Best Pieces of Financial Advice for Freelancers: Part II

Put Aside Your Emotions

For years, I’ve been writing about behavioral economics. Because we are human, we are motivated about 80% of the time by our emotions. Even when we think we’re not being emotional, we probably are — we’ve just successfully constructed a rationale to disguise the emotion even from ourselves. I realized how pernicious this tendency is in a conversation I had with one of the best investment thinkers of all time, and want to talk about it in this, the second of my three-part post on the best pieces of financial advice for freelancers.

I was in the middle of a divorce. I’d convinced myself that I needed to get my ex-husband off the deed of my house.

Just as I was about to launch into the machinations required to refinance as a freelancer (that’s a whole other topic), I talked to Charley Ellis, a revered money manager, the founder of Greenwich Associates and author of What It Takes and Winning the Loser’s Game, among many other accomplishments. I did a little bit of editing work for his latest book, Falling Short, which is coming out later this fall and is about the retirement crisis.

Along with reams of paperwork, refinancing meant I would have to buy my ex out of the house, which was going to cost $70,000.

I told Charley the situation and mentioned how determined I was to do this. “Why?” said Charley. “If you wait until you sell the house, the $70,000 will be worth a lot less.”

“But then he’ll be on the deed,” I said.

“So what? Just pay your mortgage every month,” said Charley. “The mortgage company doesn’t care.”

He was right, of course. Inflation would eat into the value of the $70,000, and 10 years from now, or so, I’ll probably be in a stronger financial position, too.

Thinking rationally about the value of money helped me decide the right course of action, which was not to refinance.

It’s particularly easy as a freelancer to allow money to represent something else emotionally — usually, it’s security. So you might jump for a big contract with income for six months without thinking through how much time it’s going to take you.

It’s also correspondingly easy to see money as a symbol of the corporate world you left behind and to adopt on attitude of “it’ll come from somewhere.” That sometimes leads freelancers to take on high-profile jobs that pay too little or pro-bono jobs.

The first step to managing your money as a freelancer is managing your emotions — and the first step to doing that is recognizing when your emotions and your money are too tied up together. And maybe the easiest way to do that is bounce your thoughts off a friend, because sometimes, the hardest landscapes to know are our own minds.

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