After I wrote an article about secrets of $200,000 freelancers, a reader on LinkedIn commented: “I’d just be happy with $50,000 a year.”
Many people feel just as intimidated by the prospect of trying to earn a full-time income when they first start out as freelancers. So how do you get to the point that you can go to sleep at night knowing you can earn the equivalent of the salary at your old job–and pay your bills on time?
The first step is knowing the exact income number you need to hit to live the way you want. Then figure out what you can realistically expect to earn this year. For some freelancers who are just starting out, it may be $30,000 or $50,000. For others with a deeper network of professional connections who can help them get work, it may be $200,000. I’d suggest aiming for 50% to 75% of your income from your last job in your first two years. Set your sights high, but not too far beyond your reach. There’s a pretty steep learning curve in the beginning. Matching your former salary is likely to happen in year three or four, based on what I’ve seen among freelancers I know.
Then break your income goal down into monthly and weekly goals. Knowing that you need to earn, say, $962 a week, will help you make the daily decisions that get you to your annual goal.
Keep track of what you’re earning each week and invoice for each job immediately after it is done, to speed up your cash flow.
After using Excel spreadsheets in the beginning, I switched to a simple accounting system, Freshbooks, to keep track of the projects I’m doing. It’s free if you have a small number of clients, and is a lot easier than winging it. This is just one option. Other freelancers have told me they like Quickbooks or Wave Accounting.
Once a month, I use the “reports” function on Freshbooks to look at my monthly profit and loss statement. It tells me how much I made per month and how that compares to other months. Keeping an eye on this helps me stay in the same ballpark every month.
Tracking your projects with a system like this will keep you honest about how much work you’re getting done and what you’re really earning. If you had a slow week or worked on lower-paying projects this week and only earned $500 of your target $962, maybe you need to step up your pitching next week. To “finance” lower-paying work that really stirs your passions, you may need to take on less-exciting but higher paying gigs at certain times of the month.
If you’re a creative type, thinking this way may be alien to you. But it is actually very freeing to be organized about this stuff, boring as it may be. Coming up with a simple system to tackle the dry parts of freelancing can allow you to lead a more interesting life.
Last week, we had our first warm sunny day in months, and I was free to take my four-year-old son to the park to enjoy it. On days like that, I am grateful I am not “on the clock” somewhere, forced to sit in a cubicle far from my family. The ticket to having that freedom, as I’ve learned in nearly 7 years of freelancing, is staying on top of the business side of what I do.