It is the type of forecast you would expect in the morning weather report. But this latest outlook in a report by IPSE and Sherpa, is about freelancers’ finance.
The sunshine? An encouraging 72 per cent of the self-employed are currently financially secure and happy. The cloudy? Over half were anxious or stressed. And the stormy? More than three quarters (77%) are worried that the money they have – or will save – won’t last.
And this uncertainty could affect more than just people’s wallets too. Recent research by the Chartered Institute of Personnel and Development (CIPD) found a strong link between financial circumstances and overall wellbeing among employees. It found money worries caused lack of sleep, difficulty
concentrating and making decisions, and even health problems.
IPSE and Sherpa launched their report, The Path to Prosperity, to both understand and find new ways to improve financial wellbeing – and by extension other kinds of wellbeing – among the UK’s 4.8 million self-employed.
What does financial wellbeing mean for the self-employed?
What exactly made for financial wellbeing among the self-employed varied a lot. Forty-six per cent said that for them it was having the financial freedom to make choices and enjoy life.
Another 40 per cent said it was about having enough to provide for their family and loved ones, while a third (37%) also said being able to put money away for retirement was an important factor.
There were some quite significant age divides. According to the report, millennials saw their financial wellbeing on a more short-term basis. For them, the most important thing was having enough money to set aside for more immediate financial goals like buying a first home.
Generation X and baby boomers, on the other hand, were more likely to prioritise longer-term goals, like putting money away for retirement or avoiding debt.
Getting it wrong: What's the impact of poor financial wellbeing?
So, what happens when freelancers can’t meet their criteria for good financial wellbeing? Well, to begin with, it looks like many freelancers often don’t. Nine out of 10 said they had been concerned – at least occasionally – about their financial situation. And 51 per cent said they felt anxious or stressed as a result.
It’s not just mental wellbeing that’s affected either – poor financial wellbeing hits freelancers’ business potential too. Of those who had worried about their financial situation, almost half had considered giving up self-employment (45%), or accepted work that they wouldn’t typically take on just to make ends meet (44%).
While many freelancers seem to have had financial worries at some point in the past, however, the majority (72%) said they were happy and financially secure at the moment.
The report also explored some useful ways to stop these concerns recurring: recommendations not just for industry bodies and government, but also for the self-employed themselves.
Getting it right: How to improve the financial wellbeing of the self-employed
One of the report’s major recommendations for improving the financial wellbeing of the self-employed is that the government and financial services should coordinate their efforts.
It suggests they could, for example, work together to tackle late payment culture and provide more self-employed-specific advice. Another extremely useful step would be designing financial products that offer flexibility and account for freelancers’ fluctuating incomes.
Being self-employed, however, also means being master of your own destiny. And there are a number of things self-employed people can do themselves to develop their careers and earning potential to ensure their future is just as rewarding as their present – or even more so.
The report recommends not only building a strong business network, but also investing in training and developing skills. These are good ways to build up client lists, which, 39 per cent of freelancers said, is important for improving financial wellbeing.
Another essential way to improve financial wellbeing is tackling volatile income. Half of the self-employed (51%) said their fluctuating income was the main barrier to healthy finances. Some possible ways of counteracting this problem are putting a sound financial plan together, setting up insurance for times without work and saving for emergencies.
Suneeta Johal, head of research, education and training at IPSE, said: “Because of irregular work patterns, late payments and a lack of tailored products, self-employment can pose financial challenges and leave people concerned for the future.
“The crucial recommendations in this report can alleviate that and help the self-employed take control of their financial wellbeing.”
By Inna Yordanova