8 Things You Absolutely Have To Understand About Money Before Going Freelance

1. It’s hard work.

Getting to the point at which you are earning enough to be comfortable is going to take 12-hour days, 7 days a week for a year or more, even in the beginning when you only have a few clients. Why? Because when you are not actually involved in your work, you have to be marketing yourself and going after new clients. And when you do get those new clients? You will be working your butt off making sure that they are thrilled with what you produce.

2. Get used to unsteady income.

One of the thing you probably liked about your life as an employee was that steady paycheck. You could budget; you could save; you knew when you could afford a new car or that vacation. Throw all of that out the window now. You have to love what you are doing so much that the “feast or famine” income stress is less important than what you do. If you have no stomach for unsteady income, then you need to keep your day job and freelance on the side – at least until you build your business.

3. You need multiple sources of income.

Figure out how your skills and talents can be used for several purposes. For writers, it is blogging, tutoring, editing and proofreading, resumes and cover letters, business plans, and so forth. All of this may be going on while that book is being written. If you are a web designer, what can you do with your skills other than just design websites for client? Figures it out and start marketing yourself in those other areas too.

4. It’s a good idea to have passive income.

If you have savings and investments before you get into the freelancing business, don’t dip into them unless you can’t make your house payment. The passive income can really help during those months when you are in the “famine” lane.

5. When artists are “starving,” they tend to do some pretty desperate things.

They will comb through Craigslist for any gig at all, charge too little, and take on clients who do not want to pay enough or who they really hate working for. They often feel a bit like prostitutes, but sometimes there is no choice. It’s hard to say no when you’re running out of money, but sometimes you should. It’s hard to find a good writer, we know it, so it is time to raise the rates, and let that hated client pay the price or move on.

6. A budget is not optional.

Start by tracking your expenses for a month – every last penny. Then start cutting. Lower your cable plan or switch providers; check out the competition before you renew your insurance policies on your house and car. See what measures you can take to save energy costs and make sure everyone in the household follows suit. See where you can cut on the grocery bill. You want to eat well but going to a discount grocer and buying less “frozen wonders” can help.

You may need to sell assets if things get really tight – antiques, jewelry, and other collectibles. And if you don’t need to sell them, put them up for sale until you get the price you want, and then start a savings account. That way you are not desperately selling them at a bargain when you do get desperate.

Three Budget Categories
You have fixed expenses (mortgage or rent, utilities, cable, insurance, cell phone, car payment, etc.), flexible expenses (groceries, gas, entertainment, clothes, etc.), and whatever is left over. Anything you do have left over, plop into savings – you’ll need it at some point.

7. Raise your rates if you are working all the time, but still not able to make it.

If you have done a great job and have great references, then you can raise your rates without too much concern. Some writers charge by the word; others by the project. Most do a bit of both, because writing gigs vary so much. However you charge, get 50% up front, 25% when first draft is submitted, and the final 25% when the project is fully complete. This should all be done by contract. You have to invoice regularly for those last two payments.

8. Once established, you’ll need to switch your strategy on finding work.

Instead of searching for gigs on clearinghouse sites for freelancers, start marketing yourself. Use social media; keep your website and portfolio and blog up to date; guest post on popular blogs; get references up on your site as fast as you can get them. Ask current clients for referrals. Go to events, give your 30-second elevator pitch, and hand out your card.

It’s sometimes a long road to “financial fitness” as a freelancer. If you have the stomach for the famines, it will all even out eventually.