Show 16 – Freelancer Finance 101

Psych Insights for Modern Marketers - Freelancer Finance 101

Droughts are inherent in all freelance gigs.

They’re not fun, they can sometimes force you to take drastic steps (like getting a J-O-B for a while), but they are regular pit-stops on the road.

Thus, you should always be thinking about survival money, which is different than Fuck You Money.

FU$ is a wad you put away and never touch the rest of your life (if you do things right) — it’s the cushion that allows you to be the adult, to take calculated risks, and to simply operate more easily, knowing there’s a stash hidden away that under the MOST dire circumstances, you can tap.

Survival money is a second stash you keep liquid and nearby. It’s an amount you decide on that gives you breathing room in your daily life — could be 3 months of your nut, might have to be a year for you to feel comfy with it.

So you work to fill your bank account. You siphon off a bit for FU$, until you have your six-month wad stashed away in a safety deposit box somewhere out of sight/mind… and you siphon off a bit for a savings acc’t or some other semi-liquid holding place until you’re ahead multiple months.

You do not live at the maximum end of your income. Not ever. There is no excuse for doing this, guys.

Money buys you the basics, buys you free time, buys you power, and it buys you peace of mind. Live starkly until you’ve got your ducks lined up — those ducks being FU$ and a survival stash. You panic when your survival stash gets low, not when you’re at rock bottom.

Do not beat yourself up over droughts. It just happens.

Naked bullets from the recording:

  • How to survive the financial peaks and valleys of the freelance game.
  • Client droughts are inevitable – no matter how long you’ve been in the biz
  • 2 rules for surviving any drought
  • Building a high-end client incubator
  • FU money
  • Survival money
  • How to know you’ve won as a freelancer
  • The first rule is, know your nut (and how to determine your TRUE hourly rate – this is a reality bitch-slap)
  • Avoiding the bad client spiral of death
  • The warning sign that you’re slipping as a respected freelancer

We’re vowing to resume recording regular episodes, so tighten your helmets!

16 thoughts on “Show 16 – Freelancer Finance 101

  1. mark

    Hi guys.

    Great insight from you guys on not just getting paid writing clients and traffic to a blog, but how to save money with 2 stashes of cash. One you don’t touch, and one just in case your finances get too tight, and you have to take from that 3 to 6 month stash.

    I’ve listened to every podcast guys. I think many people, not just IMer’s and copywriters can learn from these golden nugget filled podcast’s.

    Much peace to you.

  2. Chris Chia

    Hey guys, thanks for a great podcast took a ton of notes! Also, your discussion of Kevin’s membership site has led me to the decision that I’m gonna sign up for it!

    Hope the both of you have a great day, you guys are awesome.

  3. Will Compton

    Great show! Imma share this with all my friends…

    Because once you take control of your finances and track your numbers (like you would an ad) then it all becomes really clear.

    Basically, run your personal life like a business… monthly Financial Statements with Income/Expenses and Assets/Liabilities so you can see your Profits and Cashflow real clear.

    Here’s how I squirrel away my income:

    1. Wealth: This money is only for investing in assets that create a positive cashflow without extra work. (10% gross income)

    2. Charity: I’ve found, when you circulate your money through charities it mysteriously comes back to you… plus some. (10% gross income)

    3. Savings: To earn compounding interest. (5% gross income)

    4. Screw You Money: Enough to cover my nut for 6 months but never to be touched. It’s in gold coins and cash buried under a rose bush in the yard. (Thanks for the idea John)

    5. Survival: Enough to cover 2 months of bills, rent and food. (5% of gross)

    6. Taxes: 15% of gross income to cover self-employment taxes.

    7. Emergency: Enough to cover a trip to the mechanic’s (or whatever happens).

    Then there’s the cash drawer, walking around money, bills, rent, gas, food, etc… But I believe in paying yourself first.

    Plus… if you form entities (S Corp, LLC, etc.) you can pay for business expenses with pretax income, you can pay yourself a reasonable wage and you can protect your personal assets from litigation (if you structure everything right and avoid co-mingling accounts).

    There’s all sorts of tax planning you can do… for example, in Texas it’s $300 to form an LLC (and you pay the margin tax over $1 million)… and then you can file Form 8832, Entity Classification Election, which allows you to file Form 2553, Election by a Small Business Corporation, to be taxed as an S Corporation…

    So you get the ease of starting and running an LLC… plus the tax benefits of a corporation…

    Because only your wages are subject to FICA but not your dividends.

    Like John said, all this might seem unreasonable at first…

    But do you want to do business where you’re at or do you want to do business where you want to be?

    *Disclaimer: I’m not a CPA or an attorney. Seek professional advice.

    1. John Carlton

      Nice. One thing you covered, that I forgot, was to pay your estimated taxes on time, each quarter. It’s the number one reason entrepreneurs fall behind on tax payments, because they ignore regular quarterly payments and get face with a huge bill in April. Regardless of your attitude over the goddamned gummit taking your hard-earned money, if you’re gonna avoid jail and grief, pay your freakin’ quarterlies.

      Best advice I got, early in my career: A very rich and happy guy told me — during a heated debate amongst a number of libertarian marketers and financial gurus on how to escape taxes — this simple advice: “Pay every cent you owe. Don’t play games, and sleep like a baby at night. Consider taxes your entry fee to being a successful business owner. If it wasn’t the government, it’d be the Mob or some warlord.”

      I have followed this advice, and slept well. Many of those guys arguing over avoidance actually ended up under the cruel thumb of the IRS, some facing jail time. They did not sleep well for years…

      Pay The Man what he asks, and get back to making more yourself. Consider a high tax bill your evidence of being successful. If it bugs you, grow up.

      1. Will Compton

        I see the libertarian’s point of view… taxes are theft. But the thief also has a gun pointed at you so you should probably pay him what he wants.

        You’re right though… pick your battles. I would rather pay the man, sleep well and be free to criticize them.

        Thanks again for your life-changing insights!

  4. Jim Clair

    Outstanding advice!

    After listening I meandered around my neighborhood deep in thought about my finances… and especially about setting up my own product and list. Which Garf has been helping me out with… but after hearing this it became evident.

    Also… because of a nasty identity theft a few years ago… I have a bit of debt, which I was using to restore my credit, but then I just got lazy with it in the last 2 years. This podcast kicked my ass to write out a plan to pay that off faster… and then store more of that towards Fuck You Money.

    Speaking of Fuck You Money… John you told me as I stood side by side with you in the urinal (where obviously the best advice comes from)… to store up some Fuck You Money. I sheepishly said ok and you looked me dead in the eye and said “no… I’m serious… store up some fuck you bucks… it will be a saving grace for when you need it… and you will need it in your back pocket.”

    Which I did, I even moved some of the money I made back in the car biz, and started putting away a couple of serious bucks from (probably close to what Kevin said is the second paycheck) away.

    And… it seriously gave me some fuck you power when a guy on the phone was being a condescending prick… trying to convince me I should be paid lower… and no copywriter ever makes money… and he kept spitting a lot of nonsense my way. Well knowing I had the fuck you money stored up, it made it easy to walk away from that asshole, and actually wait to pick a pearl client without sweating it.

    When I walked away, I narrowed it down to 3 great potential people to work with, and because I wasn’t sweating it, I chose what I knew would be the best place for me to grow. Which also allowed me to not move from Denver, I love it here, love my little “copy cave” and having the fuck you money even saved me the hassle of finding a new place to live, moving, or dealing with my girlfriend finding a new job. So it was more than a saving grace in many ways.

    Been dying to thank you for that, and this podcast had a whole heap more of great advice from you and Kevin to handle the finances and plans for the future.

    Great stuff!


    1. John Carlton

      Glad you took the advice, Jim, and congrats on making it work. I had an almost exact experience mid-career with a bad client… and I was able to walk, which opened up room for a gem client with whom I still have a great (and profitable) relationship with 20 years later.

      Probably time for you to write up a testimonial for me, dude. Make it short, sizzling and specific, and send it to me privately. If I don’t hear from writers from you who got some value from my ravings, I never know I’m doing any good in the world…

      I know we’ll be hearing from you as you continue to grow and gain momentum in your career…

  5. Scott

    Holy Nuggets.

    I really enjoyed your treatment of the entrepreneur headgame – your emotional gut reaction to someone’s offering you a J.O.B. – that to me is a huge insight. I work with so many people who want that security, yet those kinds of offers tend to make me feel sick. Love the advice on the F U money and the liquid fund and how to get there. Really helpful. Thank you!

    – Scott

  6. Craig sunney

    I am so grateful for your elaboration of the FU money (in a previous course I own).
    Saved my a$$ twice now over a 5 year period….and the second time is currently happening.
    Helps me stay frosty


Leave a Reply

Your email address will not be published. Required fields are marked *