How to Invest the Money You Earn as a Freelancer

Achieving financial freedom is a universal goal, but it’s especially challenging for freelancers.

Freelancers can’t lean on a company’s retirement pension plan, which requires them to chart their path to financial independence. But this autonomy can be a boon: freelancers can strategically invest their earnings, choosing exactly where their money goes. Achieving financial freedom means diversifying income streams, not just relying on tools like 401(k) that primarily secure your distant future. While saving is crucial, many aim to enjoy their earnings now, not decades later. By wisely investing, your money can work for you. While I’ve covered earning strategies for writers, it’s time to focus on amplifying those earnings through informed investments.

Enter the stock market and stay in it for the long haul

Putting your hard-earned cash in the stock market is not as intimidating as you may think. CNBC claims that you can even get started with $1, which while not much is “a start in the right direction” according to Ryan J. Marshall, a New Jersey-based certified financial planner. After gaining some confidence and learning the ropes, you can then look to invest more. One of the easiest places to start is with your retirement account (IRA). If you have already saved a substantial amount, you can use a small part of it to enter the stock market or other similar investment options. In most IRAs, you can specifically pick individual stocks, choose from a long list of mutual funds, or even rely on a low-cost investment manager. Just remember that while the stock market can be a high-reward activity, it also poses a high risk. That’s why you should do your research first and not dive in right away. You can even use stock research tools to help you uncover new market insights.​​​​​​​ As a freelancer, you’ll want to diversify your stock portfolio to minimize the risk that comes with investing in stocks. This follows the same concept as not putting all your eggs in one basket. Moreover, stay in it for the long haul and you’ll gain substantial tax benefits.

Invest as an LLC with your family

If you want to dip your toes in entrepreneurship through investing, then it is advisable to pool your funds with your immediate family and operate as a limited liability company (LLC). It effectively allows groups of people—in this case, your family—to gather up some money and capitalize on several growth options. You can do this through the aforementioned stocks, mutual funds, and even real estate (which I’ll get into later), among others. As a freelancer, you’ll want to have more than one revenue stream and a source of passive income. Let’s face it, no one wants to be working for the rest of their lives, and starting your own business is just another way to achieve that. Without a corporation to support you, starting an LLC with your family will give you both freedom and a foundation from which to build your business. Being an LLC lets you enjoy the many investor-friendly benefits such as asset protection, pass-through taxation, and limited compliance rules. Setting one up is also fairly easy. ZenBusiness outlines the steps to forming an LLC, which start with naming your family business, selecting a registered agent, and then filing the requirements. Another benefit of setting up an LLC for your family business comes from its operating agreement. This legally binding document will clearly state what can and cannot be done, which in turn prevents miscommunication and will resolve any potential conflicts between your close relatives.

Get into crowdfunded real estate

Just like entering the stock market, getting into real estate is not as complicated as it was before. There is a new category called “real estate crowdfunding” that makes it possible for small investors to enter the arena of large commercial properties without breaking the bank. Finance writer Adam Weinger describes the model as a group of investors who pool their money for an investment property that will be managed by a professional developer. Similar to partnerships, profits will be dispersed accordingly. While crowdfunded real estate investments are riskier and more expensive than stocks, owning a physical asset will give you much more financial security. You should consider this option if you are ready and willing to shell for a single property.

Consider investing in gold

While freelance work can be quite profitable, your money will depreciate with time. This is why you should counterbalance this by investing your earnings in something stable. Purchasing precious metals can be a good way to further diversify your investment portfolio and even combat inflation. There are several options out there, such as silver, platinum, and palladium, but for now, let us stick to the most accessible one: gold. Mint Life shares that investing in gold can be relatively easy, because of its proven track record. Even in unstable markets, this precious metal has remained steady compared to other more common investment vehicles. However, just like investing in stocks, bonds, or indexes, it is important to first determine your risk appetite. There are several fundamental ways to invest in gold. The first is by buying the actual metal, the second is investing in gold funds, and the third is purchasing gold options—with each having its pros and cons. So for you, a somewhat beginner investor who is looking for ways to effectively grow your money, the simplest way to get into gold is by purchasing it in its physical form and waiting for the right time to resell it for profit. Being a freelancer doesn’t mean you have to live paycheck-to-paycheck for the rest of your life. By being smart with your earnings you can create a foundation that will support you as you strive to make a mark in the world. I hope these tips have helped. Next up, you may want to explore a guide on starting freelance writing on UpWork with no experience.