Chances are you’re undervaluing yourself without realizing it. Emotional, moral, and financial worth are all internal struggles faced by freelancers.
The vast majority start saying yes to anything they can at the cheapest rate. They’re worried they’ll never get the experience or someone else will get there first.
But if that’s you, take a step back a minute. You’re underpaid and overworked, in which case you might as well be an employee at a big corporation. So let’s fix this together with some food for thought that’ll get you on your way to understanding your own worth.
Basic Rules of Business
No matter how much freelancing is your passion, you are your own business. Thus, you need to be strict and realistic with yourself. Understand that there are two key elements to work on: Spend little, and earn lots.
These look very different to every individual. So we’re going to help you understand yourself more and work out what that means for you.
Step One: Reduce Your Outgoings
The vast majority of freelancers are self-employed. It’s good practice to keep business, and personal expenses separate, of course. But when considering your value, they should merge together. For example, think about that workspace you’re renting in the city. Is $300 per month on travel, coffee, and a workspace necessary?
Reducing your spending each month is by far the easiest pay rise you’ll ever get. Because you will realize how easy it is to save up for your life goals. Not only that, but you might actually find yourself much closer to your life goals.
The best way to work all this out is using the 50-30-20 rule. Note down all your legal commitments such as credit cards, rent, tax into the 50%. Then, put life’s luxuries (that includes anything you could live without, as painful as it is) in 30% and savings in 20%. If you have debts, use the 20% savings to pay down debts, so you can start saving quicker.
Once you realize you can save $100k buying a bigger house by not traveling to work, things get interesting. All of a sudden, you’re reading your goals quicker with more time to enjoy the forever home you wanted. That’s got to be worth it, right?
Step Two: The Value of Your Non-Work Time
Now you’ve worked out how much you need to pay the bills using the 50-3020 rule, it’s time to understand what that means to you. Right now, you might be spending $2000 a month on your essentials, with $1000 on non-essentials. Based on the 50-30-20 rule, that’s a $4000 a month wage.
Using a similar strategy to step one, understand what work means to you. If you have no personal commitments and love working, then you can keep working those 50hr weeks at $20 an hour. But if you have a young family or care for an elderly relative, then your time is precious. Working during school hours for 25hrs a week means you’re looking at $40 an hour.
If you’re used to writing for $20 an hour for an agency, the thought of doubling your rate, whatever the reason, is scary. But here’s why you should have the confidence to charge way over that.
Step Three: The Value of Your Working Time
Let’s run with this idea of $40 an hour working a 50hr week to save up for a mortgage or pay down debts. Here’s how to reach that goal.
You already know you can earn $20 an hour writing for an agency. So, how can you justify that extra $20 an hour to a client?
Well, get ready to find the jaw-drop emoji on your keyboard. Because, in this example, we’re going all-out and pricing you up at $60 per hour for your work.
Remember the 50-30-20 Rule
The 50-30-20 rule fits well into other areas of life beyond personal finance. And, it’s not surprising that it fits rather well into freelancing.
Your Working Hours in 50-30-20
Chances are, in a 50hr week, you spend 25hrs writing (because writer burnout is a real thing). These are “billable hours,” aka the time you spend doing the thing you’re getting paid for.
When you’re not writing, you’re networking. Social media posting, job boards, and contacting old clients are all networking examples. That’s about 15hrs a week or 30%. These are your non-billable hours. Oh, and then you have 10hrs writing your own blog as well.
See where this is going? Your time is now worth $60 per hour. $30 per hour for the writing, $18 per hour for the lead generation, and $12 per hour for your sanity.
Your Business Finances in 50-30-20
Another way of looking at it is not your working pattern but your billing pattern. We worked out in the personal finances you need $20 an hour take-home pay. Well, depending on where you live, there’s tax to consider, so in the USA it’s 15.3% (The other 4.7% is a buffer in this example).
This also gives you a 50% take-home income after tax, which is $30 per hour. So straight away, you’ve beaten the $20 per hour you needed in step two. Then you’ve got $18 per hour for business expenses. After paying your commitments, you can use the extra to build your brand.
This leads on to Step 4 and the deal-breaker we haven’t yet mentioned.
Step Four: The Value of Adding Value
But we know what you’re thinking. What about the person who wants to work 25hrs or less? Well, we have an answer for that too, and that’s using branding when raising your rate as a freelancer.
We mentioned above using that excess cash to invest in a professional website. Or, you can invest in top-end software that boosts your productivity.
You could even invest in a coach to support you if you struggle with networking and finding clients. Your existing clients are happy paying $60 per hour without branding. Imagine what a brand new client will think with your new, more professional branding.
Step Five: The Value of the Customer’s Time
We haven’t even discussed the value you bring to your customer. If you have a freelancing skill that is high in demand, then you’re winning at life. And if you don’t, create that demand yourself by making people need it.
Learn extra skills like keyword research that save $1000 a month on advertising. Finding one article a month to write about that will rank top of the search. Charge them $500 per month for that privilege.
They’re still making a $500 per month saving. Or, imagine a company is losing $10,000 a day in sales because their website crashed. Why shouldn’t you charge them $2,000 to fix the website if the shop loses $10,000 a day in sales?
Find Your Freelance Rate With Confidence
At the end of the day, it’s your job to convince the client your work is worth what you value yourself. Don’t be scared of raising your rate, as long as the value is justified.
Whatever your freelancing skill, you can’t put a price on time or talent. Unless it’s your Freelance Rate, in which case, you’ll need a price!
For more advice on winning in life, keep checking out our articles and see what steps you can take next!