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With the popularity of freelancing threads which seem to be growing here, I thought I would share how I went broke, several times over, freelancing. To make it easy for everyone, I've condensed it into a set of 5 rules.
Rule #1: Never pay your estimated quarterly taxes
This one is simply. If you get paid $1,000 from a client, then you have $1,000 to spend on necessities like food and rent. Don't worry about your tax bill until April comes. Sure you may have a $17,000 tax bill one year like I did, but you can always pay in installments with interest to the IRS.
Rule #2: Never ask for any pay upfront
This should be obvious, if you have done zero work, why would you expect a client to pay you anything. I once took on a 15K project where I knew I would get paid (a big prestigious company), but I also knew it wasn't going to be until 90 days after all the contracts where signed.
Keep in mind that 90 days is almost a quarter of a year -- how long would you work at a 9-5 without seeing a paycheck? I did get paid, but before I had that check I was basically out on the street with all my belongings in my car. Oh yeah, late fees and credit card interest had also added up as I tried to live through a quarter of a year without an income.
Rule #3: Don't charge for everything
Only charge for the time you are directly working on a clients project. Don't charge, for instance, for the hours of phone calls or meetings your clients want to have because, of course, your time is not that valuable.
In my case working with a lot of video and motion graphics I often had to render complex projects which could take hours. I mainly rendered over night when I could, so I never felt the need to charge (even a reduced hourly rate). The problem is, clients would often want fast changes and turn arounds in the middle of the day, and even though I wasn't 'actually working' , my computer was. So I was locked out of working on other projects since rendering is processor intensive.
So I not only lost out on other revenue, but of course electricity costs money as well as the upkeep and upgrades that I needed to do to keep my computer running.
Rule #4: Just say Yes!
No matter how bad the project sounds, if you need the money, just say yes! You are in NO position to turn down any money, right?
Every time I take on a project that I have a bad feeling about, it usually turns out not to be worth it. Bad projects usually come from bad clients that I've swore off in the past. It's very hard to say 'no' when your bank account is in the negative, but there is almost always an opportunity cost to this decision.
Bad clients will consume your entire life. Constant texting, emails, phone calls and revisions will have you asking yourself, "Is this really worth it?" The answer is often no -- you could have probably made the same amount of money more quickly and easily by temping / hustling on CL / doing audio transcriptions on Rev. etc..
Rule #5: Never Set Boundaries
Always get back to your clients with 10 minutes unless you are dead (or in coma). This is the best way to train clients. Now they will expect you to always be on call, like a 24/7 employee. Have a Sunday at the beach planned with your fiancee? Well forget about it, because you just got 10 'Urgent, call me!' texts and voicemails.
The equation works like this, you get paid for a few hours a week of work and the client gets someone on call 24/7. Sounds fair, right? This is why boundaries are not required.
I have let people, who I've never met in person, take over a lot of my life. I'm now in the process of buying back my life. Occasionally I still slip up. I recently had a client send me a 'bonus' (which they have done in the past). I said thanks, but then after I spent the money, they then tell me it was actually pre-payment for a project they wanted done. I should have just said I couldn't do it, and sent back the money. But instead, I basically accepted a fixed-price project that is a huge headache and time suck. I'm still regretting this one...
------
I'm sure there's many more rules I could come up with, but this is a good start if you're looking to go broke fast!
Rule #1: Never pay your estimated quarterly taxes
This one is simply. If you get paid $1,000 from a client, then you have $1,000 to spend on necessities like food and rent. Don't worry about your tax bill until April comes. Sure you may have a $17,000 tax bill one year like I did, but you can always pay in installments with interest to the IRS.
Rule #2: Never ask for any pay upfront
This should be obvious, if you have done zero work, why would you expect a client to pay you anything. I once took on a 15K project where I knew I would get paid (a big prestigious company), but I also knew it wasn't going to be until 90 days after all the contracts where signed.
Keep in mind that 90 days is almost a quarter of a year -- how long would you work at a 9-5 without seeing a paycheck? I did get paid, but before I had that check I was basically out on the street with all my belongings in my car. Oh yeah, late fees and credit card interest had also added up as I tried to live through a quarter of a year without an income.
Rule #3: Don't charge for everything
Only charge for the time you are directly working on a clients project. Don't charge, for instance, for the hours of phone calls or meetings your clients want to have because, of course, your time is not that valuable.
In my case working with a lot of video and motion graphics I often had to render complex projects which could take hours. I mainly rendered over night when I could, so I never felt the need to charge (even a reduced hourly rate). The problem is, clients would often want fast changes and turn arounds in the middle of the day, and even though I wasn't 'actually working' , my computer was. So I was locked out of working on other projects since rendering is processor intensive.
So I not only lost out on other revenue, but of course electricity costs money as well as the upkeep and upgrades that I needed to do to keep my computer running.
Rule #4: Just say Yes!
No matter how bad the project sounds, if you need the money, just say yes! You are in NO position to turn down any money, right?
Every time I take on a project that I have a bad feeling about, it usually turns out not to be worth it. Bad projects usually come from bad clients that I've swore off in the past. It's very hard to say 'no' when your bank account is in the negative, but there is almost always an opportunity cost to this decision.
Bad clients will consume your entire life. Constant texting, emails, phone calls and revisions will have you asking yourself, "Is this really worth it?" The answer is often no -- you could have probably made the same amount of money more quickly and easily by temping / hustling on CL / doing audio transcriptions on Rev. etc..
Rule #5: Never Set Boundaries
Always get back to your clients with 10 minutes unless you are dead (or in coma). This is the best way to train clients. Now they will expect you to always be on call, like a 24/7 employee. Have a Sunday at the beach planned with your fiancee? Well forget about it, because you just got 10 'Urgent, call me!' texts and voicemails.
The equation works like this, you get paid for a few hours a week of work and the client gets someone on call 24/7. Sounds fair, right? This is why boundaries are not required.
I have let people, who I've never met in person, take over a lot of my life. I'm now in the process of buying back my life. Occasionally I still slip up. I recently had a client send me a 'bonus' (which they have done in the past). I said thanks, but then after I spent the money, they then tell me it was actually pre-payment for a project they wanted done. I should have just said I couldn't do it, and sent back the money. But instead, I basically accepted a fixed-price project that is a huge headache and time suck. I'm still regretting this one...
------
I'm sure there's many more rules I could come up with, but this is a good start if you're looking to go broke fast!
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