Here Are the Financial Lessons I Learned as a New Freelancer --- Set aside time each day dedicated to business tasks, and periodically reassess your assignments

 

"At the beginning of March, I hit an emotional high: I started work as a freelancer, excited to embark on this new career I'd made for myself as a writer and podcaster. I set about making spreadsheets and lining up assignments. Every social-media "heart" and "like" seemed like an extra vote of confidence in favor of me betting on myself. My best friend sent me flowers. I even threw a party to celebrate.

Then, one month later, I hit a low. I -- the girl who is supposedly "good with money" and was even paid to write about such things -- overdrafted my checking account for the first time in years. I felt embarrassed, of course, but mostly, I felt a little panicked. I thought I'd researched all I needed to know about freelancing. I thought I had the spreadsheets!

Turns out, spreadsheets can get you only so far as a freelancer, contractor or gig worker. More young people are taking this type of work, as a full-time freelancer (like myself) or as a way to augment their 9-to-5 so they can keep making higher rents and their wallets can keep up with stubborn inflation. And in a world where you're often doing the marketing, the money managing and -- oh yeah -- the actual work of your own freelance business, there are always going to be some lessons you learn the hard way.

"It's all an experiment," says Paco de Leon, founder of the Hell Yeah Group, a financial firm for creatives and other freelance workers. "You have a hypothesis: 'Can I do this and make a living?' Get some data and what you do with that data, you make adjustments to the hypothesis. If you look at entrepreneurship from that perspective, then you'll realize it's all an experiment."

When I took the leap in March, I knew there would be a learning curve, and I was prepared to adjust my personal-finance strategies as a result. But three big issues -- my cash flow, the lack of boundaries on my work time and my fees -- threatened to upend my experiment altogether.

One month, I made $150, a lot of it trickling into my account via $5 and $70 subscriptions to my email newsletter. The next, a check for an especially lucrative assignment -- totaling more than I usually made in two months at my previous job -- showed up earlier than expected.

According to my freelance friends, this inconsistency in pay schedule wasn't special; "it's just the way it happens," says Jen A. Miller, a longtime freelance writer and author.

"It is both terrifying and exhilarating to not know what's around the corner," de Leon says. "In terms of managing cash flow, I would say half the people I work with don't think about this and the other half are losing sleep over it."

I thought I was one of the chill ones. For every freelance payment I received, I keep three spreadsheets: one helping me keep track of deadlines, another sorting my tax savings in advance, and the third detailing the household expenses that my girlfriend and I keep for our monthly money-date discussions. 

Every freelance assignment I complete, and payment I receive, I log accordingly. So I assumed adjusting to the rhythms of this new cash flow wouldn't require anything more than keeping a closer eye on Excel and otherwise going about business as usual.

But then I had that scary moment with the overdraft. It seems the close eye on those spreadsheets still wasn't enough to catch myself in a humdrum accounting error.

Younger freelancers may feel intimidated at the prospect of building this system and structure at the same time as they're juggling new assignments and seeking clients, but the money-management lessons learned now will only continue to serve in various jobs to come, whether freelance or not.

Miller's advice: Set aside time in your day to dedicate solely to business tasks. That $150? Research how you best want to allocate it, given your work schedule for the next quarter and any big expenses on the horizon. The giant check from that one assignment? Don't simply move some for tax savings and the rest to other goals. Instead, think critically about how you'll pay yourself back for the time you spent earning that money.

"It's a business and you have got to run it like a business," Miller says.

At the start of my journey, a friend cautioned me against sitting on my hands and waiting for assignments. "Your biggest enemy is your own inertia," she says.

So, I hit the ground running -- mostly, to be honest, because I was worried about losing momentum. I jumped on a podcast gig, pitched dozens of stories and spent Monday to Sunday on the phone or at the laptop.

I knew I was doing a lot, but I thought I had to be. I wanted editors and clients to keep me top-of-mind, and, although I admit this somewhat sheepishly, I didn't want my byline to fade from relevance.

Then, a mere four weeks into this experiment, I fell asleep at the apartment kitchen table, my usual workspace. All that running caught up with me.

"One mistake a lot of people make when they start is they feel like they have to work all the time," Miller says. "That burns you out very fast. You have to be selective and you have to say no -- and it's hard."

Younger people thrust into freelance life somewhat suddenly -- perhaps postgrad or post-layoff -- can find this balance even more difficult. But maxing out in the short-term will only hurt you in the long-term, de Leon says, no matter what your age or stage of career.

Miller also recommends doing a periodic reassessment of your past assignments, your clients and your relationships to both. "As your priorities change, go through your client list. 'Do they fit this bucket?' 'Do they fit that bucket?' 'Do they fit three buckets?' 'Do they fit no buckets?'"

When I started, I had two paltry buckets: "Do I like doing it?" and "Do they pay OK?" No wonder I crashed out at the desk.

But in a weird way, I'm glad I had that day at the kitchen table, even if it hurt my head a little sleeping on the wood. Because understanding why I was too busy led me to another retaliation: I was selling myself too cheap.

"If everybody keeps saying yes to you all the time and you don't get any noes, it might feel good in the moment, but that's a big sign you're undercharging," de Leon says.

Rate-setting isn't a skill you have or you don't, de Leon says. It's instead honed over time, with lots of trial and error. Younger or newer workers are best served by connecting with one another or to the larger freelance community; in sharing lessons and tips, the collective can demand better pay as a whole.

I'd had a vague idea of how much I made per hour at previous jobs, so my main goal had been exceeding that. And though I always figured I'd take on some lower-paying gigs alongside more lucrative ones to create a diversity of income streams, de Leon's advice made me think twice about just how much of the latter I was taking on.

"Every client is a chance for you to experiment and push and see where is the floor and where is the ceiling when it comes to a rate," de Leon says.

My hypothesis is still being tested, but so far, it's paying of -- in lessons and in dollars." [1]

1. Here Are the Financial Lessons I Learned as a New Freelancer --- Set aside time each day dedicated to business tasks, and periodically reassess your assignments. Carpenter, Julia.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 July 2024: A.10.