When I imagined the freelance life, it looked something like this: I would sleep till the sun softly poked a finger around the curtains. I’d stretch, yawn, stroke the dog gently sleeping beside my bed. Then I’d stumble to the kitchen for a cup of the finest Arabica coffee, which I’d enjoy in the morning breeze on the terrace outside, perhaps with a croissant and apricot preserves.
After some gentle yoga or tai chi in the garden and a steaming bubble bath, I’d settle down to work in my softest silk pyjamas: the ivory ones with grey piping on the edges…
Right?
Wrong. So wrong. I’m sorry, but I’m here to burst your bubble. Because if you’re considering freelancing, unless you take the financial side of things very, very seriously, you are going to come unstuck.
Before you pen your resignation letter, you might want to consider this:
1. The feast-and-famine cycle is real and the famine part can be very long. I’ve been freelancing for more than 15 years and for the first six months of this year, I didn’t make enough to cover my debit orders. If I didn’t live in a two-income household, I’d have been in real trouble. A year or two ago, I had a 10-month famine. It’s real
2. You are responsible for your own benefits: there’s no medical aid, no pension, no UIF. You have to budget for that stuff, and don’t skimp. Get a good financial adviser, and save for retirement even if you’re 25 years old. You should be putting at least 15% of your income away (but it is tax deductible). Get a hospital plan at least, and get some income protection in case of long-term debilitation from injury or disease.
3. Get good tax advice: some companies will tax you at a marginal rate of 25%, while others won’t tax you at all. You have to be disciplined about saving money for when SARS comes calling. File all your receipts and keep a log book. It’s boring, but it has to be done and it makes a big difference in the end.
4. No work, no pay: it’s that simple. If you’re sick, on holiday, or having a baby, you won’t be earning. Plan for those times.
5. A lot of your time will be spent chasing money: it’s extremely rare that clients are as efficient in paying as you are expected to be in delivering. So if you’ve pulled an all-nighter to deliver something in a fraction of the time it would usually take, don’t expect that they will pay you with the same speed.
6. Don’t take it personally: Put on your big girl panties (yes, boys, you too) and just ask when you will be paid. Mostly, you’ll find, the person you send the invoice to is not the person who signs it off for the accounts department. Nor do they do the transfer themselves. It’s your money – you’re the only one with an interest in chasing it. Charm the accounts people, be firm and keep at it.
7. You will incur bad debt: so build it into your financial planning. It’s horrid but sometimes people just don’t pay! Last week I was asked to work a minor miracle for a long-standing client. I delivered early, and she has gone to ground completely. I don’t think I’ll ever see that money, and there’s nothing I can do about it.
8. What you invoice in a month is not what you’ll earn in that month: different companies work on different payment schedules, and you are at their mercy. Get informed and find out how their system works, how you can get around it and who you need to phone to chase the money. (See point about big girl panties.)
9. Regular work is the holy grail: it’s the closest thing you’ll get to the security of a monthly pay check. If you find a client prepared to pay you a retainer, look after them.
10. You will not necessarily be able to set your rate. I know what I’d like to earn, but most of the companies I work for set their own rates, and it’s ‘take it or leave it’. You need a sense of your own worth, and stick to that. Don’t work for any old rate just because it’s work. If you don’t respect yourself, your clients won’t respect your expertise.
11. People may not understand the worth of what you do. Quoting on jobs is an exercise in strategy, education, marketing and excellent people skills. Know what the market rate for your services is, but also understand your own worth. You need to be competitive, but you can’t devalue yourself just because other people lack insight.
12. You may not be able to insist on a contract. A lot of the freelance market is informal, running on a handshake and an email brief but this, according to my legal friends, is enough to stand up in court. Keep your emails as a ‘paper’ trail so you know who’s promised to do what.
13. Set up a rainy day fund: if you only take one piece of advice, let it be this. Before you start freelancing, financial experts recommend that you have the funds for at least eight months’ worth of expenses in the bank. Yes, eight. That is advice I wish I’d taken. In fact, I’d have settled for a three-month rainy day fund. I’m working on one now.
Don’t get me wrong: it would take a lot to make me give up freelancing for a permanent job. I love it. I love what I do and the flexibility and joy it gives me. It’s all worth it. But it’s serious business: you have to treat it as such.
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