The Rewards—and Risks—of Freelancing

Why more Americans are turning to freelancing for cashflow.

Students in online courses need to establish a workspace free of distractions.
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Generating income solely from a day job no longer fits the mold for many workers looking to boost their bank accounts. One in three working Americans—an estimated 42 million people—are now working outside the traditional 9-to-5 model, the Freelancers Union reports. But while freelancing offers greater flexibility and autonomy than a salaried job, it comes with a number of challenges, such as difficulty saving for retirement, buying health insurance, and surviving the feast-or-famine nature of self-employment.

Former labor lawyer Sara Horowitz founded the Freelancers Union almost 20 years ago, and her organization has advocated on behalf of freelancers throughout the country on issues including insurance and payment protection. Her new book, The Freelancer's Bible: Everything You Need to Know to Have the Career of Your DreamsOn Your Terms, offers tips for freelancers on negotiating fees, finding clients, and juggling the extra workload.

U.S. News spoke with Horowitz about the risks and rewards of freelancing and how the workplace is evolving from the traditional 40-hour work week. Excerpts:

What do you see as the biggest financial challenge freelancers face?

The hardest thing about freelancing is the episodic nature of the work. Sometimes you have so much work, and sometimes you have no work.

How do freelancers cope with that?

I think every freelancer panics—especially new freelancers. But [once] you've been doing this a while, you start to develop short-term strategies as well as longer-term strategies. In the short term, you have to be really scrappy. People who are more seasoned often have partners in their professional network who they can call and ask for work, and [have people] they give work to when they [are overloaded]. They have a nice give-and-take.

[Read: Mastering the New Freelance Economy.]

The long-term strategy is you really analyze your work almost like a stock portfolio. You think about your tried-and-trues, like your blue stocks—the things that are coming in every week, whether that's a part-time job or a steady gig with a regular client—and you make sure to nurture that.

At the other extreme, you think about new ventures. You're looking at where [your] field is going; where might there be new work. That might not be paying in a steady way, but it really helps you in the long term to move along.

What are some of the opportunities freelancers have that their full-time counterparts may not?

Freelancers have a series of work projects that really enables them to plan their life about what they're going to do in a day. They end up really planning their lives very differently than people with regular full-time jobs. If there are things that people really care about, they actually have a chance to do it. Many people really care about being home when their kids come home or singing opera or having another career that wouldn't sustain their lives. They can very consciously have jobs that pay money to support them and then do the other things that they do, so freelancers often lead pretty interesting lives.

Also, they're starting to almost have a parallel way of being. They are more frugal because it's not clear where your next work is coming from, so you really think a lot more about your consumption and your spending. I think that thoughtfulness makes people act in different ways—thinking more consciously about food, buying locally, being scrappy.

As the trade becomes more mainstream, are you seeing a decline in some of the stereotypes around freelancing?

Freelancing used to be a euphemism for unemployment, and that's just so over, as people who are laid off after a full-time career are freelancing and people who are graduating from college are freelancing. People are freelancing in all sorts of professions, from doctors to programmers to security guards.

A lot of people started freelancing out of necessity during the recession. As the economy recovers, do you think the self-employment trend will continue or will people gravitate back to that steady paycheck?