{"id":48279,"date":"2018-07-16T17:00:22","date_gmt":"2018-07-17T00:00:22","guid":{"rendered":"https:\/\/www.creativecircle.com\/?p=47997"},"modified":"2018-07-16T17:00:22","modified_gmt":"2018-07-17T00:00:22","slug":"financial-mistakes-new-freelancers","status":"publish","type":"post","link":"https:\/\/www.creativecircle.com\/blog\/financial-mistakes-new-freelancers\/","title":{"rendered":"The 4 Worst Financial Mistakes New Freelancers Make"},"content":{"rendered":"

When many freelancers make the transition from side-hustle to legitimate, full-time business, there\u2019s a lot of trial and error \u2014 especially regarding how to do money. Some of those errors are big enough (and costly enough) that you want to avoid making them at all.<\/p>\n

These are four of the worst mistakes that can tank your financial stability \u2014 and your ability to sustain your new business. We\u2019ve also included ways to fix them or avoid the pitfalls to begin with.<\/p>\n

Mistake #1: You\u2019re not charging enough for the project.<\/h2>\n

There are a lot of complicated formulas out there<\/a> to help freelancers determine their hourly rates. An easier and more practical way to determine your rate is by studying what comparable talent commands in your market. However, it\u2019s not the hourly rate that usually throws a wrench into your finances: it\u2019s when you don\u2019t understand the scope of the project, and quote a price for 15 hours when it\u2019s really going to take you 25, or you don\u2019t take into account miscellaneous expenses that might crop up along the way.<\/p>\n

The solution:<\/strong> Ask all the questions before you quote a price. Spend time doing your research and understanding the scope of the project before you quote a number. As a new freelancer \u2014 even as an experienced professional who really wants to acquire a client \u2014 you probably want to seem flexible and agreeable. You may even be afraid of asking too many questions, lest you look inexperienced or annoy a potential client. On the contrary, these questions make you look engaged and knowledgeable. This is an essential process for doing your best work and being paid fairly for it.<\/p>\n

Mistake #2: You\u2019re not bothering with contracts.<\/h2>\n

If you\u2019re lucky, you\u2019ll get a lot of word-of-mouth referrals from your clients and even friends of friends. Because you want to keep the relationship congenial, you may think, \u201cWhy bother with a contract?\u201d But then you\u2019re on the hook when you quoted a price assuming two rounds of revisions and your client insists that you give them five rounds and personally do a press check. Not only do you lose money on the project, but these obligations also keep you from taking on new clients and projects.<\/p>\n

The solution:<\/strong> Insist on a contract. Even if it seems like a formality, a contract can save your butt \u2014 and an awful lot of money. HOW Magazine has some brilliant advice on creating contracts (including calling it a \u2018letter of agreement\u2019 rather than a contract, which sounds nicer and can help a relationship stay on friendly terms). The article is aimed at designers, but the ideas are broad enough to apply to almost any kind of freelancer. Don\u2019t trust your financial future to a smile and a handshake \u2014 get it in writing.<\/p>\n

Mistake #3: You don\u2019t have a sufficient savings cushion.<\/h2>\n

When you\u2019re first starting out on your own, money is going to be your biggest worry. Even if you already have a roster of clients and substantial projects in the pipeline and regular, recurring work \u2014 you just never know. On top of that, many companies can take as long as three months to pay an invoice (check out this woeful tale<\/a> about how the world\u2019s most prestigious publishing company pays its freelancers). Experiencing a significant lag in business can force you to take on projects that you\u2019re not super excited about, or go back to a full-time job.<\/p>\n

The solution:<\/strong> Don\u2019t take the plunge until you\u2019ve got at least a six-month cushion. Before you strike out on your own, you should have enough money saved up to cover all of your business and living expenses for at least six months \u2014 that includes food, rent on both your place of residence and a studio or small office (if you have one), residential and business utilities, and business incidentals. (And that\u2019s AT LEAST six months.)<\/p>\n

Even if you\u2019re in your 20s and life is good and retirement seems like it\u2019s a million years away, you must have a financial cushion to deal with the unexpected (e.g., getting into a car accident and needing to pay a deductible and other expenses) as well as put some away for later.<\/p>\n

Mistake #4: You\u2019re conducting business using personal accounts.<\/h2>\n

Perhaps it\u2019s force of habit or just that there\u2019s so much other work to keep track of, but many freelancers use their personal checking accounts and credit cards to do business. \u201cWhat\u2019s the difference?,\u201d you might think. Well, even if you don\u2019t see yourself as a small business owner, Uncle Sam does. Avoid wasting time and money, and really see how much you\u2019re really bringing in and spending on the business every month.!<\/p>\n

The solution:<\/strong> Shop around for small business banking services. A dedicated checking account for your business can help you keep track of your expenses and earnings, which makes doing your taxes at the end of the year much easier.<\/p>\n

If you\u2019re just starting out, it\u2019s probably easier to open a new account where you do your personal banking. However, some banks offer packages tailored for new small businesses and startups, including services that work seamlessly with business accounting software like Quickbooks. Many banks also offer other timesaving services and promotions to try and earn your business.<\/p>\n

(P.S. Having separate, business-only accounts isn\u2019t a substitute for fastidiously tracking your finances with your own system or a good app like FreshBooks, Wave, or Mint, but it\u2019s a good start.)<\/p>\n

Now, get back to work!<\/h2>\n

The point of all of these ideas isn\u2019t to create more work for you. They help you automate and protect your business. After all, the less time you waste worrying about and chasing your money, the more time you have to do what you\u2019re really good at.<\/p>\n

\n

Lisa is a Creative Circle candidate and seasoned advertising copywriter who lives in Los Angeles. Her background includes both in-house and agency work on Fortune 500 and global accounts in the consumer and healthcare\/pharmaceutical fields. She excels at words, fashion, and cats. If you want to work with Lisa, contact Creative Circle Los Angeles<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

When many freelancers make the transition from side-hustle to legitimate, full-time business, there\u2019s a lot of trial and error \u2014 especially regarding how to do money. Some of those errors are big enough (and costly enough) that you want to avoid making them at all. These are four of the worst mistakes that can tank […]<\/p>\n","protected":false},"author":3,"featured_media":49347,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[76],"tags":[],"class_list":["post-48279","post","type-post","status-publish","format-standard","hentry","category-life-as-a-freelancer"],"acf":[],"yoast_head":"\nThe 4 Worst Financial Mistakes New Freelancers Make | Creative Circle<\/title>\n<meta name=\"description\" content=\"These are four of the worst financial mistakes that can tank your stability\u2014and your ability to sustain your new business.\" \/>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The 4 Worst Financial Mistakes New Freelancers Make\" \/>\n<meta property=\"og:description\" content=\"These are four 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