course, I recently published a case study from a lady called Lyn. She now has “more work than she can handle” as a freelance writer working via Upwork. Two things that have particularly pleased me about her situation is that she’s cherry-picking projects that interest her, and that she’s been able to do exactly what I suggest in increasing her rates as she builds experience and reputation.

I’ve also had great feedback from people at a much earlier stage. I’ve kept the course price low so that people can use it to help decide if freelancing is for them – just dipping their toes in for the first time.

As one student said, the course is “ideal if you are considering going freelance and don’t know where or when to start, or even if freelancing is for you.”

Several of the testimonials so far have aligned perfectly with the original objective, which was – essentially – to help people see the wood for the trees in an environment than can seem very daunting to begin with.

I set out to create the course I wish I’d had! I’ve made more than my fair share of mistakes in over 16 years of freelancing. The people taking Freelance Kickstarter should hopefully be able to avoid the same ones!

Click here to learn more about Freelance Kickstarter.

 Are you interested in learning how to become a freelancer?

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Flexible Spending Accounts: Rules, Regulations, and Uses

clear piggy bank

Flexible spending accounts, or FSAs, are special savings accounts offered through some employer benefit plans. They allow the account holder to pay for certain out-of-pocket medical and dependent care costs with tax-free money.

However, “tax-free money” is a phrase that’s not used too often in personal finance articles—at least not legitimate ones.

So it’s no surprise that FSAs come with a decent number of rules and regulations, which limit the application of this special, tax-favored savings vehicle.

For instance, FSA rules cap the amount of money that can be placed in the account each year ($2,750 for 2021), and also dictate which types of expenses qualify for an FSA distribution.

Still, FSAs can be a powerful tool for taking care of unavoidable medical costs that frequently wreak havoc on American finances, even with the rules that keep them in check.

Flexible Spending Account Explained


We’ve covered flexible spending accounts in depth elsewhere on our site, but as a quick refresher, FSAs are savings programs offered through employers—which means that self-employed people, like freelancers, aren’t eligible.

(Psst: if that’s you, buying a healthcare plan on the market might be an option to consider, though you may also be able to get coverage through an employed spouse’s plan.)

FSAs are also sometimes called flexible spending arrangements, and there are a few sub-types, such as dependent care FSAs (DCFSAs) and limited purpose FSAs (LPFSAs).

However, for the purposes of this article, the focus will be on the account rules that govern plain old healthcare FSAs, whose funds can be used to cover you, your spouse, and your dependents.

Flexible Spending Account Rules: An Overview

IRS Publication 502 .

From acupuncture and alcoholism to birth control pills and psychological counselling, many services do count as qualified medical expenses.

Along with being the right kind of medical expense, services paid through FSA funds must be applied to the right people in order to be covered. Eligible beneficiaries include:

•  The account holder
•  Their spouse
•  Dependents claimed on their tax return
•  Children age 26 and under

Keep in mind, too, that FSAs generally work in conjunction with other types of health benefits and coverage, and funds can’t be used to reimburse services that are covered under other health plans.

It might be a valuable exercise to write out all of the expected medical expenses you’ll face as a family at the beginning of the plan year in order to decide how much to contribute, including additional coverages, in order to avoid overcontribution. While nobody can predict the future, some routine expenses can be foreseen—and a little bit of planning might save a lot of forfeited funds in the end.

Taking Distributions from an FSA


The process for taking distributions from an FSA may vary based on the plan. In some cases, distributions are made from an FSA to reimburse the account holder for medical expenses they’ve incurred. Some FSAs also have a debit, credit, or stored value card that can be used to pay directly for qualifying expenses.

Fair Health Consumer , would set back an uninsured person living in Portland, OR more than $20,000. Although that cost varies depending on location, it’s clear to see that additional coverage is necessary for most.

Furthermore, although the tax-free nature of FSAs is attractive, the prospect of forfeiting parts of a paycheck is definitely not—and there are other ways to save cash for medical expenses and other emergencies which offer not just flexibility, but growth.

For example, the average savings account earns 0.50% APY in interest, and up to 0.80%, per the latest FDIC rate cap information, which isn’t a huge return, but is more than the 0% you’ll earn on an FSA. That said, the value of tax-free dollars could easily eclipse the interest rate if the funds in the FSA are actually used.

While an FSA can be a beneficial tool, especially for those who know they’ll spend a decent amount out of pocket on healthcare, a SoFi Money® cash management account can add additional help in this instance; there are no account fees and account holders can earn cashback while they save and spend.

The Vaults system allows you to set money aside for specific savings goals—including medical expenses as well as more exciting objectives like vacations or home renovations. The tax benefits of the FSA can make them an appealing and useful tool. But if you’re not sure you’ll use the funds saved in an FSA, SoFi Money could be an alternate solution. Those that will definitely use funds saved in an FSA may consider using SoFi Money as a complementary tool to work toward other saving goals.

Want to learn more about how SoFi Money might help you get your money right? Signing up takes minutes.


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com