
The Complicated Financial Lives of Freelancers - evo_9
https://www.npr.org/2018/10/02/653627067/going-it-solo-the-complicated-financial-lives-of-freelancers
======
davidscolgan
Something I wish I'd known when I started freelancing about 8 years ago: Being
good at your craft (like programming) is assumed. _In order to do well at
freelancing, you also have to have some business sense._

There are all sorts of great resources about how to business online, but it
didn't even cross my mind at the beginning that that would be important. Once
I started learning how to business freelancing became waaay easier.

Things like how to invoice, how to negotiate, how to talk to a client, how to
schedule your time, how to budget, how to market yourself, how to network, etc
etc etc are not at all related to programming, but can make the difference
between a happy freelancing existence and a miserable career.

I've been fortunate to have a pretty lovely freelance web development career.
My key has been finding clients that are smaller companies and not full time,
with a long ongoing project.

Smaller companies allow you to build a relationship with the owner of the
business, and to position yourself as not just a pair of hands to write code,
but a trusted advisor who takes the business's actual needs into account when
writing code (which is how you compete with global talent).

Not full time means you can have multiple clients at once to give you a nice
advantage over a full time job: if one source of income dries up, your income
doesn't go to zero.

Most of my clients have been multi-year projects. I'll slowly build their
webapp for around 10 hours a week at most. I've worked about 20 hours a week
for the last 8 years, lived in lower cost of living areas, and spent the rest
of my time on doing whatever I feel like.

Some resources I'd recommend:

* The Personal MBA by Josh Kaufman - a nice overall summary of how to run a business

* The corpus of Kai Davis's material ([https://kaidavis.com/](https://kaidavis.com/)), including his super valuable/highly entertaining podcast Make Money Online ([https://makemoneyonline.exposed/](https://makemoneyonline.exposed/))

* How to Win Friends and Influence People by Dale Carnegie - how to interface with fellow humans (freelancing/business is mostly a human activity)

Happy to help anyone who's interested in freelancing if I can, send me an
email.

~~~
camillomiller
I would avoid Dale Carnegie. It might have been valuable in the past, but
right now to me it reads just like a bunch of out of time platituteds. Also,
as a freelancer in Germany, I can tell you that those guidelines mostly apply
to the American way of doing business--which definitely isn't the worldwide
standard of dealing with business owners and managers.

~~~
JumpCrisscross
> _as a freelancer in Germany, I can tell you that those guidelines mostly
> apply to the American way of doing business_

American here. I’ve found that the friendly “American way” of doing business
lets my team seal deals faster than their European competition. I initially
got pushback from my UK team. “That isn’t how it’s done.” But human nature is
human nature, and taking people’s personal aspirations into mind is never a
bad strategy.

~~~
pc86
It's always funny to me to see people say "well we just don't do business the
way it's done in [the largest economy the world has ever known]."

~~~
rolleiflex
America is only 24% of world’s GDP — Most business in the world is not done
‘the American way’. Europe is 21%, their ways are just as valid. It just
depends on the expectations from the other side.

You won’t be able to run a business the American way in Germany, not would you
be able to it vice versa.

Nor you should be able to be.

(There is nothing historic about being able to capture 20-25% of the world’s
GDP either — England (1800s), Turkey (1600-1700) and China (European dark age
through Middle Ages) has all achieved the same economic power US enjoys as of
today.

~~~
mixmastamyk
> You won’t be able to run a business the American way in Germany, not would
> you be able to it vice versa.

This thread is incredibly vague. I bet there is significant if not majority
overlap between the two.

Back to Dale Carnegie, his advice about not telling people "you are wrong" and
getting to know them is some of the best and simplest advice I've ever
received, and transcends time and space.

~~~
rolleiflex
My personal experience is that Germans take 'doing it by the book' to a whole
another extreme. It's paperwork until the end of time. (I have no affiliation
with either, but I've worked with both)

------
prawn
That this is likely a submarine piece for one of the linked products or quoted
entrepreneurs shouldn't discount the value of discussion. There are only going
to be more and more people working like this and it's a huge price to pay for
the "freedom". I've effectively freelanced for 20 years and it's brutal,
crushingly so. Until you're big enough to have someone handling admin/etc, you
are doing everything and things inevitably get missed or ignored. For me, it's
been invoicing and chasing up invoices - to the tune of hundreds of thousands
of dollars over the years missed completely. End result is all of the hassle
and pressure but with less reward.

Building specific frameworks/systems to work within is absolutely the solution
IMO. So, like Xero but with a focus on an exact industry/locale. One-button
follow up of unpaid invoices, automatic setting aside of money for paying
taxes, automatic advice on rates. Too often, people try to fit the tools to
their way of working when I think they'd be better off fitting their work to
the tools.

~~~
chasing
> ...to the tune of hundreds of thousands of dollars over the years missed
> completely.

Whoa, whoa, whoa. You're doing something _very_ wrong if you've lost track of
$100,000s of payments.

~~~
prawn
Keep in mind that it's over 20 years. Happens in dribs and drabs like this:
get really busy, forget to invoice project for a while, realise you're months
behind and so put off invoicing because clients won't like receiving them
late, later it gets, more awkward and easier to avoid it gets. Or the business
is sold or collapses. Or you don't chase up unpaid invoices for so long it's
unlikely you can convince them to pay. Every client harasses you to get the
work done. Very few harass you about the invoices. You start invoicing and
then the calls come in or urgent emails. You plan to do it from home at night
but then life/kids happen and you're exhausted. I forgot to invoice one
maintenance client for a year and threw away five figures. Would've been handy
money that year.

In the early years, aggregating staff time sheets was manual and easy to put
off. We ended up building [https://usepunch.com](https://usepunch.com) to
handle that which is a massive help.

In web development and with 100+ clients, it can be quite difficult to track
things like hosting and domains when they're spread across multiple providers,
renewing at different times of the year, etc. We ended up building an internal
web-app that interfaces with Xero to help manage this, but this was 18+ years
in...

And yeah, I can appreciate I've done something very wrong. I've found that all
too easy when spread so thin.

~~~
kowdermeister
That administration mess is exactly why I stopped freelancing.

~~~
pc86
It's not a mess unless you have some weird hangup about billing people and
agreed-upon rate for an agreed-upon service. I freelanced full-time for 3-4
years, at one point with dozens of active clients, and never missed a billable
hour. It's not difficult if you have a system to track and bill. Yeah it takes
time, and it's a grind, and there are times you'd rather just not do it, but
to imply that freelancing makes it easy to miss _hundreds of thousands of
dollars_ in billables, which is a non-trivial percentage of most folks
_lifetime income_ , does not jive with my experience in the slightest.

~~~
prawn
You did 3-4 years with dozens. I am at 20 years and more complexity. For a
number of years, I managed staff and interns - just keeping interns busy chews
up a lot of time. I had a co-founder to start with, and was then solo running
it from then. Once you have staff but not the scale to get help managing that,
it gets seriously difficult. When I started, things like Toggl didn't really
exist. I used to print out and manually sum hours from staff per
client/project and per month. And then create dozens of invoices each month
manually in MYOB, an awful and miserable interface. It was a huge timesink. I
couldn't outsource it because I was the only one with true knowledge of each
relationship - what to bill in what way, which clients were sensitive, etc.

I'm not saying it's impossible to do it OK, I'm saying it's easy to get it
wrong and fall behind. I mentioned the idea of an opinionated business
framework to a friend (freelancing very occasionally 1-2 years) and they said
"Oh YES, absolutely." And that's for someone who'd send 2-3 invoices a month,
not 50+.

------
NTDF9
One of the things that I have really come to understand is America is not even
close to "land of the free".

There is a very very narrow set of rules that you absolutely have to follow to
even be able to live peacefully here. Be born at least middle class, go to
good schools, pursue the right degrees, go to corporations, make no mistakes
in life and then finally retire in a retirement home paying thousands a month.

Steer from the above path and you'll start seeing things like mistakes in IRS
filings or a medical issue or a pre-existing condition or a divorce or a
bankruptcy or an unmangeable debt or a gap in career.....you know, normal
human problems, you are screwed.

And then there are man-made problems like jail without bail, lawsuits flying
around, guns, crime.

Notice there is no place in society for teachers, small-time healthcare
professionals, career in arts etc.

~~~
captain_perl
And don't forget about being downvoted for listing facts!

~~~
NTDF9
> And don't forget about being downvoted for listing facts!

Yeah,its a very funny phenomenon. For some reason, Americans like to downvote
anything true about their society. This is what you would expect out of
communist societies.

~~~
jstewartmobile
Not true. You'd be about halfway up in any other forum, but this is hacker
news--where we're not supposed to talk politics... unless it's the kind of
politics they want us to talk about--like net neutrality or antitrust or some
other intersection of nerds and money.

~~~
NTDF9
> but this is hacker news--where we're not supposed to talk politics... unless
> it's the kind of politics they want us to talk about

But this isn't politics. This is the societal reality of the home of tech
industry. There are many people around the world who are blown away by the
stories of Silicon Valley.

When we share stories of SV parties, VCs, lifestyle, homelessness, then why
not about life and reality here? At the very least, it is informative to
people who are uprooting their families and lives in other countries.

~~~
da02
> blown away by the stories of Silicon Valley

What kind of stories? Housing prices? Management horrors?

------
stevenicr
Anyone aware of any bank accounts (USA based banks) - that allow for some
programmatic moving percentages of money between accounts?

I want to have it when I deposit client checks in one account it takes the
money and moves one third to another account and one third to another. (then
I'd like to have a personal account do the same, whenever money is transferred
from my business A account to this personal account, take one third and move
to savings, one third move to wherever..

My google FU did not find this.. I found a couple of banks saying that you
could do transfers, and I think one bank had it so you could choose an amount,
like $500 every week or something more static and have that auto transfer...
but for freelancing gigs it's not usually a static amount every week.

I thought about doing (and may still have to ) an ask HN on this, but this
story / thread is likely perfect for this.

I'd like to find an actual bank product that would do this, I don't really
trust the security of a phone app to mess with accounts, and don't want to put
a bunch of eggs into some cloud basket either, so I'd prefer to stay away from
third party cloud sites that use my authentication to touch any accounts.

This kind of thing would help so many in the gig economy plan for the
quarterly stuff better, hope someone can point to a bank that does this.

~~~
SmellyGeekBoy
+1. I'm absolutely amazed that this isn't a thing. "Put 10% of everything that
comes in into this savings account" (for example) wouldn't just be useful for
freelancers!

~~~
TheOtherHobbes
It's not a thing because the market is limited, it could be a security
nightmare to administer, and because useful rules would be more complicated
than "Put 10%..." \- because you would have to allow for overdrawn accounts,
closed accounts, moved or renumbered accounts, and so on.

Product features like these invariably turn out to be far more complicated
than they look.

~~~
mixmastamyk
Nah, you login at the website and add rules for moving money around. Already
available. Moving percentages instead of fixed numbers is a small step up from
that.

------
acconrad
> _" No one really explains to you taxes and contracts and how to chase a
> client for that bill that they owe you — like, the nitty-gritty,"_

Wait...what?

Before I even broke out into freelance consulting I hired an accountant. When
starting your own business, I would think it's base-level knowledge that
anything with legal ramifications (and that includes the IRS) should be
handled by a professional.

Get an accountant. Get a lawyer (at least for one day to draft up your
documents and make sure your business is set up or even use LegalZoom).

And within the first month of breaking out on my own, I must have read like 3
or 4 books on freelancing/consulting, 10+ blog posts, and podcasts.

True - no one is going to act like Clippy and say "Hey looks like you're
starting a freelance career. Have you considered an LLC and liability
insurance?"

 _But_ \- do people not try and learn about what they're getting involved with
anymore? Starting a business, even if it's a 1-person sole proprietor
consulting firm, is a _big_ task. And yes, davidscolgan is right that you
should consider _all_ business aspects beyond your primary skill. But it seems
almost irresponsible to say that starting a business is going to be a huge
shock. No one is going to _tell_ you, but even a cursory search online will
give you a torrent of information on freelancing, consulting, and starting
your own business.

If I hadn't put in the initial legwork into studying the consulting landscape
there is absolutely no way I'd: (A) still be consulting or (B) make nearly as
much money. But the answers _are_ out there. And yeah - get an accountant, it
will drastically simplify your finances.

~~~
cgb223
> And within the first month of breaking out on my own, I must have read like
> 3 or 4 books on freelancing/consulting, 10+ blog posts, and podcasts.

Any recommendations?

~~~
oneredoak
Brennon Dunn has a lot of great free blog content and an excellent podcast
about all things freelancing / software consulting. Would highly recommend as
his content has helped me a lot over the past year, mainly regarding the
marketing/selling, billing and dealing with clients sides of things:
[https://doubleyourfreelancing.com](https://doubleyourfreelancing.com)

~~~
SyneRyder
Brennan Dunn's stuff is great, and I know freelancers who have been very
successful in part thanks to him. I'd recommend starting small if buying
products though - he had a $50 book version of Double Your Freelancing that
was worth it, but at one time he also had a $2000 online course version which
probably isn't the right choice for everyone.

Freshbooks have a fantastic free PDF called Breaking The Time Barrier that is
about charging for value, not for your time. It's worth reading even if you
don't use Freshbooks (I use Harvest instead). The PDF was actually recommended
to me by a client, who I think was giving me a hint that I was charging
unsustainably low prices.

[https://www.freshbooks.com/blog/breakingthetimebarrier](https://www.freshbooks.com/blog/breakingthetimebarrier)

------
meesterdude
Well, if this isn't my life to a T. A THIRD of the workforce though? I
wouldn't wish what I'm going through on anyone. I had no idea it was so
widespread.

~~~
ggm
"soft" mechanisms to remove unemployed people from the labour pool have been
used for a long time, to reduce the visible statistics on the rate of
unemployment. It leads people to talk about other measures like the rate of
under-employment, the number of people seeking work, the number of people in
part time work who seek full time work.

But, since many people _choose_ this life to get work:life balance outcomes it
shouldn't be assumed all freelance and self-employed are there for nefarious
reasons. Just, that quite a few of them are, because there aren't good
alternatives.

"I won't give you a job as a bricklayer but I will subcontract to you if you
form your own company" for instance...

------
HillaryBriss
> _Freelancers are competing not just within their town, not just with in
> their state, but are completing globally, and there 's just huge global
> pressures on the amount that they can earn..._

bingo. for a piece of work that can be well specified, separated out from the
main workflow and then farmed out, it's natural, in today's world, for the
customer to open the field globally. a little _too_ natural.

so, the US freelancer is left asking the question: how can I compete with
wages set at the global standard of living, including currency exchange
differences?

there doesn't seem to be a good answer.

~~~
gk1
The answer is to stop offering a commodity and start offering something that's
unique and valuable. See Patrick McKenzie's epic post:
[https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-
pr...](https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-programmer/)

~~~
HillaryBriss
excellent. thank you.

------
mancerayder
I've been freelancing for a few years as a DevOps Engineer. I've gotten very
lucky because I've landed gigs that let me become virtually in expert in a few
different technologies, while making the most money I've ever made, all with
no on-call at all (traditionally the bane of my existence) and with very
friendly people and clients. _However, I 'm nervous now as my gig runs out for
at least two reasons._

First, I'm self-employed in name only. While managers view me as a very senior
resource that is essentially a team lead due to experience and charisma, I
still feel like I have no more control than an employee. In other words, I
feel like an employee. Which is not how I suspect many of you feel.

Second, finding a new gigs is going through recruiters (here in NYC) and
interviews are --again-- exactly like, if even worse than, employee
interviews. In other words, not only am I expected to spend hours going
through round after round of interviews, but I'm expected to already know all
the technology they need, and moreover I'm competing with A) full time
employees since many roles will take FTE or contractors; B) other contractors
with lower rates.

I live in NYC and would pay someone for advice on the second part above.

We need some sort of not-for-profit place to meet and congregate online as
freelancers.

~~~
mixmastamyk
> interviews are --again-- exactly like, if even worse... hours going through
> round after round

I would decline _extensive_ interviews for contracts less than a year.

Be up front with them that the process does not make sense. It will be obvious
in a few hours whether you can do the job, and therefore little risk to them.

(I realize some places will stick to their process, be damned. It is a quality
signal, however.)

------
ryanwaggoner
Making a ton of money as a freelancer is easy: just hustle harder for clients.

Let me explain :)

I quit my job and started freelancing full-time when I was 24 because I found
a $50 / hour PHP gig on Craigslist and did the stupid math of "40 hours per
week x 50 weeks per year x $50 / hr = $100k / year!!"

Ugh, so naive.

Those first few years were _rough_ and I almost quit many times. Everything
was so much harder than I knew, from finding clients, to getting the work
done, to getting paid, etc.

BUT I stuck with it and gradually figured it out. I started spending time on
"business development". I stopped charging hourly. I started investing in my
own skills to move into higher margin areas. I focused on a particular client
niche instead of doing everything under the sun. I built better sales and
marketing channels. I got more disciplined with my time. Etc, etc.

To date I've billed over $2 million to clients for mobile dev, web dev,
product management, technical writing, and online marketing (by decreasing
order of where I've made the most), and I know this sounds like I'm bragging,
but I have zero concern these days about being able to make at least $250k per
year from freelance and consulting. I haven't figured out a lot of things in
life, but I've figured out this.

I've also spent the last few years writing, speaking, coaching, and otherwise
helping other freelancers get started and grow their businesses, first friends
and family, now a pretty sizable online audience, so I have a pretty good view
of how freelancers succeed and how they fail.

More than anything else, the quality I see that helps freelancers succeed is
being willing to spend regular time hustling for clients. You don't have to be
a sales and marketing wizard, or be an extrovert, or spend half your time on
it. But you need to spend time every day / week / month on it, and never stop,
always be thinking about who your customer is, where you find them, and how to
close them.

The freelancers I see fail almost invariably have no reliable marketing
channel other than referrals (or Upwork, which is the fast-track to commodity
rates). And referrals are awesome, some of the best work I get, but they're
passive AND they work a lot better if you can seed your ecosystem with other
sources of leads.

If you can build a pipeline of qualified client leads, everything else is
easy. You can make a lot of mistakes with a client or a potential client if
you have another lead coming right behind that one. And that wipes away most
of the concerns in this article.

Through solo 401ks, my wife and I have saved more than half a million for
retirement. We have a healthy emergency fund. We have insurance. We take
plenty of vacation, etc, etc.

No one in this article would have any of the problems they're talking about if
they made twice as much. And I can guarantee you that almost none of them
spend hardly any time trying to find and close clients. They either wait for
clients to come to them, or they use Upwork, which is almost as bad.

The problem here isn't irregular income, it's just not enough income.

OK, enough rambling...I'm happy to help anyone in the HN community with some
free 1:1 advice if you want to email me: hi@ryanwaggoner.com

~~~
josephmx
So how old are you now? Has this been a 5 year journey or 25 year journey?

~~~
ryanwaggoner
I’m 36. I started August 2007.

------
josephjrobison
For a book recommendation, Simple Numbers... by Greg Crabtree is definitely
the best accounting and finance book for freelancers and small businesses that
I've ever read. It's just about perfect, I read it two years too late but it's
transforming how I look at finance and accounting for my consultancy.

[https://www.amazon.com/dp/B00FUINEYG/ref=dp-kindle-
redirect?...](https://www.amazon.com/dp/B00FUINEYG/ref=dp-kindle-
redirect?_encoding=UTF8&btkr=1)

------
mgkimsal
"No one really explains to you taxes and contracts and how to chase a client
for that bill that they owe you — like, the nitty-gritty,"

Years ago I ran a conference for independent web/tech folks. I put it together
because I'd been tired of going to other tech conferences and... just
realizing that none of the content would have any impact on my ability to have
good contracts, deal with insurance, get paid, deal with taxes, market myself,
onboard new projects, etc. Figuring out how to shave off 4ms of a query, or
replicate mysql, or float my divs with sass... none of that was relevant, but
I still enjoyed the social aspect of conferences - the gathering of folks with
similar needs, skill and problems looking to help each other.

Yeah, no one 'tells' you how to do any of these things. Tax stuff, especially
starting out, doesn't need to be that complicated (but you don't necessarily
know that up front).

"There's no such thing as maternity leave for freelancers"... Hint - it's
really just extra overhead an employer budgets in to the price they charge for
their services minus the expense of you. Budget for this stuff yourself. It's
_hard_ , especially at first, if you haven't done it before, to begin to think
about this stuff, and deal with 'irregular income'. But it's possible.

"Two-thirds of them are dipping into their savings every month to make ends
meet. We see that freelancers as a result are really lagging behind employees
when it comes to saving for retirement,"

It's because they're undercharging, and the buyers are profiting off that
arbitrage. I'm not sure there's any simple or easy way to get around this.
Years ago I was part of a forum for tech folks where 'rates' were discussed,
and a couple people shut down the thread (and the next one, IIRC), because
they had this notion that this was "price fixing" and somehow they were
playing a part ('safe harbor' sprang to mind, but... they weren't having it).
Yet... everyone keeping their prices "secret" doesn't really help most people.
I can see prices for auto labor on websites, but most tech folks don't put
pricing (hourly or otherwise) out there. And... I get it. I understand why (I
don't, but did for a while, and may again).

> Another big barrier to savings is the complexity of taxes for independent
> workers.

> Traditional employers contribute toward their workers' payroll taxes, but
> that's not the case for the self-employed, who must pay all their own Social
> Security and Medicare taxes. And because taxes aren't automatically deducted
> from their paychecks, freelancers must figure out what they owe on their
> own.

> "Without that, Chang says, it's hard for freelancers to know how much they
> can save.

Well... even when taxes are 'automatically deducted' from a paycheck, that
doesn't mean it's the _correct_ amount (which is often a moving target).

As others in the thread here mentioned, this is sort of a solved problem,
especially for smaller/solo folks, by using a payroll service. It's not free,
but generally for under $600 for the year, and factor in another few hundred
for a CPA to prep taxes... you can sort most of this out. It's not fun, and
... yeah - hey - you're going to need to charge enough to cover these costs of
doing business.

Dealing with all this gives you a whole new appreciation for anyone you may go
work for in the future. I was at a client's meeting of around 15 employees,
and they were discussing health insurance. Premiums were going up, and the
company was covering X% of the premiums, but everyone would have to pay a bit
more. The owner said "does anyone know what our actual monthly cost per
insurance policy is?" There were a dozen guesses... and I was shocked as to
how far off people were guessing - almost all way on the low side. At the
time, the employer's cost for each health plan each month was... $580, IIRC -
people were guessing $80, $120, $95, $160.

> "I almost can't have fun anymore because there's always something that I
> should be doing". Welcome to business. Go take a 'regular' job and have
> 'fun' with your 5 paid days off every 365 days. I don't mean to be negative
> here on that point, I just feel like many (most?) people have a very naive
> view of business, work and money/finances.

------
yourstruly33
> "It's just excruciatingly difficult to manage our finances"

And it's US. Compare it to Italy and you'll have a difficulty setting
switching from Medium to NIGHTMARE.

------
sverhagen
Freedom, right?

Oh, really?

I am one of the hardest working people I have ever met, people can
(hyperbolically) say I work more than a hundred hours per week. But that's
easy to say when you're full-time, and you leave early for that errand or come
in late to drop the kid off at daycare, and then make a few hours at night.
When you are tracking your hours, suddenly making 60 real hours is hard, or
even 40 real hours for that matter.

(I'm still in a privileged position, so no real complaints.)

~~~
gk1
So start billing for the value you provide, not by the hour.

