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The Rewards--and Risks--of Freelancing

Susan Johnston

Generating income solely from a day job no longer fits the mold for many workers looking to boost their bank accounts. One in three working Americans--an estimated 42 million people--are now working outside the traditional 9-to-5 model, the Freelancers Union reports. But while freelancing offers greater flexibility and autonomy than a salaried job, it comes with a number of challenges, such as difficulty saving for retirement, buying health insurance, and surviving the feast-or-famine nature of self-employment.

Former labor lawyer Sara Horowitz founded the Freelancers Union almost 20 years ago, and her organization has advocated on behalf of freelancers throughout the country on issues including insurance and payment protection. Her new book, The Freelancer's Bible: Everything You Need to Know to Have the Career of Your Dreams--On Your Terms, offers tips for freelancers on negotiating fees, finding clients, and juggling the extra workload.

U.S. News spoke with Horowitz about the risks and rewards of freelancing and how the workplace is evolving from the traditional 40-hour work week. Excerpts:

What do you see as the biggest financial challenge freelancers face?

The hardest thing about freelancing is the episodic nature of the work. Sometimes you have so much work, and sometimes you have no work.

How do freelancers cope with that?

I think every freelancer panics--especially new freelancers. But [once] you've been doing this a while, you start to develop short-term strategies as well as longer-term strategies. In the short term, you have to be really scrappy. People who are more seasoned often have partners in their professional network who they can call and ask for work, and [have people] they give work to when they [are overloaded]. They have a nice give-and-take.

[Read: Mastering the New Freelance Economy.]

The long-term strategy is you really analyze your work almost like a stock portfolio. You think about your tried-and-trues, like your blue stocks--the things that are coming in every week, whether that's a part-time job or a steady gig with a regular client--and you make sure to nurture that.

At the other extreme, you think about new ventures. You're looking at where [your] field is going; where might there be new work. That might not be paying in a steady way, but it really helps you in the long term to move along.

What are some of the opportunities freelancers have that their full-time counterparts may not?

Freelancers have a series of work projects that really enables them to plan their life about what they're going to do in a day. They end up really planning their lives very differently than people with regular full-time jobs. If there are things that people really care about, they actually have a chance to do it. Many people really care about being home when their kids come home or singing opera or having another career that wouldn't sustain their lives. They can very consciously have jobs that pay money to support them and then do the other things that they do, so freelancers often lead pretty interesting lives.

Also, they're starting to almost have a parallel way of being. They are more frugal because it's not clear where your next work is coming from, so you really think a lot more about your consumption and your spending. I think that thoughtfulness makes people act in different ways--thinking more consciously about food, buying locally, being scrappy.

As the trade becomes more mainstream, are you seeing a decline in some of the stereotypes around freelancing?

Freelancing used to be a euphemism for unemployment, and that's just so over, as people who are laid off after a full-time career are freelancing and people who are graduating from college are freelancing. People are freelancing in all sorts of professions, from doctors to programmers to security guards.

A lot of people started freelancing out of necessity during the recession. As the economy recovers, do you think the self-employment trend will continue or will people gravitate back to that steady paycheck?

The conventional wisdom is that during recessions, companies start hiring temporary workers, and then when the recession lifts, you start seeing that the employment numbers are coming back. We're not really actually seeing the employment numbers coming back in any real significant way, and we're not really counting employment properly because we're not including this new part of the workforce. It's only counting the full-time W2 jobs.

I think what we're really seeing is a trend towards gigs. People are working full-time jobs and often working gigs to make up for the declining standard of living or they're putting together a series of gigs when they're between jobs. This is just part of the way the whole work landscape is shaping up.

[Read: The Best-Paid Moonlighting Jobs in America.]

You mentioned issues around measuring the freelance and self-employed workforce, as opposed to the current method of counting the W2 workforce. What are some of the Freelancers Union's initiatives around that issue?

The president has put in his budget to count the independent workforce, and that's something that we are strongly encouraging him and the Department of Labor to do. We're going to be working on that a lot more in 2013 and also starting to look at the unemployment numbers and saying, 'How are we relying on these numbers when they're only counting full-time employees?'

We hear the Freelancers Union is also working on legislation in New York state about protecting freelancers from non-paying clients.

Yes, it's also been introduced in New Jersey as well. One of the difficulties that freelancers have is that they do work, and then they don't get paid. In fact, our survey found that 77 percent of our members had that happen. If freelancers were regular employees, they could go to the Department of Labor. One of the things we're trying to do is when a freelancer hasn't gotten paid, they should be able to go to the Department of Labor, and the Department of Labor should be able to go to the companies to try and help people get paid.

[Read: 10 Questions to Help You Earn More Money.]

How do you think the workplace will look five or 10 years from now, and how can readers prepare for those changes?

I think that we are going to see even full-time jobs becoming short-term. It's just a greater transience, and I think it's very important for people to build up their own professional network. By that, I mean not just your network in a kind of boring, old-fashioned way; more like a series of relationships where people are outsourcing some of their work, or helping and collaborating with other people and building new ways that they can minimize the risk.

We've been doing this very actively with health insurance and retirement, disability, and life insurance, but I think we're going to start seeing a lot of new businesses that will help people find work and help them manage their taxes and other things. It's a whole new field out there.

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