Beating Broke

Personal Finance from the Broke Perspective

Can You Earn a Stable Income by Only Freelancing?

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Many ambitious professionals are turning to freelancing in order to advance their career and make extra cash. In fact, studies suggest that freelancers will soon comprise a majority of the US workforce. What’s more, there are lots of well-known benefits to freelancing. After all, freelancers get to be their own boss, set their own schedule, and follow their passion. However, it’s understandable for prospective freelancers to wonder about the financial viability of such a job. At the end of the day, can you really make a good living just by freelancing?

How Much do Freelancers Make?

Unfortunately, the answer to this question depends on a number of factors including your experience level, skills, personal connections, and industry. However, it’s not unreasonable for freelance writers, for example, to make anywhere from $40,000-$60,000 per year. And while that’s hardly an opulent salary, it’s certainly enough to keep the creditors at bay. It’s important to remember though that these figures are just estimates. Certain freelancers with highly sophisticated knowledge of an industry or web-design practice should be able to attract high paying jobs. Indeed, B2B companies will pay top dollar for freelancers who are familiar with an esoteric product like a chamber slide or a high pressure homogenizer. Alternatively, new freelancers without much experience and with few connections could find it difficult just to make ends meet.

Financial Drawbacks of Freelancing

While on paper freelancers may seem to make more money than their traditional, nine-to-five counterparts, the reality is that there are certain financial considerations that only freelancers have to deal with. For one, most freelancers operate as independent contractors. As such, freelancers have to cover all costs associated with their business, such as office equipment and startup expenses. Furthermore, freelancers are unable to access certain benefits like group health insurance, which are usually provided by an employer. Instead, they typically have to pay a premium for such services.

Do Industry Trends Affect Freelancers?

The short answer is that the fluctuations of the stock market and changes within a given industry inordinately affect freelancers. Harsh though it may sound, business owners will typically cut ties with a freelancer before they think about laying off any full-time personnel. On the other hand, freelancers can make a killing in a market that’s riding high while large corporations have plenty of capital available.

Is Freelancing a Good Idea?

In the end, each professional is different. They have different goals, dreams, and preferences. So while it is possible to carve out a career working solely as a freelancer, it’s probably a wise idea to take on a few side projects first before you commit yourself fully to this path.

What’s Credit Insurance and How Can It Protect Me?

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This post in collaboration with Paul Brian

Credit card spending continues to increase in the United States. According to NerdWallet’s 2018 household debt survey, credit balances carried month to month increased five percent in late 2018 to surpass $420 billion.

The same survey found that around nine percent of Americans who have credit card debt don’t think they’ll ever be completely free from it. Considering the average revolving balance among households is nearly $7,000, the hopelessness makes sense.

While careless spending may be the reason for many people’s misfortunes, it doesn’t tell the whole tale. Aggressively high interest rates can punish any type of financial hardship, self-imposed or otherwise.

In these cases, things like credit insurance can prove valuable. There are many types of credit insurance, ranging from consumer to business needs. However, for the purpose of this article, we’ll discuss what consumer credit insurance is and the protections it offers.

What Is Credit Insurance?

Credit insurance is just as it sounds. It’s an insurance policy that a borrower has on their credit card. It’s a safeguard that pays off the credit card debt if something unexpected occurs that makes repayment difficult. The main types of credit insurance include credit life insurance, credit disability insurance, credit unemployment insurance, and credit property insurance.

How Do These Different Coverages Protect Me?

On a broad level, understanding how credit insurance protections work is quite straightforward. Credit life insurance pays off your debt if you pass away instead of your family being burdened by what you owe, while credit disability will cover your payments if you become disabled and aren’t able to work.

Less common types of credit insurance are unemployment insurance, which takes care of payments if someone is laid off; and credit property insurance, which protects property used to secure a loan if the property is damaged.

As ValuePenguin notes, any of these coverages can be taken out as a single or joint policy. A coverage type may also be worded differently depending on the institution offering it.

Do You Need Credit Insurance?

Credit insurance seems prudent to have, but how essential is it? It’s important to have financial protections in place that will cover you and/or your family should something unexpected occur, but doing so via credit insurance is typically the more expensive option to take.

This of course excludes situations in which credit insurance is required by the lender, such as in mortgage loans. However, this usually only happens when the borrower puts down less than 20 percent. This insurance can also be canceled once the borrower has built their equity over 20 percent.

As you peruse credit insurance terms and offers, evaluate the benefits and costs of life, disability, or supplemental unemployment insurance packages to ensure you’re getting something you actually need.

If you do find a credit insurance package you like, be sure to look at the fine print. It’s often a lack of preparedness and understanding that buries consumers in debt in the first place, which a quick scan of Freedom Debt Relief reviews unfortunately verify.

Like any credit card agreement, credit insurance policies are packed with jargon, small font, and exclusions. Ask questions until you know what you’re getting in a credit insurance policy. Ask questions like:

  • Does the insurance cover the entire loan’s entire term and balance?
  • Are there any exclusions that would impact coverage?
  • Does the lender have the right to change or cancel the policy at their discretion?
  • How long do the benefits take to be paid?

The last thing you want to do is pay for a policy monthly only to find that it doesn’t protect you in your time of need.

Debunking Myths about Filing for Personal Bankruptcy

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If you’re thinking about filing for personal bankruptcy (either chapter 7 or 11), then the most dangerous adversary you face at this time isn’t an army of aggressive creditors: it’s a horde of devastating myths!

Indeed, there is arguably more misinformation floating around online and offline about bankruptcy than there is reliable information. That’s the bad news. The good news is that you can arm yourself with facts so that you can make informed decisions that are best for your current and long-term financial interests.

To that end, let us debunk the most enduring — and potentially catastrophic — myths about filing bankruptcy:

Myth: Filing for bankruptcy is an admission of financial irresponsibility or incompetence.

Fact: Across the U.S., more than 1.5 million individuals file for bankruptcy protection each year. The vast majority of these people aren’t thrill-seeking spendthrifts. They’re regular, ordinary people who fell into a debt hole that became a debt trap. For some, it happened slowly over time. For others, they were financially sideswiped by unexpected medical bills, home repairs, job loss, divorce, and the list goes on.

The message here is simple: if you decide to file for bankruptcy, then be assured that it’s nothing to be embarrassed about or ashamed of. Unsustainable debt happens. Filing for bankruptcy is a legal process designed to help people get out of debt and start fresh. It’s a protection, not a punishment.

Myth: Filing for bankruptcy will destroy your ability to get a loan in the future.

Fact: Yes, it’s true that filing for bankruptcy will damage your credit score (the actual number depends on where your credit score is right now — the higher your current score, the larger the drop).

However, it’s not true that filing for bankruptcy will permanently destroy your ability to get a loan in the future. Within months of filing for bankruptcy you can start rebuilding your credit score by applying for secured credit cards, and paying all of your other bills on time and in full. Within a year you’ll be eligible for a car loan or personal loan (you could actually get a car/personal loan sooner, but the rates will be sky high), and in a couple of years you’ll qualify for a competitive-rate mortgage.

Ironically, many people who file for bankruptcy end up surpassing their old credit score ceiling, because in their new post-bankruptcy life they are in control of their saving and spending, and are far more aware of the dangers of only paying the minimum amount on credit cards, buying “too much car” or “too much house,” and so on. They’re like people who, after getting a serious health scare, end up taking their health and wellness to unprecedented levels. They go from couch potato to marathon runner.

Myth: To save money, you should represent yourself in bankruptcy court.

Fact: If you have a legal background — and this doesn’t mean a few law classes in college or a neighbor who was once a paralegal — then you might be fine representing yourself in bankruptcy court.

However, if you’re like most people — i.e. you couldn’t write a book on how to correctly and safely file for bankruptcy — then do yourself an immense favor and consult a bankruptcy lawyer. You’ll not only avoid potentially costly mistakes, but you’ll save a great deal of time and stress. Why stress? Because once you file for bankruptcy, you want to ensure that everyone else around the table — from the court-appointed trustee, to all of the creditors who want a piece of the settlement pie, and even to the judge who is a human being and can make errors — behave in a legally compliant and appropriate way. A bankruptcy attorney ensures this happens.

The Bottom Line

Arming yourself with bankruptcy facts — and debunking myths — will help you make an informed decision on whether moving ahead in this direction is in your best financial interest.

If so, will it be a walk in the park? No. But it won’t be a trek through a minefield, either. With the right information, guidance and support, you’ll make it through this phase and into your new, better financial life ahead.