From Kristine Kathryn Rusch:
Freelancers must plan how they will get through a year financially. Which means they need four cash flow charts. Now, realize, when I’m talking about cash flow, I mean how the money owed will arrive. It generally will not arrive in one lump sum.
So here are the three charts that I listed in the first freelance scramble post:
The first chart shows how everything might flow.
The second chart shows how it probably will flow.
The third chart shows the absolute worst case scenario…assuming the freelancer does get paid.
For more explanation of those charts, please read the earlier post. In it, I also recommend a reserve savings account to get you through the hard time, and paying off all of your debt. That means a paid-for car, paid-for house, and paid-off credit cards, among other things.
After I laid out those first three charts, I mentioned that there is a fourth chart that every freelancer has.
The Fourth Chart shows the true worst case scenario—what happens when no one pays.
Does that happen? Oh, sadly, yes. Especially to new freelancers. Freelancers who’ve been at it longer usually know how to mitigate the circumstances, which I’ll discuss in a future post.
. . . .
Do not volunteer to write anything for free. Ever. You make your living as a writer. Do you go to your day job and tell them they don’t have to pay you for your efforts this week? Then why in God’s name would you ever do that as a freelancer?
Value your work so that other people value it as well.
The problem of undervaluing what you write isn’t just a traditional writer problem. It’s also an indie writer problem.
In the United States, the myth is that artists (writers, painters, actors, musicians…) starve. And so anyone who chooses the lifestyle of artist, it follows, should expect to do a lot of work for very little money.
That attitude is what causes so many writers to undervalue their own work. Indie writers do it more than traditionally published writers. Most traditionally published writers have at least gotten the memo that they should, at worst, get an advance on their novel.
. . . .
Dean and I did not get paid by any of our New York traditional publishers for six months after 9/11, even though some of that money had been due since July. In some cases, we went more than a year without payment from our usual sources. We survived because of the freelance scramble.
Major crises happen, from the stock market crash to the fall of the Berlin wall. And sometimes those crises have an impact on freelance writers (as a group).
Other times, though, it’s just a series of bad circumstances that keeps every client from paying the writer. One client goes bankrupt. Yet another shuts down his business for good. A third decides to pay a different writer instead of you.
Everyone is late, significantly late, for a variety of different reasons. There are techniques to get money from each of these clients, and I’ll give you some techniques later in this series, but for the sake of argument, let’s say you know you’re not going to get any cash for the next six months, despite what’s owed to you.
If you’re a longtime freelancer, you’re prepared for this contingency. You might hate it, but you’re ready. You have a plan.
The plan, simply put, is this:
You use your reserve funds to pay this month’s bills. And then you find new work. That new work will not pay as quickly as the work you’ve already done should have paid. But it will eventually pay.
You just need to hang on until the new money comes in.
. . . .
So you made $200,000 last year, and will make $50,000 this year. You will still have to pay taxes on that $200,000 this year. If you didn’t save for it (or pay estimated), then you will have to pay those taxes out of that $50,000.
This is why, in addition to copyright, the other thing writers need to learn to maintain a long-term career in this business is how to work the tax system to your benefit.
Because a good half of my readership for this blog are not in the United States, I am not going to go into a long tax discussion here (or in the comments). Suffice to say that you need a good accountant who works with non-traditional clients—particularly musicians and other writers. Because the tax law is different for those of us who freelance, run businesses and/or make a living as artists. There is no one-size-fits-all tax preparation and no one-size-fits-all answers to tax questions.
If you need a way of thinking about this fourth scenario, think of it like this: You got fired from your day job and you have no prospects for a new job. You still have to pay your bills and cope with the day-to-day stuff, but you have no unemployment coming in and no safety net except the one you build for yourself.
That’s the scenario I’m describing here.
Yes, it’s scary. Yes, it’s hard. Yes, it might happen to you.
The key to surviving it isn’t to hide your head in the sand. The key is to plan for it. Expect it, at least once in your freelance career, and then when it hits, do your best to find new work.
Link to the rest at Kristine Kathryn Rusch and thanks to Bruce and several others for the tip.
Here’s a link to Kristine Kathryn Rusch’s books