 This is Henry. A little bit more here, like this with a little something. Henry is a photographer who just decided to shift his career from a full-time position to freelance. And luckily, he has already found a client. And boom, break time. But he still feels like everything is brand new, and he needs to learn the ropes of working as a freelancer. He often finds himself wanting to call his friend Francis, a veteran freelance illustrator who has it all figured out. Hey, Henry. How goes the freelance life? It's actually a bit better than expected so far. I already have my first client. I'm not surprised, knowing you, though freelance life can be unpredictable. I was actually thinking about that today. As a freelancer, how do you deal with unpredictable income and expenses? Well, going into this, you should always have an emergency fund saved. That way, you can cover a few months worth of expenses should you ever need it. About how much savings do you already have? Regardless of his current savings, Henry should always aim to have three months of expenses saved as an emergency fund. This way, if he goes through a slower phase, he will be able to pay his bills and cover his living expenses. Super helpful stuff. Thank you. Hey, it's what we freelancers do. We look out for each other. Talk soon. You got it. Thanks again, Fran. Bye now. Henry now has a great plan for his emergency fund. A few days later, he has a call with his friendly banker, Arthur, who has spent years advising freelancers on all aspects of their financial situations. Hey, Arthur. Hey, Henry House Business. It's good. It's good. I was just talking with my friend Francis yesterday about creating an emergency fund, and I'm working towards getting that in place. That's great. Expect the unexpected, you know. I mean, that's what I tell all freelancers and business owners. Now, you can't calculate how much money you will make, but you can't calculate how much you want or even need to make. There's a simple formula for just figuring out self-employment costs. Are you ready for this? I'm ready. Lay it on me. So it's total earnings needed equals desired salary, plus your retirement savings, plus health insurance, plus business or home office expenses, plus your taxes, plus marketing costs. That's it. Do you get all that? I got it. That's great. Good. Now, tell me this. How exactly are you planning to charge clients? There are several options. Henry could charge per project, per day, or per hour. He should pick whichever option he finds the easiest to track, and that ensures he gets compensated the most fairly. A lot to think about. Yeah. Well, the beginning is the hardest part, and once everything is up, it gets easier. That makes sense. Well, thank you as always. Of course. We'll talk soon. Now, you take care of yourself, okay? All right. Bye. Thanks. Henry immediately gets to work on understanding how much money he wants to earn and starts making a new plan for how to charge his clients. A few weeks later, he's already gotten into the swing of his freelance life when Francis calls to check in. Hey! How are things going? Everything's great. I'm loving this. So good to hear. I was thinking, what's your plan for taxes? Well, I guess I don't have one yet. All I know is that freelance of taxes are a bit more involved. They are indeed. Grab a notebook. First of all, since you're self-employed, you'll now be paying self-employment tax on top of other taxes. So a good rule of thumb is to set aside about a quarter of your earnings to cover your taxes. Oh, right. That's different for sure. But you might also be able to deduct your business-related expenses, which can help. There's definitely a good amount to keep track of. In that way, an accountant can be super helpful. That said, there are also a lot of tools out there to make it easier if people want to do it themselves and save some cash. So what do you think? Are you planning on using an accountant? Either way, Henry will need to track all his expenses and learn how to classify them. An accountant could help him save time updating his records. But Henry should know the general process for submitting and paying his taxes. This is really helpful. Of course it is. Would you expect anything less? Never. I can't thank you enough, Fran. Anytime. Don't be a stranger, okay? You got it. And so, with freelancing advice from Francis and Arthur, Henry forges ahead, as part of the over 36% of Americans who freelance. And like all of them, he begins to develop freelancing advice of his own.