What You Probably Don’t Know About Freelance Writing

To many people, writing professionally is a dream that never seems to come true. Sure, they dream about quitting their day job and writing for a living. They perceive writing as an easy life, but it’s far from it.

Articles on freelance writing often present writing as a glamorous profession. While a few writers achieve celebrity status, most live with the day-to-day struggle of finding work and paying bills. Doesn’t sound very glamorous, does it?

Some people work just to make money and many don’t really enjoy what they do. And while writing can be a more fulfilling occupation than working in an office handling expense reports or working in a fast food restaurant, the writing life can be hard and stressful if you’re not prepared. You’ll have to constantly search for new markets, make deadlines, work through times of little or no work, and manage finances. This last item is what brings down most beginning freelance writers.

Were you good at math in school? At the time, you probably had no idea how math might play a role in your success or failure of your freelance business. As a freelance writer, you’ll have to keep track of your expenses, report taxes, and manage submissions. Unless you’re independently wealthy, you’ll need a budget that allows you to keep a roof over your head, food on the table, and the Internet powered up. That means you’ll need accurate record keeping to stay ahead of your bills. And you’ll have to be able to predict income throughout the year and figure out percentages of income at year’s end.

If you’re imagining being able to do what you want and living the life of Reilly, think again. You’ll need to be organized and disciplined. Record keeping will become a big part of your life. After all, you’ll be in business for yourself. Too many writers don’t see the similarity between what they do and what their dry cleaner or auto mechanic do. Both are owners of small businesses.

You’ll also need to back up information. You never know when you’re computer will unexpectedly die and you’ll lose all your data. You have to plan for fires, floods, and other catastrophes. So you’ll need to keep excellent records that you save in multiple locations.

To be a successful freelancer, you have to take risks. Someone once said that freelance writers should be brave enough to jump off a bridge even though they can’t see the water beneath them. You’ll have to believe that you’ll continue to find work, even though you may only have a handful of projects assigned at any given moment. If you’re waiting for the perfect conditions to become a freelance writer, they’ll never come.

Ask any freelance writer if what they do is worth it, and just about all will tell you—without hesitation---that they wouldn’t do anything else.

Budgeting for Success

Freelance writing is one part creative skill and one part business sense. The only problem is that too many writers who get into this business don’t have much of the latter. Unfortunately, this came from what most learned in school—albeit subconsciously.

Writing has always been looked upon as an intellectual endeavor. Therefore, it shouldn’t be tied in any way to business. But when you’re in business to make money, having a bit of business sense is a prime concern. And if you’re going to make money in this business—at least enough to live on—then you have to know what’s coming in and what’s going out. If these aren’t relatively balanced, you’ll be out of business sooner than you think.

To keep tabs on your finances, you’ll need to create a budget based on what you’re spending now and what you predict you’ll spend in the not too distant future. The best way to do this is to create a budget sheet for each month for at least six months. Doing so will let you know if you’re going down the right marketing path and making enough money to cover your expenses. Once you know how much you can afford to spend based on your earnings, you’ll be able to take control of your finances. If you're always coming out in the red, you’ll find it easier to change your work patterns once you're faced with the actual figures.

One of the best ways to start budgeting is to faithfully record the details on your budget sheet. After you've recorded these for a month or two, you'll have a better idea of what sums to enter in your budget for the month. At the end of the year, add them up and divide by 12, putting the resulting figure in the proper slot, even though you may pay some bills quarterly, semiannually, or annually. With an accurate monthly record, you'll be able to more easily adopt counter measures if your receipts aren't tallying with your expenditures.

Lay out your budget sheet like this: Divide it into three columns.

The first lists your sources of income for that month, your uncontrollable expenses, and your net income (the first minus the second). Under that, list your regular expenses—mortgage or rent, gasoline, equipment, office supplies, utilities, travel, etc—and the their totals. At the bottom, create a line for profit or loss.

The second column lists the predicted and the actual amounts in each category in the first column.

The third column lists the predicted and actual totals for the year to date.

A budget sheet faithfully kept will show clearly where your problems lie. Are expenses in one category heavier than you imagined? Is disaster looming around the corner if you continue to work for a specific market? Where and how can you cut down on expenses? Will you have to negotiate for a higher fee from your best client? Should you aim for more sales volume? Do you need to consider getting a part-time job? Are you paying too much rent? Are you billing properly? Has your inventory of stories and ideas been turned over quickly enough?

Obviously, this budget sheet, too, needs to be balanced monthly. Be sure you carry over the figures on the following month's sheet where indicated. To accurately record figures on this sheet, you'll have to tally up those petty-cash slips you've collected. Keeping an account of each expense as it occurs will help you tremendously in following a budget plan.

Count in the current inflation rate when you're setting up your future budget pages, saving yourself from too many unpleasant surprises when new costs arise. For instance, is your phone/Internet plan slated to increase next year? What about your health insurance premium?

By keeping an accurate tally of your income and expenses, you’ll be able to tell when you may possibly be getting into hot water. If you don’t, you may find yourself reaching for that life preserver all too soon.

Making Book on Your Business

No, you’re not headed down to your local bookie to make a bet, although sometimes it may feel that way as a freelancer. This business is fraught with risks, so why not take control of one from the start. Keeping a record of your income and expenses, known in the business world as bookkeeping, is an off-putting subject to many writers. But in fact, it’s an essential tool you shouldn’t do without. As for the idea that it's just a drag on your creative prowess, get over it. If you want to make a success of your business, you’ve got to keep records. It’s as simple as that.

Most people think bookkeeping is only for tax purposes. True, keeping good records certainly will help you at tax time, whether you do your own taxes or have someone else do them for you. But record keeping has other advantages. It can tell you where you’ve been and perhaps where you’re going. It gives you a heads up when things aren’t going as well and let’s you know when to breathe a sign of relief when they’re going better.

If you don’t keep good records, you’re allowing forces other than yourself to run your business. For one thing, whether your freelance operation shows real profit or not will he evident in well-documented books. Losses won't hit you as hard since they’ll appear in time for you to make needed alterations in your work habits or markets. On the positive side, if your income is growing, you might he edging toward a higher income-tax bracket. By noting this possibility early, you'll be in a better position to make the decisions that will save money and offset your tax liability.

How you keep control of the financial end of your business is totally up to you. You decide whether you want it to be easy or a constant headache. But it doesn't have to be the latter. Much depends on how you lay out your initial plans and how willing you are to diligently record the necessary information. Whatever system of keeping track you choose, you'll want it to he simple to use, easy to understand, reliable, accurate, consistent, and designed to provide information on a timely basis. The IRS doesn’t require any particular accounting system. All it requires is that you keep track of income and expenses.

Today, you have many digital accounting programs, both independent and online, to choose from. In most cases, these are meant for larger businesses. You want to keep things simple—at least in the beginning. You’ll need nothing more than a simple record hook using a single-entry system of recording expenses and income. You can pick one up at your local office supply store.
If you’re more inclined to work digitally, you could create a simple spreadsheet or multiple ones showing the necessary information. Whatever system you decide to use, you want to make sure it allows for expansion and ease of input.

One thing you’ll have to learn to do is a profit and loss statement. This should be done at the end of each year. Such a statement not only helps you see where you’ve been, but can also help if you need to get a loan as most lending institutions require one. There’s no special form. Just list all the money you took in and the expenses you paid out in various categories. By employing the expense categories set up by the IRS on Schedule C, you can just transfer those amounts to your statement. The difference between what you earned and what you spent is your profit or loss. This may or may not be the same as the total on your Schedule C of your tax return as there are other items involved on it.

A record of furniture, fixtures, and equipment in a separate section of the same record book will be an added convenience when, at tax time, or perhaps during any problems dealing with an insurance company, you need to see quickly what you purchased, from whom, when, and for how much. With all of this together you can then also record by which means of depreciation you are operating—another bit of information the IRS requires of businesses. All equipment needs to be depreciated according to IRS rules.

You can also keep a record of payments to your retirement fund, your savings account, insurance payments, dividends received, receipts from medical and disability insurance, details on payments and subcontracts, accounts receivable and payable, loans, leases, etc. Only your own particular situation and your accounting preference will dictate what is or isn’t included. Generally, as a freelancer, you don't have to be concerned about most of these details but, if and when you do, the same record book is expandable to include them and you have, as near as is possible, a complete financial accounting of your situation in one handy book.

NEXT WEEK: Some bookkeeping tips to make your life a little easier.

Controlling What Comes In vs. What Goes Out

Let’s face it, unless you’ve just written a best seller and have sold the movie rights to it, you won’t make a whole lot freelancing. That’s the truth and there’s no getting away from it. So to maximize your profits, you have to control your expenses—and not just your business expenses.

To set up a good system to control your overhead, you should take a look at how other small business do it. The first, and most important, thing to do is to keep careful records of what you spend on every item and review the figures regularly. Keep an eye out for bargains and buy in bulk at a discount when you can. Use credit wisely—but don’t become dependent on it. Create a budget and stick to it. And lastly, update your equipment when you can afford to. In other words, put some money back into your business.

You'll want to measure your success against the cost of it to see where you can cut corners and still maintain your needed writing routine. While the latest and greatest computer and phone equipment might be nice and will impress your friends, neither is necessary to conduct your freelance business. In fact, you may not want to buy the latest computer with the latest operating system.

For example, let’s say you have some programs that you know how to use well. It’s likely that if you upgrade to the latest Windows, for instance, those programs will no longer work on your system. You’ll have to go out and buy new ones or new versions of the old ones and that takes money. Plus, you’ll have to take the time to learn the new programs and that takes time and time is money. The same applies to your phone. If you have to have a cell phone, then consider a prepay plan like Tracfone that will enable to you to keep your costs in line and not give you another bill to pay every month.

How you handle the basic, materials of your trade is a matter too important to ignore. However the thought process may begin, you’ll soon find yourself composing and refining your thoughts on paper. Perhaps you’ll begin in longhand on a legal pad. Or maybe you’ll go directly to your computer and compose on the screen. Keep an eye on how you use paper. Do you really have to use fresh sheets for your notes? Why not print out your notes on the used pieces of paper? Likewise, do you need to buy special note pads or can you employ the backs of used envelopes to jot down memos or to-do lists? This may sound frugal, but it does save money. And while you’re at it, why not reuse those large envelopes in which you get other mail. Of course, in all cases, the envelopes shouldn’t have more than an address and return address on them, both of which you can cover over with labels and new addresses. To reseal them, buy some clear shipping tape.

You'll be dollars ahead if you study religiously every tip that comes your way regarding items you can get for less or, better still, for free. Know what you need and be on the lookout for sales. For example, you know you’ll need to buy additional print cartridges for your printer, so why not buy them from a discount house like LD Products and take advantage of their occasional sales and free shipping on weekends.

When you need office supplies, don’t make a beeline for your nearest Staples or Office Max. Instead, check online first and keep an eye peeled for sales of printing paper at your local supermarket when school begins in September and at drug retailers like Walgreens.

Today, you don’t even have to buy books new. There are plenty of places to buy used copies, both online and at book sales. And don’t forget that you can still borrow them from your local library, and they won’t cost you a dime unless you return them late.

Look at each item on your budget, including food and utilities, and examine alternatives. Can you use another service, such as UPS, in place of the U.S. Mail and save money? You don’t have to spend hours clipping coupons to get bargains.

Also, consider how you do your research. Technology in general has enabled people to spend far less for communications. Not so long ago, you would have had to pay hefty long-distance charges to interview someone across country—and even worse, within your state. Today, most phone companies, both cell and land line services, offer package plans that include long distance—one amount for all services per month. While before you would have had to keep a phone log of each call, today you needn’t worry about it. Instead, you can deduct a portion of your phone bill for your business.

You can even conduct interviews or get the information you need by E-mail. An advantage to using E-mail is it enables you to send the questions you want to ask ahead, so that your interviewee can prepare, resulting in a more productive interview. It also enables those who speak English as a second language to get an assistant to send you the answers to your questions in clear English, so there will be no misunderstandings.

Finally, you’ll need to record your expenses so you can interpret them as you go. There are a number of programs that allow you to do this. Try to find one that will let you record each expense right after you pay for it, then will let you compile all your expenses for tax purposes.  Splash Money from www.iambic.com is one such program that works with smartphones, tablets, laptop and desktop computers.