Freelancers: When to Give Yourself a Raise
Freelancers: When to Give Yourself a Raise

Freelancers: When to Give Yourself a Raise

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Let’s have some real talk about freelancing and money matters, shall we? When it comes to running your own freelancing business, solopreneurs face some particular challenges. A major one? Knowing when it’s okay to spend more on personal, day-to-day living expenses. In other words, how can you gauge that it’s time to move some of your earnings from your business account into your personal budget? 

Being your own boss, only you can determine that. When the only thing regular about your income is how irregular it is, how can you possibly know if it’s okay to “pay yourself” a little more each month? Sure, you might have had a flush few months, but there’s a chance that your income could take a dip in the near future. 

Here’s how you can go about gauging whether to give yourself a raise:

Look at End-of-Year Income 

Income that fluctuates all the time is maddening. Some months, it can be hard to figure out if the rent will get paid, let alone whether or not you can afford to up your living expenses. To figure out if you’ve been earning more overall, look at your income for the entire year. If you’ve made more this year than years prior without your expenses going up too much, it might be time to consider allocating more toward your personal budget. 

Maybe your annual earnings got a boost because you worked more, upped your rates overall, or diversified your streams of income. Whatever the reason, it might be time to let yourself spend a little more. 

Anticipate Your Earnings for Next Year

This is another tricky endeavor. While it’s anybody’s guess how much you’ll be earning next year as a freelancer, there are a few ways to fine-tune your prediction. For instance, which clients do you think you’ll continue to work with? Do you anticipate larger projects or higher-paying clients? 

On the flip side, your earnings might take a dip. Maybe you’re planning a pivot, which means scaling back on what you do currently to make room for something different. I’ve had freelancing colleagues voluntarily earn less so they could focus on writing a book, developing a podcast, or investing in themselves to prepare for something new. 

Know What You’ll Use That Money For 

I’m quite cautious of lifestyle inflation and avoid it for the most part. However, there are times when spending more money on the regular could improve your day-to-day life. 

For instance, last year I bought a new car. That meant monthly car payments, higher insurance premiums, and potentially higher maintenance. Because this decision would increase my living expenses for the long term, I had to carefully assess it. As I work from home and tend to use my car less often than most people, I felt like this additional expense would be okay. Plus, if my income took a temporary dip, I would still be able to manage. 

There are other areas where, if I’m having a great month income-wise, I’ll tuck away extra money into my vacation fund, splurge fund, retirement fund, or general savings. This way, you can free up some money on an as-needed basis, which alleviates any pressure to give yourself a permanent boost. 

If you put your money in a splurge fund, or toward a savings goal, you can always adjust the amount later. If you’re not sure that a living expense bump is something you can sustain, then test things out by putting some money into a goal instead. 

Keep Your Living Expenses the Same

Another way to avoid lifestyle inflation while making the most of your earnings: figure out exactly how much you need to earn each month to cover your living expenses. After you hit that amount, you can use any excess for whatever you please—enriching your life, saving for a vacation or home, or putting toward retirement. 

For instance, writer and editor Elen Turner and her spouse contribute equally to living expenses. Their joint account is used to cover bills, utilities, food, shared entertainment, and car expenses such as gas. If Turner makes more, she’ll put that money toward other things, such as her savings. “We can generally cover our essential expenses without much problem,” says Turner. “So when I get paid more, I give my savings account a raise.”

Find Ways to Be More Profitable

As my colleague Barbara Ruth Saunders explains, instead of asking for a raise from clients — which makes it sound like a job — think of ways you can be more profitable. For instance, accept projects that might take less time for you to do. Maybe you already have expertise on the subject or access to useful sources. 

Or is it something that’s very time-consuming for the client, but would be relatively quick and easy for you to do? If the stakes are higher, you can probably land a high project fee. Case in point: One of the best projects Saunders landed was a templated report that her client had to submit in a timely manner. Failing to do so could have meant a fine for the company, or disrupted work in which they’d invested a significant sum of money. 

Saunders was able to ask for $1,000 per report. As their project was budgeted in the hundreds of thousands, this was chump change to them. “They did care that these reports took me as little as 45 minutes,” says Saunders, who is a self-employed writer and educator.

Consider When It’s Not Necessary 

The idea of giving yourself a raise might seem like a keen idea, but sometimes it might not be necessary. If it won’t affect your quality of life nor propel your money goals forward, perhaps it’s best to keep your monthly income the same. And you can keep that money in your business account for the time being. 

Giving yourself a raise can be tricky, but the good news is that there are several ways to go about it. Whether you decide to undergo a bit of lifestyle inflation, give yourself permission to spend a bit more in a given month, or put “extra cash” into a money goal, having a plan for that extra influx of dough can help you make the most of it.