Talking about money is uncomfortable. This has never been more apparent than at the most recent Freelancers Union Spark event. In Manhattan, we typically draw a crowd of forty to fifty freelancers, and we have to actively stop discussions short – our freelancers normally have so much to say, it’s near impossible for everyone to have a chance to share their thoughts. This month, the turnout and engagement at the workshop were noticeably lower than usual. Even in the freelance world where, like it or not, we have to have conversations about money with each and every client, it still feels like a taboo topic.
Fortunately, we enlisted some help to facilitate the discussion on this sticky subject. One of the experts from our partner Moven kicked things off by setting the foundation for the way in which we should approach our finances. The pathway to financial freedom starts with a basic understanding of your spending habits on a macro level, not a micro level. Approach this practice with mindfulness. Don’t psych yourself out by getting caught up in every single expense, and never make judgement on yourself in the process. Remember that step one is simply the gathering of information – what do your spending habits look like over the course of ninety days?
Once you’ve gathered this data, start working on a deeper level. Divide your expenses into categories and classify the elements within the categories as “wants” or “needs.” For example, within the category of Food/Drink, a Starbucks coffee might be classified as a “want” and a trip to Trader Joe’s might be classified as a “need.” It’s important to organize items within a category as opposed to identifying an entire category as a “want” or “need” to get the best assessment of your spending habits. Another component you might want to consider here is the “happiness factor.” Identify which expenses are making you feel fulfilled, well-rounded, and balanced. Although an expense may be a “want” and not a “need,” this step will help you recognize which nonessential expenses are still beneficial to your well-being.
After you’ve taken a look at your expenses, shift the focus to your income. One of the key differences and challenges between freelancing and having a traditional job is consistent income. Without a fixed salary, your income is likely going to fluctuate from month-to-month depending on the number and scope of projects you’re working on. The key to creating stability with your earnings is to diversify. There are numerous ways to create multiple income streams – passive income projects, physical products, courses, teaching, and even working a part-time gig in addition to freelancing. Remember to think about diversifying from multiple angles – this could be breaking down your projects into daily, weekly, monthly, and quarterly work or finding alternative ways to generate income like consigning or selling on eBay. Just start brainstorming, and you may be surprised by the ideas you come up with.
The final element of creating pathways to financial freedom is to assess your rates. In order to determine the rates you need to charge, you must know your spending habits – what does it cost you to live, work, and play? Compare this against industry standards, and you’ll find the sweet spot. Don’t forget the importance of varying your income streams. By taking on multiple types of projects and work, you’re not only diversifying your income but also allowing yourself to diversify your rates. When you’ve got an array of offerings at a range of prices, you’re able to attract a wider scope of clients and, ideally, more work.
Talking about money may be uncomfortable, but it’s time to break out of your comfort zone. Let’s continue the conversation – tweet me at @AOCBlogGirl using the hashtag #FreelanceSpark with questions or tips on how you’re creating pathways to financial freedom in your freelance business.
Freelancers Union Spark events take place monthly in over twenty cities around the country. Visit the Freelancers Union site to find out about a Spark event near you. If you’re in the NYC area, stop by the Manhattan Spark, and say hello! I’ll be there co-leading!