Why freelancers can’t approach money with an “employee” mindset

May 31, 2017

This is a post from a member of the Freelancers Union community. If you’re interested in sharing your expertise, your story, or some advice you think will help a fellow freelancer out, feel free to send your blog post to us here.

I was talking to a non-freelancer friend of mine about how much money I make at one of my regular gigs.

First, this is a dumb idea. Don’t talk to friends about how much money you make.

Second, I noticed that there was a disconnect between the numbers I was saying and the amounts she was hearing.

People who think like employees have an entirely different perspective when they hear a number. This caused my friend to think I made vastly more money than I do.

When I say “Thirty dollars an hour” to an employee, they hear “forty hours a week,” “sixty thousand a year,” plus health insurance, unemployment benefits if they are fired without cause, and other benefits.

They may be approximately aware of the amount of taxes they would have to pay with this salary. They formulate an idea about what kind of lifestyle they could afford with that money.

When a freelancer hears “thirty dollars an hour,” they should view it in a completely different manner. They should be thinking about self-employment taxes and business expenses that will reduce this amount.

They should be thinking about the volatility of their workload—inconsistency is the only thing that’s guaranteed in freelancing. Lean weeks are to be expected. Lean months can have you filling out an application at Burger King. Unemployment compensation is not provided, so you better be providing it for yourself.

The bigger problem, though, is that freelancers can make these mistakes too. My first 12 years in the work world were all as an employee. My schooling rarely mentioned the possibility of entrepreneurship; it was designed to build future employees. This viewpoint continues to pervade my thinking, and it can lead to some mistakes in how I view my financial situation.

We need a reference point to compare things to. If you’ve been thinking like an employee for most of your life, that reference point might sneak into your freelancing. If you look at the numbers with an employee’s mindset, you will end up being very disappointed, and probably broke.

My friend thought that I was raking in the dough, but she’s never freelanced. Your hourly rate is only one piece of the puzzle in freelancing. If you make $100 an hour for 30 minutes of work, then never hear from that client again, you won’t have accomplished much once you consider the hours you put into finding that client.

If you can manage to forget the employee mindset and view your income like a business owner, you’ll have a more realistic view of your finances, and be able to adjust your business and lifestyle appropriately. You’ll also probably realize that you deserve to be paid more.

Freelancing is not just like being an employee with more freedom. They are two completely different things, and need to be looked at from different perspectives.

I'm a freelance copywriter who works with legal professionals. I live in California, don't like to set alarms, and consume free wi-fi at an alarming rate.