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SETTING UP ON YOUR OWN: HOW TO GO FROM CORPORATE COG TO FREELANCE FINANCIAL SERVICES PROVIDER

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An ever-increasing number of people are moving away from full-time employment towards freelancing. In the past, such a career move was usually reserved for those in senior positions facing redundancy or looking for early retirement. Nowadays, however, a much broader group of individuals are taking steps to set up on their own and become their own boss. Here are some tips to help ensure that your transition towards freelancing is smooth and successful.

 

What Does Freelancing Entail?

Many people have a misconception that the grass is greener on the freelance side of the employment market. While it is true that there are considerable upsides to breaking out on your own, these bring some complications with them.

One of the biggest mistakes that new freelancers make is simply sitting at home and waiting. This tactic almost always ends badly. As a freelancer, you can’t rely on your superiors to provide you with work. Instead, you need to get out there and fight for contracts. Additionally, you may be required to work different hours than you are used to since you will be giving up a nine-to-five office job stability.

Despite these issues, the ability to set your own working hours, control your schedule and workload and have more freedom in your working life is enough for some people to move towards freelancing. If managed correctly, the upsides of freelancing can significantly outweigh the drawbacks.

 

Get Out There and Network

Have you ever heard the saying, “it’s not what you know, it’s who you know”? Sure, you need to be competent and skilled to successfully retain clients, but good luck getting any in the first place without some graft.

Before setting out on your freelance journey, you should contact everyone (really everyone) that you know in your industry. Inform them of your decision to become an independent contractor and give them a timeframe for when you will be taking on jobs. Also, impress them with your skillset at the same time.

Discussions with prospective clients will undoubtedly take place some time before the work is actually due to begin, so giving yourself a head start here is essential. The more experience, contacts and references you have before going freelance, the better your chances of success later on.

Additionally, make use of networking events or services like Linkedin to publicise your services. This can help you find new contacts in the industry and, ultimately, more work later on.

 

Insurance is Essential

When working for a company or another individual, there are things that you will likely never need to think about. This is one of the key upsides of full-time employment over freelancing. When you strike out on your own, you will need to consider aspects of business like insurance or taxation that you might not have needed to before.

If you are thinking of becoming a freelance financial service provider, you will need to consider insurance to protect your business and your clients. This is essential, as, without insurance, your business could be dramatically impacted by an unforeseen event. Clients may also be unwilling to work with a contractor unless sufficient safeguards are in place.

Thankfully, it is becoming more accessible than ever for freelancers to get financial services insurance, thanks to the industry’s ever-growing number of independent providers.

 

Take Control of Your Taxes

Much like any other job or business, freelancers are legally required to pay their taxes, whether federal, state or local. In practice, this means filing your estimated tax returns, much as you would had you started your own business.

The critical difference between filing taxes as an individual rather than as a business is that they will be filed under your name and social security number. For typical businesses, this would be the business name and their tax ID number.

If you have any clients who pay you more than $600 in a calendar year, they will need to provide you with an IRS form 109. You can use this to report your earnings to the relevant authorities.

 

Conclusion

On the whole, striking out on your own can be a great career move for many people in the finance industry. While it offers a lot of freedom, you need to carefully consider your strategy before becoming a freelancer. This will help you to gain clients and retain them in the future.

 

Finance

HOW TO TELL IF YOU’RE OVERPAYING TAXES

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HOW TO TELL IF YOU’RE OVERPAYING TAXES

Paying taxes is a necessary act in our world, and with good reason. Our governments use taxes to build the infrastructure we use, improve our children’s education, and fund the societal safety nets we all end up needing at least once in our lives, like Social Security, unemployment insurance, and welfare.

There’s a difference between paying your fair share and paying too much because that money could be used to better your situation instead of sitting in a government account. But how do you know whether you’re paying too much and what can you do about it? We’ve got a few tips below.

 

The easiest way to tell if you’re overpaying: Do you get a refund every year?

Does your yearly tax filing fill you with a sense of excitement because of the refund you’ll receive? Unfortunately, that excitement is a clear sign you’re paying too much in taxes.

Try to see your taxes like a loan you give to the IRS. If you pay too much, then you’ve given them above and beyond your fair share, interest-free. Yes, you get it back by April (if you file on time and there’s not an extension for a global pandemic) of the following year, but you’ve lost the opportunity to make that money work for you by either accruing interest, getting rid of debt, or improving your lifestyle. This is known as “opportunity cost” and removing as much of it as possible is a critical part of having a solid financial plan.

Balancing how much you pay in taxes works both ways. Underpaying taxes amounts to an interest-free loan from the IRS to you that will need to be paid in full by Tax Day on April 15. If you can land into a sweet spot where you owe $0 and are refunded a trivial amount, then you’ve adjusted your withholdings correctly. It’s a tricky situation to get just right, though, so let’s cover a few adjustments you can make.

 

How to adjust the amount of taxes withheld from your paycheck

Taxes in the U.S. are complicated, so don’t feel bad if you’re just now realizing you’ve been overpaying.

If you have an employer, the first step is to figure out which department handles your payroll and taxes. Typically this will be HR, though it can fall on the accounting department, too. You can update your withholdings at any time, though it’s better to adjust it when new life circumstances come up. These include:

  • Getting married or divorced
  • Having a child, either from birth or adoption
  • Changes in income

To adjust withholdings, you’ll submit a new W-4 that includes your updated tax situation. You shouldn’t need to send any additional verification, but check with the payroll department to see what the latest requirements from the IRS look like.

 

What to do after you’ve adjusted your withholdings

If you’re able to adjust your withholdings, you should see a bigger paycheck after your next pay period. While it can be exciting to have more money coming in, it’s important you use this opportunity to get into a better financial situation. Consider putting that “extra” money toward paying down your debt or putting it into a retirement account. Using that new infusion of cash responsibly will not only help your financial situation now but ensure you have a stable source of income in retirement, too.

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WHY THE EXPLOSION IN LOCAL RETAIL DEMANDS NEW PAYMENT METHODS

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Kasper Enggaard Krog, CEO at mobile payment and business technology firm, Vibrant, explains why micro businesses are being badly let down by contactless payment providers while local retail has boomed.

 

Before the pandemic, between 40[i] and 47[ii] per cent of micro businesses didn’t accept card payments, depending which statistics you prefer. This includes everything from corner shops to cafes and builders to barbers. They relied on cash, cheque, or where suitable, perhaps the laborious process of an invoice and bank transfer.

This is despite there being 6 billion contactless cards in the world and 47 per cent of people preferring to pay with one when at a physical point of sale[iii]. At first glance, it might seem that these small traders were cutting their noses off to spite their faces. Customers wanted to pay them with cards, why wouldn’t they just allow them to do so?

 

What was stopping merchants?

The answer is simple. Because for the smallest of merchants, accepting a card payment has always led to expensive ongoing fees, results in slow settlements, requires admin and calls for an up-front investment in cumbersome and basic technology.

It won’t be news to anyone in the industry that the recurring costs all add up. Transaction fees are typically between 1 per cent and 3 per cent, not to mention authorisation fees and merchant service charges[iv]. A credit card reader might be about £20 and the same for a receipt printer. This all eats into profit, not to mention time.

 

Kasper Enggaard Krog

The pandemic changed it all

Yet the pandemic has forced micro businesses to reassess their reticence to take card payments. Two reasons are behind this. Firstly, there has been an explosion in people shopping where they live. When lockdowns swept across Europe, it became hard to get to larger retailers. Local merchants of all sorts became a lifeline[v].

Not only that, but many people were forced to reconnect to their communities and realised they enjoyed shopping on their street and wanted to support independent businesses. The data proves this. According to research, the convenience store sector grew by 6 per cent in 2020[vi].

This led to the second factor, contactless payments were considered safer than handling cards or cash. The overall impact of more shoppers and the threat of infection led to a boom in contactless payments. In fact, the number of purchases made in May 2021 via contactless technology doubled compared with the same month a year earlier and was up 50 per cent on May 2019[vii].

 

Woefully underserved

This shift to accepting card payments among the smallest of businesses should be applauded. There are currently £2.25 trillion in cash and cheque payments made in Europe[viii]. They’re now opening themselves up to this huge market.

This is undoubtedly good for consumers and merchants alike. But it does beg the question, why did it take a pandemic to cause the change? Why did they have to face the prospect of potential infection or financial ruin to make the move?

Simple, the existing model is broken. The barriers to accepting card payments remain – high cost, poor tech and slow settlements – but they’ve been overcome through necessity rather than benefit. These businesses remain woefully underserved yet have been forced to accept what is on offer. There must be another way.

And there is. For the first time, the technology now exists for market traders, stall holders, car washes – any number of micro businesses – to take contactless payments using only their phone. No additional tech. No annoying dongles or readers that take up space and will ultimately add to the vast rubbish bin of obsolete, single-function peripheries. These will soon join calculators, MP3 players and digital cameras.

Furthermore, this tech not only takes payments, but within months is expected to allow merchants to run their whole business on their phone. They will be able to add product lists, inventory details, accounting tools and much more. It’s like a mini enterprise resource management system for the tiniest of firms. And the fees are transparent, predictable, lower than the market rate and don’t have binding contracts. Importantly, it also has the backing of Visa – and Vibrant is leading the roll-out.

The business is proud to do so and sees a huge opportunity. Micro businesses are now worth £1.85 trillion to the European economy[ix]. Their importance will grow, and they need the payments sector to take note of their needs and do better. It’s no longer acceptable to foist poor products and services upon them and allow the pandemic to drive change rather than innovation.

The explosion in local retail demands new payment methods – and they must be made available. In many ways, it’s a scandal that it took a pandemic to force change.

 

[i] 40% of the UK’s micro businesses do not accept card payments
[ii] Visa data
[iii] 40% of the UK’s micro businesses do not accept card payments
[iv] Credit card processing fees
[v] Local heroes: The retailers benefiting from the rise of localism
[vi] Lumina Intelligence UK Grocery Data Index for 2020
[vii] Contactless payments dominated as lockdowns eased
[viii] Visa data
[ix] Visa data

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