We all know that freelance income and salaried income are two different things. There are hard factors (self-employment tax, health insurance, paid time off) and soft factors (flexibility, enjoying your work, being able to live where you want). But at a certain point, you have to run the numbers, which you should do at least once a year.
First, come up with a number
If you want an actual freelance income needs calculator, I would recommend:
- Jonathan Hine’s booklet I am worth it, which will help you calculate your total cost of doing business
- Motiv’s freelance hourly rate calculator
Those are not affiliate deals, and there are other ways to calculate how much you need to charge in order to reach your desired income, but they’re a good start.
Next, give up on “I earn more than my salaried friends, so I’m fine”
Lots of people get sucked into this trap: “I was making 65K at my last job and doing fine financially. I worked 40 hours a week with four weeks of vacation, so that’s 1,920 hours a year. So I only need to earn $33.85 an hour (65,000/1,920) and I’ll replace my income from my old job.” A couple of issues there.
- If the salaried job provided paid time off (vacation time and/or sick time), you’re now funding that yourself
- If you’re in the US, the salaried job paid the employer’s portion of certain taxes, and you’re now going to be funding those yourself
- Most freelancers do not bill 40 hours a week (unless they work 55-75 hours a week)
- If you’re in the US and the salaried job provided health (disability, life, etc.) insurance, you’re now funding that yourself
- If the salaried job provided other benefits such as matching your contributions to a retirement plan, you’re now funding that too
Even established freelancers fall into this trap, in that they can’t help comparing what they earn as a freelancer to what their spouses, friends, and colleagues earn at salaried jobs. So, the first step is to get rid of that mindset and think only in terms of your freelance income.
Be honest about the soft factors
The second step is to assess how much the soft factors of being a freelancer mean to you. Perhaps that’s the ability to work from anywhere. Perhaps it’s that you can be home when your kids get home from school, or when your elderly parents need help. Perhaps it’s that you can take a month off and go trekking in the Himalaya, or just that you don’t enjoy having a boss, or that you want to live in a place where there are very few salaried jobs for what you do.
For me, the soft factors alone are a deal-breaker for most salaried jobs. I don’t want to move to a major city. I don’t want a boss unless the person is really, really awesome. And I want the flexibility of scheduling work around my family and personal time. So in a sense, I have no choice but to make freelancing work. I’m happy with how much I earn, but I would stick with freelancing even if I earned less. Other freelancers might take the opposite angle. If the soft factors don’t mean much to you, then you need to earn *a lot* as a freelancer to make up for the financial hits of self-employment tax, no benefits, and no paid time off.
Don’t limit yourself
The longer I work as a freelancer, the more I realize the importance of mindset. In my first year as a freelancer (2002), I made $9,000. And I was really, really excited about that 9K, because I had a newborn baby and wanted to find a way to work from home while she was little. Then I thought, hey…what if I could actually replace my income from my old job as a teacher? Like actually make 35K? So in 2003, I made 18K, and in 2004, I made 36K, and that felt just amazing. The thought of earning a lot more than that wasn’t really on my mind, until my accountant said, “You’ve doubled your income three years in a row, which means you need to plan for a lot more growth.” Really? Really. And within another two years, I was making the part-time equivalent of six figures.
So, the first step in earning a higher income is to stop limiting yourself to “just getting by.” Hang out with freelancers who earn a lot more than you, and soak up their tips. Gradually start filtering in some higher-paying work, and some higher-paying clients, while keeping your bread and butter clients as your baseline income. Test out a new revenue stream. Invest in classes that make you a better translator, which will give you the confidence to market to better clients.
Readers, other thoughts on freelance income?
I have to agree about the “soft factors.” In fact, some of these have hard, real-world benefits. Because my job is so flexible, my husband and I can get by with just one car. Our daughter is old enough that child care is not much of a concern, but we have saved thousands. And that is not even counting the health benefits of not being stressed all the time.
Thanks, Jenn! Yes, very true! We also have one car (and lots of bikes!). And when my daughter was little, we also avoided lots of day care and after school program costs because I was able to shift my schedule around the school day. Great point that these have hard benefits too!
That last point about “not limiting yourself” hits really close to home, and something that I really should be repeating to myself every day. Having grown up in a Russian immigrant family that was scraping by and soaked in all the Soviet-era tips on how to never spend an extra cent anywhere, I’ve ended up feeling like I can’t dream big about what I want to achieve and save for. And that’s not true! Remembering that it’s not true, and that there’s no reason to settle for “good enough,” is what will (hopefully) be my driving force as I tackle the unpleasant business of raising rates.
Thanks for these insights!
Thanks, Eugenia! I agree: I am inherently frugal and still hang out the laundry on the clothesline, wear a sweater instead of turning up the heat, etc. Nothing wrong with that. But I do think that if you believe it’s impossible to increase your income, it’s never going to happen. And your reason for increasing your income doesn’t have to be a material thing, like a more expensive car or a bigger house. My primary motivation is that I hate worrying about money, for example.
Love the advice “Hang out with freelancers who earn a lot more than you, and soak up their tips” – I think surrounding yourself with a certain mindset can be a huge factor in finding success.
Thanks, Jamie! Yes, that is so true! One of my eternal reminders to myself is, “shut up and listen.” That’s where you get some of the best advice…just by absorbing what people a level above you are thinking and talking about.
Hi Corinne,
One thing that you failed to mention is the fact that in a regular job, you can usually expect to get a raise every year (even if it’s only a tiny one). In the meantime, you can certainly expect your cost of living to increase as the years go by. Unfortunately, the price pressure in the translation industry is huge, and as far as I can see, prices have not risen in the past ten years. In fact, in may cases they have actually fallen. Granted, there are many strategies for “raising your rates” (Chris Durban has a lot of good advice about that in her book The Prosperous Translator), but in general, my sense is that it is increasingly difficult to do so, plus the fact that there is a rate beyond which agencies simply will not go (in other words, the sky is NOT the limit). And even direct clients are increasingly price sensitive. So when deciding whether to become a freelancer, the notion that your income may remain flat or even fall as the years go by is an important factor to consider.
Thanks, Tom! Good food for thought there. In terms of translation clients, I agree with you that a) there’s a rate above which agencies will not go, and b) if you’re talking very high income, like say over 200K, I think it would be difficult (but perhaps not impossible) to achieve that exclusively from doing translation. But it’s also possible to keep doing translation *and* teach, write books, do consulting, etc. Just for the record, I don’t make 200K, but I have been able to significantly increase my income from classes, books, and consulting.
I started freelancing when I was 58 years old, after working in jobs where translating was not my primary job but I frequently did translations as part of my work. My job was eliminated, and I was offered a lower paying job. So I quit, started freelancing and moved overseas. It was one of the smartest things I ever did. The “soft factors” appeal to me tremendously – I’ve lived overseas for the last eight years, where living expenses and medical care are a lot cheaper than back home. I can live anywhere I want.
I can start collecting pensions now and afford to cut back on work, but I enjoy what I do so much that I don’t want to stop. I wish that I started doing this 30 years ago.
Thank you! That is a great story!
Corinne, when you’re calculating the expenses involved in freelancing vs. salaried, you can’t forget things like: 1) your family only needs one car now instead of two – plus maybe less wear and tear on the one car you still own; 2) depending on where you live, you don’t have to spend a lot of money on transportation to work, whether it’s on gasoline or commuter trains/buses – for a lot of people this could be a savings of several hundred dollars a month; 3) you don’t need to spend a lot of money on clothing for work.
Thank you! Yes, definitely true! Another huge one is child care, unless you live in a country with a government-run child care system. For example when my daughter was little, she went to half-day preschool (still expensive, but less expensive than full-day!) and then I routinely worked from about 7-11 PM. Not the greatest for your social life, but it gave me more time with her and cost a lot less money. Thanks for your comment!
It makes perfect sense.
Thanks for the reference, Corinne. I hope the booklet is helpful.
No problem! And as I mentioned, not an affiliate deal; just a useful resource!
I agree with Jenn that there are lots of hidden costs (monetary and otherwise) to salaried jobs that people don’t factor in when comparing paychecks. So just as we shouldn’t forget to include taxes and potential sick days to arrive at our real freelance earnings, nor should we overlook the financial and emotional costs of combining care work (for kids, for parents, even for friends and community) with less flexible jobs. Although I believe this is a concern for men and women, the way our societies work means that realistically much of the care burden does still tend to fall on women, and I’d suggest it’s no coincidence, then, that this is a female-dominated profession. I see this flexibility to combine paid work and care as potentially a huge boon for all genders (who doesn’t want the best of both worlds?) but obviously the catch is managing it right. And this post (and your books) give eminently pragmatic advice on this, so thank you! Given how much the freelance and telecommuting economy is growing, we need to start thinking more about working collectively to see if we can gain some benefits that salaried workers have. In her (fascinating) book Unfinished Business, Anne-Marie Slaughter suggests the creative professions should start exploring the guild/equity association model (think screenwriters guild, etc.) for things like affordable healthcare and disability insurance. Worth thinking about…
Thanks, Victoria! Great observations there! I think it will be interesting to see whether the gender (im)balance in our industry shifts as the entire economy moves more to the contractor model. For example in years past, 90% of the people in my “get started as a freelancer” class were women who wanted a job where they could work part-time from home while their kids were little. Now I’m getting more guys who just don’t want to be tied to a 9-5 job. thanks for the Anne-Marie Slaughter book recommendation too; I want to check that out (listened to a great interview with her husband on Note to Self!).
I enjoyed that Note to Self interview too and there was also a good one with her on Freakonomics. I think that you are right that the gender balance will slowly shift: indeed, Slaughter’s argument in that book is that younger men and women expect to share care duties more equally than previous generations and 9-5 generally doesn’t allow that (in fact, she explores it as a roundabout situation, i.e. we need more employment flexibility for more gender equality and vice versa). One of the conclusions I reached is that we should be aware that as highly educated self-employed professionals we are in a position of great privilege and that we should be thinking of how the lessons we have learned from working flexibly can help improve working conditions (hard and soft benefits including work/care balance) both for our own profession and for those in other industries that have not yet accumulated the experience or collective organization to do so. Bottom line, as a working mother, the book gave me a lot of food for thought.
Just bought the book that you suggest, Corrine! Let’s see! Can’t wait! 🙂
Great! I hope you enjoy it!
Thank you for this article Corinne! I’m just finishing up my first year freelance translating full time (after working in a company for awhile and translating on the side), and I’ve made about half of what I was earning at the company. Hearing stories of growth as the years progress is inspiring to me, as I am constantly wondering, “Am I earning enough?” and comparing my salary to what I earned before. This post couldn’t have come at a better time and I am very glad I stumbled upon it! Thanks for sharing your wisdom.
Awesome, I’m glad it was helpful!!
Corinne, one factor that is having a significant impact on our industry – and which probably accounts for the greater number of men coming into the field – is the overall economy. As underemployment becomes more of an issue and full-time, long-term employment becomes harder to find and keep, freelance translating becomes a more attractive option for people who have the skills.
Thanks, and I agree. I also think that over time, freelancing is seen as more of a ‘real job’ and less of an excuse not to have a real job!
Corinne, I couldn’t agree more when it comes to the importance of mindset. It’s played such a big part in my translation business. And I also love the suggestion of hanging out with freelancers that earn more than you. Some of the best advice I’ve received (and still get) is from top translators.
Thanks, Maryam! Glad you enjoyed the post!