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Reasons Why a Freelancer and Contract Employees Should Avoid Debt: Freelance businesses are growing rapidly due to rapid technological invention and growth. In recent years the majority of small to big companies hiring plans has changed too. And instead of hiring permanent employees, all are hiring staff on contract basis for a duration of 11 months to 18 months and so on. These hiring practices have put companies in secured shoes. They do not need to worry about bearing the cost of employees for their salaries and other benefits when their business suffers or their projects end if staff were hired to work on any special project. Logically this sounds good too and there is no harm in it.
But this raises the question of job security for the contract employees. Similarly due to unemployment in every corner of the world or for the flexibility of working independently and getting livelihood many professionals are leaning towards freelancing.
The Golden Period
When a person starts freelancing or joins a new job as a contract employee then they start earning good money depending on their skillset. And due to this they change their lifestyle and start enjoying the life they always dreamed about or by seeing the lifestyle of their colleagues. This is called their gold period. Their worry to earn money ends with their job. And they forget to plan and think about their future.
There are many lectures available online on the internet regarding how to manage personal finance for a debt-free life. But rarely any young kids care for this. With growing lifestyles their expenses increase and some of them take personal or home loans too to fulfill their dream.
Their thoughts behind taking a loan is that they do expect that their life will always go on like this and they will be able to manage it by working the way they are working and earning money. And they easily avoid golden rules of finance management which are meant for freelancers and contract employees.
Whatever you earn, save some percentage of your earnings for your rainy days when there won’t be any work for you or for any reason if you need to stop working due to sickness or any unexpected happenings in life. Hene they never save money and never do their financial planning. And it pushes them into debt trap.
Impact – Why a Freelancer and Contract Employees Should Avoid Debt
If a freelancer or contract employee has taken any personal loan, or home loan or if they have credit card bills to pay or if they have bought goods on EMI and suddenly they stop getting work. Or if their contract ends and they fail to find a new job or new freelance opportunity then just think about what will be the situation when they need to pay a good amount of money and they don’t have any savings in their bank account.
I can’t imagine this because this is totally scary. No one will come forward to help you in your financial crisis. And if you borrow cash from other sources then how long that will last and it will be another liability for you.
This would be a really critical bad situation. It attracts a lot of frustration and hopelessness and a happy life will be ruined until you start getting new job opportunities and new business. So it is always recommended to freelancers and contract employees that they should start saving money from their first month of income and with their first job. A small percentage of savings contribution each month will come to you and will be a big help when you need it most.
Solution
As a freelancer or contract employee you should always keep your foot on the ground and should accept the fact that your job is not a secure job. You are not going to get any corporate or government aid of any kind when you don’t have enough work with you.
Never ever take a loan of any kind. Whether it is a personal loan or a mortgage. No matter what, you should avoid being in debt if you want to live a peaceful life. Because being in debt and being unemployed will completely ruin your life. It will be very difficult for you to overcome this bad financial situation. Never ever expand more than you are earning and adopt the habit of saving some money each month.
Conclusion
Freelance businesses are growing into this fast paced gig economy and it is helping millions of people to live a happy life and earn their livelihood. Similarly, the corporate world has changed their hiring habits and they are hiring workers on contract basis for a smaller period of time to keep themselves burden free when they would have no sufficient business or projects to continue for some period of time. Because no one gives free money to anyone. And this changing work environment has brought a number of challenges which freelancers or contract employees need to learn about how to avoid and handle such challenges successfully.
One of the biggest challenges is to maintain the cash flows in rainy days when a freelancer won’t have any work in hand and a contract employee won’t have a job. So it makes sense to avoid debt and live a debt free life.
Why a Freelancer and Contract Employees Should Avoid Debt FAQs
Is freelancing good?
Of Course doing freelance work is good and it helps us earn our livelihood and live a good standard of life. But as a freelancer it is always advisable to avoid debt and overspending.
What is contract employment?
Contract employment is a new hiring standard for companies where they hire workers on a contract for a small period of time such as six months, 11 months or more but they never offer permanent jobs to their employees.
Is a full time employment contract a permanent job?
No, a full time employment contract is not a permanent job. It just means that you will be working 9 to 5 as a full time worker in the company but your job will be on contract for a fixed period of time.
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