How Should Freelancers Prepare for a Recession?

This is How Freelancers Should Prepare for the next Recession

For the past nine years, we’ve enjoyed the longest bull market on record in the United States. However, what goes up must eventually come down, and the market is already showing some serious signs of weakening.

Even optimistic economists predict that we are due a recession within the next few years. The question, then, is how should freelancers prepare for the upcoming recession?

How a Recession will Affect Freelancers

Unemployment rate chart from 1996 to 2019 – Shaded areas represent a recession.

Freelancers aren’t exactly at risk of being laid off due to a recession since they are not completely reliant on any single employer. What they are at risk for, though, is seeing their business sharply decline.

During recessions, businesses of all sizes cut back their expenses and slow down their investments. This means that the budget available to go out and hire a freelance programmer to create a new application or a freelance writer to create a new series of blog posts takes a hit.

The good news for freelancers is that much of the work a freelancer does is going to be considered critical for many companies and likely won’t be the first area where they cut costs. For example, while a company may lay off a lot of lower-level employees during a recession, they aren’t necessarily going to suspend the higher level operations that freelancers are involved with such as marketing and website maintenance.

Nevertheless, companies may still cut back in these areas during a recession, leading to a decreased workload for freelancers. This makes it highly important for freelancers to prepare for the impact of a recession.

How to Prepare for a Recession if You are a Freelancer

Not being completely reliant on a single employer will make it easier for freelancers to weather a recession than many traditional employees. However, making preparations ahead of time is still highly important for freelancers eyeing the down the possibility of a recession in the not so distant future.

The most important thing by far that freelancers must do to prepare themselves for a recession is set aside an adequate amount of savings. Having at least enough money in the bank that you are able to live entirely off of your savings for six months is ideal. Having more is even better.

Compared to bull markets, recessions don’t typically last all that long. Since 1945, the average length of a contraction in the market has been 11 months. Granted, eleven months of economic downturn can be plenty painful, but it’s always helpful knowing that there is a light at the end of the tunnel that isn’t too far away. With enough savings in the bank, recessions are survivable.

If you aren’t doing so already, another effective thing you can do to prepare for a recession is to start budgeting your income. Sticking to a budget may not be a requirement for many freelancers when business is good. During a recession, though, having a well-thought-out budget in place can help you avoid financial pitfalls. Since it takes a little time to iron out all the kinks in a budget as well as a little time to get used to sticking to a budget, it’s important to set a budget now rather than waiting until you have to rely on one. You may have to adjust your budget when a recession does hit, but adjusting a budget is a smoother process than creating one from scratch.

Of course, budgeting as a freelancer can be somewhat difficult since you might not necessarily have a stable income. In other words, setting a budget is a little more complicated when you don’t know how much you’re going to earn on a week by week basis. Thankfully, there are budgeting methods that freelancers can employ that make it much easier to set and stick to a budget on a variable income.

Finally, one of the best responses to a recession that freelancers have available is hustle. If you’ve already built a thriving freelancing career, then you know what it means to hustle. Likewise, if you’re just starting out as a freelancer and are determined to succeed then chances are you are hustling for clients already.

Established freelancers are often able to step back their marketing efforts to a large degree once they are able to rely on a consistent amount of work from long-term clients. During a time of economic downturn when much of that work starts drying up, though, established freelancers will need to go back into hustle mode and start marketing themselves to new clients more fervidly in order to replace the workload that they lost.

Marketing yourself as a freelancer is no-doubt a lot of work, and it’s work that you won’t immediately be paid for. This is why it’s so beneficial to establish a network of clients that you can rely on for a steady workload. Nevertheless, having the option to go out and start finding new clients and new sources of work is a major benefit for freelancers during a recession.

Finding a few new clients during a recession as a freelancer is much more doable than finding a new job as a laid off employee during a recession, which is one more reason why freelancers are arguably much better positioned to survive a recession than traditional employees. Still, you’ll probably need to be prepared to start putting in quite a few extra hours marketing your services during a recession if you want to maintain the same workload that you currently enjoy.

Conclusion

Freelancers have a number of key advantages when it comes to surviving a recession. However, it’s still highly important to start preparing for a recession ahead of time by putting back money in savings, setting a budget, and preparing to ramp up your marketing efforts. With the right preparation and enough motivation, your freelancing career should be able to survive any upcoming recession, putting you in a great position when the sky clears and the economy starts trending upwards again.