Finance tips for the self-employed
This is probably what you think self-employed looks like:
I’m at an amusement park with my kids, in the middle of the week, and I’m on a conference call while I watch my son try to get on a ride.
Being self-employed looks so nice at an amusement park. The self-employed are always free to go on a vacation. They pick up their friends at the airport in the middle of the day, they show up for poker night because they can stay out late, and they can plan their wedding without having to pretend they are working.
Close up, though, most self-employed people are completely stressed about money.
That money part is what I hate about being self-employed. Anyone who says they don’t love a steady paycheck is lying. A paycheck is so nice. It’s reliable like a friend, it makes you safe, it gives you a way to organize your life.
Here’s how I deal with the worrying:
1. Pretend you have an out.
Sometimes I have to calm myself down by telling myself I’ll solve my money problems by taking a regular job. One fantasy I have is getting a job at Microsoft. Once I was giving a speech at a human resource convention in Seattle. And a top HR guy from Microsoft was there. And he wanted to talk to me.
I thought, “Great, I’ll sell him something from Brazen Careerist.”
Then I thought, “No. I just want a job.” I thought I’d do anything—even read resumes all day—if he’d just give me a steady paycheck and access to the amazing health care they give autistic kids of employees.
I hear Microsoft is ending that insurance plan. I wonder if this will help me stay more focused on running my own company instead of looking for escape routes. Probably not.
2. Forget living in the moment. Instead, live five months in the future.
Your clients will take too long to make a decision, no matter how long they take, and they will never pay immediately. So instead of fighting the lag-time, you should always be earning money for five months out. If you are spending your days trying to drum up business to get revenue five months from now, you feel safe, knowing that it’s not an emergency. Any closer than that and you feel like if you don’t close you’re gonna die.
3. The only way to feel rich is to be able to dump an awful client.
Thinking five months out frees you to dump a client, and it’s so so fun to dump a client who misbehaves. It’s a way to assert your power as a freelancer even though you have no power because if you don’t get money you’ll starve and have to get a staff job somewhere (and you probably can’t – because most self-employed people are largely unmanageable in a corporate hierarchy).
I had a client that signed a contract to pay half up front, and then didn’t. And the company was so late it was almost time to give the speech. And I said, if you don’t pay this week, I’m not doing the speech. I loved that. I loved that because I don’t need the money from the speech. I’m okay for right now. Well, I mean, I’d really like the money this week. But I’m okay for next week, so I liked telling her to fuck off.
4. Have one great client.
You need a lot of schemes. You have to always be pitching different people different stuff because you don’t know what’ll stick. But you really need one client that is great, and pays on time, and makes you love doing your job. That client gives you sanity.
For me that is Federated Media. Really, I could write a whole post about how much I love them. They are so easy to work with and they sell ads that I’d never sell on my own, because I’d get impatient and tell the advertiser to fuck off before I collected any money. So Federated makes my life great, because I can blog about anything and say yes or no to anything and they just roll with it, and keep selling ads. Well, they did tell me to remove the word fuck from a post. But that’s how you know that Federated didn’t pay me to write this post. Because they allow pretty much anything except obscenities, which they say fuck qualifies as.
5. Self-employment stability requires doing stuff you hate.
Be a grown-up. Self-employed doesn’t mean you love everything you do. I have done stuff to appease editors that drove me crazy. I have given speeches to groups of people that were all at the conference with the sole purpose of cheating on their wives. I do lots of stuff I don’t like. I remind myself that I do it so that I can have a job that I pretty much love.
To cope with the bad stuff, you have to find a way to trick yourself. Like, I don’t love the pressure, but I love writing about the pressure.
I read this…and all I wanted to know on the first read was if your son was able to get on the ride. He’s almost tall enough. Did the ride operator cut him a break? Was he able to get on other rides?
On second read – I miss the video conferences on Brazen with you saying fuck.
By Jove, how I LOVE this blog! Truth + Humo(u)r = HIT! Thank you, P. :)
People are kidding themselves when they think successful self-employment means doing whatever you want whenever you want. Maybe freelancing, but owning a small business is a lot of hard work. My husband owns a small business and if he’s able to take the kids somewhere in the middle of the week it’s because business is slow. When business is good it’s great financially but forget taking a day off.
He has commented that after all this time owning a business he thought it would be ‘easier’ by now (meaning less work to bring in the money). I also work full time and told him in the world where you work for someone else it doesn’t get ‘easier’ – you have to keep working hard, doing better, proving yourself, etc. Why would it be any different if you own your own business.
I do agree with your points – we have the ‘what if business is too slow to continue operating’ discussions and made plans for that, he does stuff he doesn’t care for but has to get done, he has experienced the joy of ‘dumping’ clients and has a couple of ‘great’ clients that he’s always trying to think of out of the box ways to provide service to.
Owning a small business is hard and requires a lot of your time if you own a traditional business. I don’t know if anyone will agree with me or not but even Robert Kyosaki talks about the beauty of owning a network. That is why I enjoy network marketing!
These aren’t really finance tips more than they are just regular tips for the self-employed to feel more secure about money. Which is fine, since you’re not a personal finance blogger.
Great suggestions, Penelope. Does anyone ever call you Penny? I like your name. Friends of mine just named their baby girl Penelope.
The best financial advice you can get is career advice. Because the biggest impact you can have on your finances is to stay employed. The second biggest impact you can have is to earn more money.
Also, the best financial advice is not about numbers. It’s about how you feel. Financial security isn’t a number, it’s an emotion. And figuring out how to make your life feel secure — job, love, self-esteem, etc — is all wrapped up in financial security; of course, because there are tons of millionaires who don’t feel financially secure. So I actually think this blog is about knowing yourself and acting on that knowledge, and that’s the most important financial advice to read.
Penelope
Loved your response! Of course, as someone self-employed, how do you handle taxes? You’ve written about some IRS stuff from putting your money into your start-ups, but what about all the speaking, blogging and coaching you do? Do you have a great tax person in WI or some big city?
Also, you really seem like a writer who’s a hyphenate. Writer-blogger, writer-author, writer-speaker, etc. Is branching out and keeping fingers in different media and revenue streams part of your own success plan? Or is it just like doing cross-training or marketing?
Loved your response! Of course, as someone self-employed, how do you handle taxes? You’ve written about some IRS stuff from putting your money into your start-ups, but what about all the speaking, blogging and coaching you do? Do you have a great tax person in WI or some big city?
Also, you really seem like a writer who’s a hyphenate. Writer-blogger, writer-author, writer-speaker, etc. Is branching out and keeping fingers in different media and revenue streams part of your own success plan? Or is it just like doing cross-training or marketing?
Also, keep in mind that Penelope has dyscalculia. She can’t really write about money because she can’t do numerical reasoning. So I always take her personal finance advice with a pinch of salt, because there’s just a lot about numbers that she doesn’t understand. Which you can tell because her financial advice always boils down to ‘live within your means’, as if it were only that simple, and as if that isn’t just common sense anyway.
I think it’s interesting she thinks personal finance is about emotions – I guess for her it’s the only way she can grapple with it.
Also, keep in mind that Penelope has dyscalculia. She can’t really write about money because she can’t do numerical reasoning. So I always take her personal finance advice with a pinch of salt, because there’s just a lot about numbers that she doesn’t understand. Which you can tell because her financial advice always boils down to ‘live within your means’, as if it were only that simple, and as if that isn’t just common sense anyway.
I think it’s interesting she thinks personal finance is about emotions – I guess for her it’s the only way she can grapple with it.
I loved this post — as I love all of your posts, even though I rarely comment. I’m going to be on a panel on Friday (10/21) at RIT in Rochester, NY. It’s their 8th Annual Entrepreneurs Conference, and I’m speaking on a panel on Entrepreneurial Journalism. I love that title, because it has a better ring to it than freelancing. I am going to point the audience to your blog, and I copied the last tip “Self-employment stability requires doing stuff you hate” which I may read to them if I have a chance.
I read so many rah-rah tweets and “motivational” advice on social media about “kicking butt” and being “kick ass awesome” and fueling your passion, etc. etc every day …. and after a 30 year career in writing (freelance) and 16 years in marketing, I want to tell young entrepreneurs (or just new ones, no matter how old) — Sweetie, there are many days when you’re not going to feel like dragging yourself to the office/computer, much less kicking some ass. And that’s OK. Because that’s the truth, and entrepreneurs have an emotional life no one talks about — except Penelope Trunk.
Being self-employed is like doing a high wire act without a net. No sick leave, no personal leave, no disability or unemployment. And the longer you do it, the less likely you are to ever get a permanent job, or so the managers at the big companies tell me. I have three businesses/jobs: freelance writer/editor, private investigator, and mystery/romance author. Life is always interesting but I’m really tired of the insecurity, too. Thanks for a thoughtful post.
Hi Again, Penelope!
Boy! Did this post relate to ME!
Here I am, at home, commenting on a blog, because…being a freelancer, I decided I wasn’t going into the ofice today, because it wouldn’t make any difference if I did, because there is NO job that has to get done, because, alas, I work in the film business going from movie to movie (have been for years), and only recently, did I get used to the STRESS OF NO PAY CHECKS between PAYCHECKS! And the ONLY reason why I no longer stress about the money, is because finally, now, after all these years, there’s ENOUGH $$$ between jobs…almost.
And another reason why I don’t stress, is because I finally figured out, worrying doesn’t help!
FAITH helps. That conviction that somehow, it will fall into place, actually MAKES things fall into place!
So now, I don’t stress out about not having enough money. I stress out about not having enough FAITH. And for some Godly reason, that’s easier. Because I can sort of fake faith, if I don’t think too much about it. I can tell myself I HAVE faith, when what I really need, is MORE faith. So I have faith that more faith will come.
But to end this comment, I want to add a number 6, when dealing with the worrying about money. And here it is:
MARRY SOMEONE WHO COLLECTS A WEEKLY PAYCHECK!
I did that. It helped.
(But there is a number 7 that goes with that: STAY MARRIED to that spouse with the paycheck. That helped even more.)
Enough said. Loved this post. Love YOU!
Irv
Penelope, Please keep all the words in you post professional and inspiring. I liked your post where you described a conversation with your son about the possibility of using certain explitives in select circumstances around people for whom the words are not offensive. I’m sure I’m in the minority, but that whole little category called explitives come across as crass and even a bit unsettling to me. I want to feel free to continue recommending your blog to people of all ages and backgrounds. I know you get a lot of flak from many critics. I don’t want to be counted as a critic. I love your posts… your bright mind, you witty humor and your marvelous way with words. Keep it up!
Fuck off! Its her blog and she can say what the fuck she wants… last time I looked around this was still a democratic country…. Obama hasn’t completely given Wall St. everything (yet)… (and yes I’m a registered democrat)…
It’s HER blog, and it’s Don’s comment. You contradict you own point.
It’s HER blog, and it’s Don’s comment. You contradict you own point.
As long as you’re taking requests, Penelope, please don’t use the word “portion”, it has an odd sound, and I find it unsettling. And if you can, try to work in “peripatetic”, it’s a good word that people hardly ever use, and if you use SAT words I will look smarter to people for recommending your blog to them.
Also, Freebird!
As long as you’re taking requests, Penelope, please don’t use the word “portion”, it has an odd sound, and I find it unsettling. And if you can, try to work in “peripatetic”, it’s a good word that people hardly ever use, and if you use SAT words I will look smarter to people for recommending your blog to them.
Also, Freebird!
It just wouldn’t pack the same Penelope-punch if she were to change her writing style, much as I respect your request.
Penelope, you absolutely rock. So loved reading this one – I even told my husband that Penelope just wrote a post that totally addresses my life right now. :)
I’m so happy to hear I’m not the only one with these thoughts and issues … thanks for the tips! Also … fuck is a great word!
I’m so happy to hear I’m not the only one with these thoughts and issues … thanks for the tips! Also … fuck is a great word!
I’m so happy to hear I’m not the only one with these thoughts and issues … thanks for the tips! Also … fuck is a great word!
Fuck. Great word Penelope. I felt like fuck today at work. Until I read your post. I’ve been very frustrated at work lately. After a corporate lay off I took a role selling ads for a magazine. The problem: I suck at it. And I work on commission so I really work for myself. Your tip about planning for business five months from now is really helpful. I’m going to raid my 401(K) from my former job and take out five months’ worth of expenses so I can survive and not worry about money (don’t need to hear how stupid that is, I already know it. I don’t have a choice). If i don’t start making something in five months, then I will know that the reason I suck is not because I have some things to learn but because…I suck at it. t will be time to think about doing something else.
Great post! Can you talk more about the Federated Media gig? Sounds interesting.
You can read about them online – just google federated and blogs or something like that. They are an ad network. They sell advertising on my blog. They are really creative about helping companies come up with good ways to get to blog communities.
Penelope
I didn’t google them but found them mentioned today in a slashdot.org post.
They recently acquired Lijit Networks and have now partnered with WordPress.com – http://thenextweb.com/media/2011/10/19/federated-media-lands-wordpress-coms-25-million-blogs-in-advertising-deal/ .
I left my full-time job at a big tech company and became a freelance designer about 8 months ago and things have been great. I’ve been able to double my income since I turned independent. I’m not even a people person and I don’t consider myself great at networking. I’ve been lucky to be able to quote high rates for the projects I do. This way, I can ensure high quality for the works that I do and not make myself overwork by taking on too many projects. The quality of your work will drop if you work too many hours. But, the quality of 1 or 2 of your work is the thing that will attract more clients. Not the quantity.
I think many freelancers shortchange themselves by charging low and saying yes to all kinds of projects, perhaps out of their own insecurity. Sure, I’ve been burned as well. There were 1 or 2 bad clients who were just awful and took forever to pay. I fired those clients. You’re right Penelope, bad clients are not worth it. Have at least 2 or 3 good clients and make them really happy and charge them really well. Clients will respect you more when you’re not afraid to charge a respectable rate for yourself. Have you heard of the 80/20 rule? The rule says that 80% of your income will come from 20% of your effort. I found this to be true.
Another thing I’ve learned about going independent is that you don’t have to do everything yourself. Find good partners in your circle whom you can collaborate with to take on bigger, and higher quality projects. Partner with other freelancers who can complement your skill set.
Befriending the lady at the local copy center never hurts.
What you have done sounds like the dream for any wanna-be freelancer.
Must know more about the cheating conference in #5!
You should make your son comb his hair before you go out. Lots of studies show that people who look good do better in business. Why not start teaching that lesson now?
He fluffed his hair in the morning in anticipation of needing to get on the rides! It’s why I love the picture.
Penelope
This post rocks my world! As always P, you’re the bomb.
I wish you could be my client (for what business I am still trying to figure out) because every time I read this blog my sanity is restored.
Dead on, as usual.
First rule of self-employment: cash is king.
People go into it to do what they love. For very few people that is cash-flow management. But it really is the most important thing if it’s going to work.
Reading this makes me realise I may have a near perfect job. It is something I like to do most of the time, I have a regular pay check and I still get to come and go as I please as long as I do the hours I am contracted to do over the course of the month. Freedom AND stability is a great combination.
Reading this makes me realise I may have a near perfect job. It is something I like to do most of the time, I have a regular pay check and I still get to come and go as I please as long as I do the hours I am contracted to do over the course of the month. Freedom AND stability is a great combination.
After 20 years of self-employment my husband just got that Microsoft type job. While I loved some of the freedom of his self-employment, fuck I love the regular paycheck.
It also helps that he loves his job and gets 5 weeks vacation. And makes enough that I can stay home, work on my own business and look after our son. And we can save and go on kick-ass vacations. Of course, we do all of that because we don’t have a car, have pay-as-you-go cheap cell phones, have small wardrobes and live in an apartment. It’s all about choices.
Hi! Thanks for the great tips. I think I’m going to toss the five year plan in favor of the five month plan.
Love the advice about planning 5 months out. Getting paid on publication is not my preference but it sure is nice to know that come early January I will have a check…and another one in early February. The stress is a bitch but the rewards of doing work I enjoy, having the freedom to work when, how, and where I want, and not having to be a clock-watcher are all proving to be worth it.
Being self employed also means you will probably schelp your laptop to the amusement park and catch up on e-mail while others enjoy the e-ticket rides.
Currently self-employed with no work lined up for December and beyond. This was like reading my own mantra at the moment.
It isn’t so much that you think you’re going to die if you don’t close, it is that you fear that you will end up on the streets. That you will never earn a penny again and will end up in poverty. And that you’d rather die than live out the rest of your life like that. Which is motivating while also being paralyzing at times.
I love that I went to the chiropractor this morning and then to crossfit while other people were in meetings but I hate that I’m into my credit line and waiting to be paid by a client and have no financial security. I hate the lack of security but I love the freedom of making my own schedule. That said, if a staff job that looked interesting came up, I would take it. Hopefully my year of self-employment hasn’t made me unmanageable in the corporate world.
Currently self-employed with no work lined up for December and beyond. This was like reading my own mantra at the moment.
It isn’t so much that you think you’re going to die if you don’t close, it is that you fear that you will end up on the streets. That you will never earn a penny again and will end up in poverty. And that you’d rather die than live out the rest of your life like that. Which is motivating while also being paralyzing at times.
I love that I went to the chiropractor this morning and then to crossfit while other people were in meetings but I hate that I’m into my credit line and waiting to be paid by a client and have no financial security. I hate the lack of security but I love the freedom of making my own schedule. That said, if a staff job that looked interesting came up, I would take it. Hopefully my year of self-employment hasn’t made me unmanageable in the corporate world.
This article is really helpful! Love it!
This article is really helpful! Love it!
This article is really helpful! Love it!
Agreed. This helps me to think about my private practice, which as a self-employed dietitians, is very difficult. Thanks for the 5 month tip!
http://www.noraeshank.blogspot.com
Agreed. This helps me to think about my private practice, which as a self-employed dietitians, is very difficult. Thanks for the 5 month tip!
http://www.noraeshank.blogspot.com
Greetings Penelope,
Been thinking of going on self-employment, that’s why surfing the net to get views on it.
Read your eye-opener post especially no. 5 -” if its doing stuff you hate is no better”, than its better to stick with the regular paycheck even though lots of stuff with the toxic boss I don’t like. Guess I have to trick myself not to hear negativity.
Glad to have read your post.
Greetings Penelope,
Been thinking of going on self-employment, that’s why surfing the net to get views on it.
Read your eye-opener post especially no. 5 -” if its doing stuff you hate is no better”, than its better to stick with the regular paycheck even though lots of stuff with the toxic boss I don’t like. Guess I have to trick myself not to hear negativity.
Glad to have read your post.
A lot of people have this idea in their head of what they think being self employed looks like. I don’t think I’d be doing a conference call in line waiting for a ride — I’d be enjoying that time with family! Now, if I was taking my kids to a fast food place that had a playground and my wife wasn’t going, sure, I’d take something to work on. But more often than not, if I’m with family, I focus on my family. After all, even self employed people need to enjoy life too, right?
I like your idea of living 5 months in advance when it comes to money. By working on that future income, you’ll know you have the stability when you need it when things don’t work out as planned. Like when you need to drop something that isn’t working :D
Whatever we do, there’s going to be parts of it we don’t like. That may be a bitter pill to swallow, but even doing things we love is not all pie in the sky. We can get others to do some of that work, but there will be parts that we have to do. Just bite the bullet and do them.
Thanks for your great post!
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It’s not like being an employee doesn’t include doing things you hate!
You forgot the biggie for self-employment finance and that’s to have money in the bank and do your best to pay cash. You may not be able to drive a monster Mini-Van but more likely than not you’ll arrive where you need to be.
It also helps if you have a spouse with a job with benefits. It’s supposed to get easier to buy non-group coverage in the future but for now it can get really expensive.
Thanks for the article, it really puts an excellent perspective on being self employed!
Being self-employed means, above all, insecurity. It also means getting laid off after every contract.
Learn to convince yourself that everything will be fine.
After all, we live in flush economic times and have leaders with our best interests at heart, don’t we?
I love being self-employed. I only have to work half days – I can do whatever I want with the other twelve hours. :)
Me, I think about how much I would hate going to work at the horrible mind-numbing call-center job that I hated so much that it physically made me ill to walk in the door.
A couple of good, reliable clients … pearls above price. And something always shows up. I can’t predict my income … but something always shows up.
Me, I think about how much I would hate going to work at the horrible mind-numbing call-center job that I hated so much that it physically made me ill to walk in the door.
A couple of good, reliable clients … pearls above price. And something always shows up. I can’t predict my income … but something always shows up.
When working with a new client, ask as soon as you submit your work what they need from you in order for you to get paid. There is ALWAYS another form that you haven’t been told about.
Also, ask what they need in order for you to have your payments directly deposited to your bank account. For those of us who travel, this is particularly important but, if nothing else, this question will force your contact to talk to, or put you in contact with, the people who actually issue the checks.
Also, ask what they need in order for you to have your payments directly deposited to your bank account. For those of us who travel, this is particularly important but, if nothing else, this question will force your contact to talk to, or put you in contact with, the people who actually issue the checks.
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The A number 1 rule taught to me by a self-employed mentor 30 years ago: Never, EVER work on your own money…if your client won’t make an advance, a retainer or partial payment, walk away.
I’m a freelancer outside of my day job, and this post addresses the things I worry about when I consider making the jump. Thank you for your frankness, as always.