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Working remotely as a freelancer seems like a great financial idea at first. It allows you to cut out commuting, work clothes, canteen costs, and other things . . . but switching to a career that enables you to work from home has its own costs.

Creating a home office environment is difficult enough, but then there’s also health insurance, retirement accounts, dealing with freelance taxes, increased utility bills, and other costly requirements. What should you take into account when considering making the switch to working from home? Let’s take a look.

The Savings You Can Make

First, let’s think about where you can expect to make savings.

Perhaps the most obvious is the end of your commute. Unless you consider the distance from your bedroom to your kitchen table or dedicated home office a commute, you can completely cut out this part of your life, and you’ve just saved potentially thousands each year on traveling to work. This means extra time for work as well as a massive savings!

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Other savings can be made on a uniform or suit (although it is worth keeping a couple in your wardrobe for meetings), and the vast sums of money you spend on lunch (and perhaps breakfast) can be saved in favor of your usual monthly groceries (which you can also save money on How to Use Technology to Spend Less on Your Groceries How to Use Technology to Spend Less on Your Groceries There are tons of places you can save money, and the grocery store might be the most important. Here are a variety of ways to save at the supermarket. Read More , with the right tools). In America, 30-40% of food is wasted, amounting to over 20 pounds of food per person every month. There’s scope for savings to be made there, and working from home could help!

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So, are you ready to start working from home?

You Need Money in the Bank

Well, stop what you’re doing. Really, get your bank statement out and have a good think. How much do you have saved? Is it enough to live on in an emergency (you know, like having no income)? You might have some residual income, but is that enough to live on in a squeeze?

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If you’re planning to work from home, you need to make sure that you and your family (if applicable) have the resources to deal with this. Then there’s reassuring yourself that the mortgage and other bills are paid, that you can eat, and that you can still afford your utility bills — including your Internet connection! Do you still need your smartphone? More importantly, do you really need mobile Internet anymore Save Money On Your Smartphone Bill: Cut The Mobile Internet Save Money On Your Smartphone Bill: Cut The Mobile Internet How much are you paying for calls and mobile Internet? Is your iPhone really worth that type of outlay? Do you use your Android tablet enough to justify paying over $50 a month? Read More when you’re working from home?

While you might be thinking about going freelance because you’re unemployed, some of these things still apply. Ensure your efforts aren’t subject to benefits penalties that could leave you poorer, too.

Beware Income Variability

Another reason to have a bunch of savings before and during your freelance career is the variability of your freelance income. While you may be lucky enough to build up a regular working relationship with one or two clients, there is nothing in your freelance working career that you can rely on.

Don’t be afraid of this, however; embrace it. The variable income will be a challenge, but so will finding new clients, and getting involved with bigger and better, higher paying projects. Your variable income may start low, but with hard work, diligence, and strong communication, it can be increased, enabling you to keep saving, and maintain that savings safety net to get you through the hard times.

Setting Up Your Home Office

Perhaps you have a space ready to convert into an office; it might be an alcove, a cupboard under the stairs, a spare room, or an attic or basement. Wherever it is, the chances are that you’re going to need a computer, and an Internet connection. You probably already have a suitable computer, but it may not be available to you all day long (perhaps your children use it for homework, for example).

The sensible response, then, is to buy a new computer; a laptop 5 Money-Saving Tips You Must Know Before Buying a New Laptop 5 Money-Saving Tips You Must Know Before Buying a New Laptop Keep these five tips in mind next time you're shopping for a laptop and you could save hundreds of dollars. Read More may make working from home more agreeable, but you might just as easily opt for an affordable desktop. You might save even more money by opting for a Linux computer 5 Cheap Linux Computers You Can Buy Today 5 Cheap Linux Computers You Can Buy Today Let's take a look at five computers that you can order today for under $500 that come preinstalled with a popular, well-supported Linux distro. Read More , but you’ll find plenty of affordable Windows desktops, too.

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You may also need a printer, and somewhere to keep it. Printers come with their own expenses — paper, ink, etc. — so you need to make sure that the printer you buy suits your needs and your budget 4 Questions to Ask Yourself When Choosing a New Printer 4 Questions to Ask Yourself When Choosing a New Printer You don't have to spend a ton of money to get a reliable and versatile new printer Read More . And unless you have one already, you may need to invest in a desk and a good office chair (or you could just build your own DIY Sitting / Standing Desk DIY Sitting / Standing Desk Read More ).

Working from a room that is pleasant is better than being bundled away into a gloomy loft or basement, however, so if you can grab room with a window, do so — it will be worth it.

Make Sure You Have Health Insurance

One of the all-important provisions that companies offer to their employees is health insurance. But as soon as you go freelance (in most cases), this stops. You’ll need to arrange your own health insurance once you start working from home.

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Opting for the cheapest low-level health insurance isn’t a good idea. Finding a policy that fits your circumstances and family is. The benefits of health insurance are well-known, so do the sensible thing. Check out Nerdwallet’s guide to choosing the best health insurance plan for you, and start doing your research as soon as possible.

This can be a major expense, as premiums in the United States average about $285 per month for an individual, and almost $730 per month for a family. Can you afford to pay for your own health insurance? If not, you may want to hold off going freelance for a while.

Staying healthy will help keep your healthcare costs down, too. The best way to do this is to maintain a healthy diet, take plenty of breaks during working hours, and don’t get dragged into the trap of working 16-hour days from home. It’s easily done, so make sure you plan so you can manage your time effectively How to Create the Last Perfect Time Management System You'll Ever Use How to Create the Last Perfect Time Management System You'll Ever Use Productivity is a constant search for more organization with less work. A way to accomplish everything you dream to accomplish, without losing out on sleep. Can this automated time management system do it all? Read More .

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Starting work at 7am and finding yourself still beavering away at 11pm isn’t a healthy way to live, especially in a job that sees you sitting down for long hours 4 Serious Health Issues From Sitting Too Long & How To Avoid Them 4 Serious Health Issues From Sitting Too Long & How To Avoid Them When you work at any job that requires long hours sitting at a computer - programming, accounting, writing - it is very easy to stay in that one position for eight to nine working hours... Read More every day. Keep your hours realistic; if extra work is required, use the time you would normally spend in bed on a Saturday and Sunday morning instead.

Plan for the Future

Compared to standard work for an employer, further outlays will be required to manage your pension. Many employers offer a compulsory retirement plan or pension scheme, and while these are often transferable between jobs, they may not be when you switch to a freelance, home-working role. Can you afford to keep up a pension?

Can you afford not to?

Without a retirement plan, you’re pretty much abandoning the concept of having an income beyond your 60th year, unless you continue working. While this isn’t unacceptable (many people are working beyond retirement), as you age, there is a likelihood that you will have some health issues, and be unable to work.

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Without having an employer-sponsored plan, you’ll need to come up with your own way to save for retirement, through investing, putting away savings Are You Saving Enough for Retirement? Find Out With These 9 Tools Are You Saving Enough for Retirement? Find Out With These 9 Tools Saving for retirement is one of the most important things you can do - but how do you know if you've saved enough? Here's 9 tools to help you find out. Read More , or opening an individual retirement account. This is definitely something you should speak with a financial advisor about. Speaking of which…

Get an Accountant. No, Really, Do It!

Keeping accounts is tough. Getting it right is even harder. While you might have good advice from a tax-aware friend or family member, after the first year you need to forget about doing the taxes yourself, and find an affordable, competent accountant to oversee everything.

So much can be missed, from benefits and rebates you might be owed to receipts for expenses that you really shouldn’t be claiming. Without the protection of competence that a professional accountant delivers, you could find yourself staring at a massive tax bill, or even a prison sentence.

An accountant will have a fee, but it will be less than a fine or a spell in prison.

Operating Costs: Household Bills Will Go Up

While you’re making savings on transport, be aware that household bills will be on the rise. Heating (gas and electricity), water use (where metered) and, of course, metered Internet will be impacted by your new office, whether it is a converted room or a comfy chair in the kitchen.

It’s unlikely that these bills will significantly impact the savings you make from ending the commute, but they’re worth keeping in mind, and minimizing where possible. Consider some smart controls for your heating system How a Smart Energy Monitor Can Save Money And Give You Peace of Mind How a Smart Energy Monitor Can Save Money And Give You Peace of Mind Smart energy monitors tell you how much electricity your appliances use, and how much money you could save if you turned them off. They can also help you create clever smart automations. Read More , for instance, so that the heating is only on when necessary (such as in rooms that are in use).

We hope we haven’t put you off, but mulling over these seven considerations before you make the leap to work from home could save you a lot of heartache, time, and money.

Perhaps you have an experience or tips to share in the comments? Have you made the switch to working from home? How did it go? Tell us below!

Image Credits: Matej Kastelic via Shutterstock.com, cherezoff via Shutterstock.com, ChickenStock Images via Shutterstock.com, vinnstock Images via Shutterstock.com,
InesBazdar Images via Shutterstock.com, www.BillionPhotos.com via Shutterstock.com.

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