When I left my nine-to-five job, I also left behind the security of a stable paycheck. Of course, I also left behind micro-managers, a rigid schedule, and the dread of working on projects I couldn’t care less about. As a freelancer, I decide what projects to take on, and have found a balance in both writing and developing social media strategy.
As a new freelancer, it’s not always easy to know how to price your work, but by setting the bar as high as possible, understanding your tax liability as a contractor, and utilizing contracts, you can ensure that you’ll get paid not only what you deserve for your services, but if you do it right, more than ever before.
If you are a new freelancer, don’t set your rate as the same (or equivalent to the same) hourly rate you were being paid as a full-time employee at your last job. If you, you aren’t taking into consideration factors such as new expenses and additional taxes you’ll need to pay out of your pocket. Remember that your last employer was billing more for your services than what they were paying you.
Since your skills are obviously worth as much as your previous employer could charge, raise your bar. You should know, at the minimum, what you need to make every month to pay your bills. You can also use this handy calculator to determine what you should be charging. It’s may also be useful to know what the average going rate is for other types of freelancers, such as writers.
Then, once you know the minimum you need to charge, as well as the rate you’d like to set, you’ll be more comfortable saying “yes” or “no” to certain projects. One popular approach to ask your potential clients what their budget is — often, it may be higher than your rate. And if not, you can easily negotiate or walk away without wasting time.
Know your tax liability
As an employee, most of your tax liability was handled by your employer’s accountants. As a contractor, your taxes are your responsibility, and as Michelle Goodman, author of My So-Called Freelance Life, explains, you can expect to hand over up to 40% of your income to the IRS as a freelancer every year. If you’re not sure how taxes differ as a freelancer, check out this handy infographic, produced by Freshbooks, which explains your options. It’s also recommended that freelancers not only keep track of every single transaction (since more expenses can be deducted), but consider consulting a CPA to help ensure costly mistakes aren’t made when you file.
Carefully read your contracts
You’ve likely heard about the “World’s Longest Invoice.” Sponsored by the Freelancer’s Union, this collective list of outstanding invoice highlights the problems freelancers can face when you embark on a project without a strong contract. Elise Oras, a freelance PR and digital communications specialist in Seattle, has worked with dozens of small businesses over the past few years, but demands a contract is in place before beginning work on any project. As she says, “contracts allow for both parties to set and acknowledge expectations from the start.” She adds that, “from a freelancers standpoint, a contract can protect the freelancer from accepting more work for the same pay, contract lengths, and of course, the dreaded non-payment.” Working with a lawyer to draw up a strong contract that sets your exact rate and scope of work can cost a few hundred dollars up front, but can possibly save you thousands in unpaid invoices down the road.