Posts filed under 'Money honey'

Ask the cubicle expat: Should I lower my rates if a client can’t afford me?

Thanks to everyone who wrote in with their burning freelance questions last month. I really appreciate it. This question really stuck in my craw, so I decided to give a quick answer now.

Frustrated Freelancer asks: I recently was negotiating a project with a client I really wanted to work for. After I told them my price, they came back with, “We think this could turn into a lot of ongoing work, so would you be willing to come down?” It made no sense. If they are going to come to me with more work (and therefore take up a higher percentage of my time, which is then unavailable for other projects), why would I lower my price? Maybe there is some logic to lowering your price for some situations? I’d love to know.

I answer: Your instincts are right. “We will give you more work later” does not justify a haggle-down now. It’s a pretty weak argument for the client to make. Not only are you forfeiting 5, 10, or 20 percent of your earning potential now, you’re doing it month and after month if you continue to work with this client. And since you’d ideally want to raise your rates in another year or two to keep up with the cost of living (a topic for another day), you’re starting out wayyyy behind where you need to be.

The client’s tentative language (“Would you be willing…?”) indicates they’re just bluffing and trying to save a few bucks. Something more hard-and-fast like, “We’d love to work with you, but $xx.xx is the highest our budget will allow” lets you know there’s no more wiggle room (say, because you’re negotiating with a non-profit organization or a small company with limited funds for outsourcing projects). So my answer would be, “No, but I could do [a price midway between what you initially suggested and what they're now offering].” If you’ve padded your first offer by 10 to 20 percent of what you actually want for the job and a haggle-down ensues, you have a much better chance of coming away with a price you like.

Before you enter into any negotiations with a client, I’d get clear on what “I really want to work with them” means. Would one sample in your portfolio from this company meet your needs? If all you’re looking for is to be able to say, “I’ve worked with Fancypants Client X,” then the answer is yes.

If, however, you believe strongly in the organization’s mission and want to do whatever it takes to forge an ongoing relationship with them, maybe you resign yourself to working for them at a discounted rate (if that’s the best you can do) in the name of community service and make up the difference with higher-paying bread-and-butter clients. Or, if the client’s offering some high-profile work that would get you noticed by other potential clients, industry bigwigs, and perhaps even the media, maybe you do a few pieces for them and reap the rewards in other ways (perhaps press for your business, which leads to more business) before moving on.

But back to the haggle-down at hand: Say the client’s shot down your counteroffer or shut you down with a “We simply can’t afford it” statement. You want to work with this client at least once, but you don’t want to get branded as someone who makes 80 percent of what she knows she’s worth. So you tell them you’d really like to work with them on their campaign to save the polar bears and will give them a 20 percent discount on this one gig so they can afford it. If it’s a for-profit company, you can add that you hope they can come up in price in next time.

Then on your project agreement and invoice, be sure to indicate that you’re giving a 20 percent discount. That way, the client won’t expect the same low price in the future. And neither will any of the colleagues they recommend you to.

16 comments April 3rd, 2008

Ask the cubicle expat: My client didn’t send me a W-9 form — help!

Jasmine asks: I just started out as a full-time freelance writer/producer/creative consultant in NYC about a month ago. I am a little unsure whether it is my responsibility to offer a W-9 form to clients, or if it is up to them to ask me for one. (Obviously, I’d rather not hand out my social security number willingly.) I have good record-keeping practices to ensure I am able to determine the appropriate amount of taxes I will owe, but expect that without a W-9 I won’t receive a 1099, although I will certainly report the income on my own returns. Any insights as to who needs to initiate a W-9 are very welcome.

I answer: Congrats on going freelance! This question, cousin to “Help, my client didn’t send me a 1099!”, is one I hear a lot from new freelancers. For those who don’t know, a W-9 is a simple form that tells clients your tax ID number (your social security number if you’re not incorporated), which they need for their records and to generate those cute little 1099 forms they send you each January.

It’s in the client’s best interest to get this form to you, and 99 percent of them will. You’re right that you won’t get a 1099 if the client hasn’t asked you to fill out a W-9, either because they’ve never done this before and have no idea that they’re supposed to (in which case, your good records will come in handy at tax time) or because they’re just starting to use freelancers and are too lazy/busy/confused to follow proper tax practices.

Don’t worry so much about giving your social security number to a reputable business that other freelancers can vouch for. I understand the fear, but I’ve never heard of anyone getting their social security info misused by a standup client, and I’ve been doing this since the Pliocene Era. If, however, a new client is giving you the heebie-jeebies, that’s a clear indicator that you shouldn’t work with them. And if anyone has a juicy My Client Committed Identity Theft And/Or Sold My Social Security Number On The Black Market story, I’m all ears (and of course, sorry to hear it).

11 comments March 17th, 2008

Why freelancers should avoid living check to check at all costs

While I haven’t had many problems getting paid by clients over the years, the occasional accounting snafu does arise. This week I’m dealing with a client who’s been all thumbs in the accounts payable department. (In their defense, a personnel change has led a few check-cutting hiccups.)

Fortunately I’ve had enough money in my account to cover the boo-boos. Still, I thought I’d share my Not Getting Paid Properly Hall of Fame with you. Curiously all these goofs happened during the December holiday season.

  • Client who normally sends checks within 14 days of receiving invoice takes almost three months to cut me a check. This requires some prodding on my part. Check arrives unsigned by client. I fail to notice and race to deposit it. Bank returns check to me, unable to cash it. I’m left waiting for client to reissue a valid check. (Duh all around.)
  • Long-time client accidentally pays me double the invoice. All on one check. Not wanting to embark on a life of crime, I let the client know. I tear up the check and wait for client to issue a new one. (Merry Chrismukkah. Not.)
  • Another December, another long-time client insists that I bill them in advance for work I’m slated to do the coming January. Something about having to pre-bill their client. When the project scope shrinks, I wind up having to reimburse my client a couple thou. (Don’t try this at home. Just as stupid and painful as it sounds.)
  • My personal fave: My check arrives in an envelope stuck to the adhesive of another envelope addressed to and containing a check for another freelancer. Clearly an automation goof. Rather than send the poor guy’s check back to the client, I Google him, let him know, and drop it in the mail to him. (A Christmas miracle!)

This probably goes without saying, but impeccable accounting records (via Excel, QuickBooks, or the program of your choice) are a must if you’re even going to catch this stuff (save for the sig-less check).

So what about you? Any stupid payment tricks/accidents on the part of your clients you care to share? Please don’t name names, unless you want to pay my legal fees.

7 comments March 5th, 2008

Grad school, round two: Q&A with PayScale reporter Kristina Cowan

We had ourselves such a lively conversation about grad school last month, I thought the topic deserved another look. I recently did a Q&A about all things higher ed with Kristina Cowan, aka The Salary Reporter, at Kristina has more than a decade of experience reporting on education and the workforce. Here’s her take on higher ed, community college, trade school, and recession-proof gigs.

Q. I’m a big fan of not using grad school as the “I don’t know what else to do next” default. In the The Anti 9-to-5 Guide, I suggest auditing classes and talking to students in programs you covet before enrolling. Can you offer other tips for weighing a program you’re interested in?

A. It’s a good idea to interview others in the field you’re exploring. Talk to a professor at the school you’re considering, as well as professionals working in the industry. Request informational interviews by phone or, ideally, in person, and prepare a set of questions. A good one to ask is: Will a master’s degree help speed me along the career path and boost my paychecks? I did this when I was exploring a master’s degree in journalism, and found it very helpful.

Ultimately, you should determine the pricetag of graduate school, and whether the advanced degree will truly advance your career and increase your pay enough to justify the expense. Do as much research and talk to as many people as possible so you make a well-informed decision.

Q. When grad school isn’t required for making strides in a particular career path (for example, writing) what are the most compelling reasons to go?

A. I chased a master’s degree in journalism for two reasons I thought were compelling: I knew I could get hands-on experience from the school I picked (Northwestern University’s Medill School of Journalism). I’d get a chance to write and report for real publications in both the Chicago and Washington, D.C. areas, while getting guidance from professors with plenty of journalism experience. I also knew I’d come away with clips I could use when interviewing for jobs.

The other reason was networking. Medill’s alumni and professors form a strong circle of seasoned journalists at every level and in every medium; they’re individuals on fire for the Fourth Estate. I owe much of the last eight years of my journalism career to that network and my Medill experience.

Q. More and more career paths don’t require a college degree, and more and more students can’t afford a college education at all. If a person is clear on the career path they want to pursue and it doesn’t require a four-year university degree, would you advise them to save themselves the cost and skip the diploma? Go to a more affordable community college instead?

A. I always argue in favor of a bachelor’s degree. I’ve read a slew of studies and talked to countless career and education experts who say a bachelor’s degree these days is what a high-school diploma was years ago: almost essential if you want to make it in this world. I wrote a story for exploring the value of a bachelor’s degree, where I report that earnings tend to rise as education levels increase.

That said, higher ed’s skyrocketing costs are scary and disheartening, but they shouldn’t be a deterrent. Community colleges are an excellent, inexpensive option, and they’re incredibly accessible: according to the American Association of Community Colleges, there are 1,195 in the United States. Students should consider spending their freshman and sophomore years at a two-year school, and then transferring to a four-year school. To help pay the bills, they can do work-study or find off-campus jobs.

At the end of the day, college teaches young people about accountability, responsibility, and organization — essentially, what it means to be an adult. I don’t remember much about the facts I learned or the essays I wrote as an undergrad, but I do remember learning how to fend for myself, pay bills, and take responsibility for my future. It was my first taste of independence, and I’ve never looked back!

Q. I’ve interviewed a number of women over the years who’ve rejected the corporate grind from the get-go — or rejected it after a decade or two — for work in the trades (firefighting, bus driving, construction). Do you think trade school is the new graduate school?

A. Trade school can be invaluable. It provides real-world experience you can’t get in a classroom or through a book. I think it’s especially useful for career-changers who want to gain skills and put them to use relatively quickly.

Q. Any tips for a person with a traditional college education who’s considering embarking on a one-year or two-year trade school program? What might they find different in their new program, and what perceptions do they need to let go of?

A. Depending on the person’s age, re-entering anything associated with the word “school” can be daunting. But the truth is, we all should approach learning as something we do throughout our lives. There is no right or wrong age to attend a trade school, community college, or a four-year institution. Demographics in our country are shifting swiftly, as baby boomers retire or change careers and Generation Y comes of age. We must let go of the dated notion that school is for kids. School is for us all.

Q. Do you think there are there any truly recession-proof jobs?

A. It’s important to remember nothing in life is guaranteed — except death and taxes, as the saying goes — and that includes careers and jobs.

Still, some career paths are more fail-safe than others, such as health care, information technology, education, and jobs with the U.S. government. So-called green jobs are another option. The green arena, which includes energy and environmental industries, is growing quickly and there’s high demand for workers in a variety of positions. You can see my recession stories here and here.

Want more Kristina? Visit The Salary Reporter on

1 comment March 4th, 2008

Freelance tax FAQ #117

I subscribe to a lot of self-employment and freelance writing discussion lists. Not surprisingly, this month everyone’s been buzzing about how to file their freelance taxes. Here are a few recurring questions I’ve seen.

(Note: These answers are geared toward sole proprietors like me, not LLCs or corporations, which are subject to different tax laws, about which I know diddly. Double note: I’m a freelance writer, not a financial professional. If you want solid tax advice you can bank on, you’d best check with your friendly neighborhood accountant. Okay, now that we’ve got the requisite ass-covering out of the way, let’s talk taxes…)

Q. Help! I earned more than $600 in 2007 from a client, but they didn’t send me a 1099 form. Do I still have to pay taxes on that money? Do I need that form?

A. You do still have to pay taxes on that money. But no, you don’t need the form to do so. Also, in case you were wondering, if your client tries to claim the money they paid you as a business expense, they could get into trouble with the IRS for not sending you a 1099 form. But that’s their problem, not yours.

Q. Help! I billed Client XYZ for $3,000 in December of 2007 but wasn’t paid for it until January of 2008. Do I have to pay taxes on this money with my 2007 fed tax return or should I pay those taxes with my 2008 estimated tax payments?

A. Since the client paid you this amount in 2008, you will owe taxes on it for 2008, not 2007. You go by the year paid, not invoiced. If the client tries to put this amount on your 2007 1099 form, you need to talk to their accounting department about correcting this mistake. Otherwise, you’ll be paying taxes on money you technically didn’t earn in 2007.

Q. Help! I just measured my home office and it’s 20 percent bigger than I’ve been reporting to the IRS for the past three years. Can I tell them my office is actually bigger? Will this trigger an audit?

A. Congrats! You get a bigger write-off. It’s perfectly reasonable that your home office size would increase as your freelance business blossoms, so just tell the IRS that your office space has grown. (Actually tell your accountant, and s/he will know how to indicate this on your fed tax return.)

This minor change in office size alone should not trigger an audit, unless of course you’re unfortunate enough to be randomly selected for an audit (like jury duty, only more painful). As I understand it, if the IRS intentionally audits you, it’s because you have some serious red flags on your tax return — for example, an inordinate amount of expenses claimed. Your accountant is there to ensure this doesn’t happen. Yet another reason you should not solely rely on random internet advice when doing your taxes.

Final notes: There is a limit to what percent of your home you can write off as office space. Because I’m too lazy to Google it, you’ll have to ask your accountant about this. Also, the IRS wants your home office space to be solely dedicated to your business, so be careful that you don’t blur lines here.

You can find more of my freelance tax FAQs here and here. And you can find an accountant by asking your freelance friends who they use.

4 comments February 27th, 2008

Suze Orman’s Valentine for you

Not everyone likes Suze Orman. But if she wanted to give you free financial advice, wouldn’t you take it? Considering she knows a hell of a lot more about money than I do, I would. So I downloaded her book Women & Money for free from Oprah’s website just now.

You can too. For free. Today, February 14 only. Until 5 pm PST. From this here link.

Happy VD!

1 comment February 14th, 2008

Ask the cubicle expat: If a client paid me less than $600 in 2007, do I have to report it?

Denis writes: I’m 23 and just started doing freelance work this year. I did work for three different clients and I didn’t receive more than $600 from any of them. So I’m not going to receive a 1099 from any of them. Do I still have to report that income? If so, then can I deduct expenses such as internet and computer accessories? I just wanted to know what you think based on your past experiences.

I answer: Congrats on starting to freelance. Exciting! As for your question:

(1) From what I understand, and what an accountant once told me when I was starting out more than a decade ago, technically you have to report to the IRS (pay taxes on) any income you earn as a freelancer. Your clients might report that they paid you $200 for a job, and through its omniscient brain, the IRS could catch wind of this and come after your self-employed ass for the money it’s due. Or something like that.

That’s not to say I haven’t heard of freelancers doing the occasional one-time $100 job they knew the client wasn’t reporting and electing to keep that information to themselves, not that I’m advocating trying to screw the government out of its hard-earned war funding or anything. Mess with Uncle Sam at your own risk.

(2) Without being a financial professional, and without knowing your situation, it’s impossible (and professionally irresponsible, not to mention risky) for me to advise you what to do. But here are a few questions for you to ask yourself:

  • Do the city and state in which you live require you pay business taxes? If so, you may owe them money too. Check your city and state licensing departments to find out.
  • How much income are we talking about anyway? If it’s just $100, you might be able to go away quietly into the night without any political entity being the wiser (see above), not that I’m advocating you do. If it’s $1,500, I suggest you talk to a tax pro who can advise you how much to pay up. H&R Block has a free “Ask a Tax Advisor” service on their site that might be helpful. Or you could get TurboTax, which supposedly walks you through every little detail of filing your taxes.
  • Do you also have a full-time staff job that’s taking taxes out of your paycheck? How much you’re already sending to the IRS through your day job might affect how much you’ll owe on your freelance earnings. Again, a tax pro who’s looking at the big picture is your best bet here.
  • And finally, how much are your business expenses? Yes, you can claim the internet bill and computer accessories if you’re claiming the freelance income. But if the expenses exceed the earnings, you might not owe Uncle Sam any money. Maybe. I dunno. But you still may need to file a form. Maybe. See why you need to talk to a tax pro?

(3) I can’t stress this enough: Don’t rely on people like me who don’t work as CPAs, CFPs, or bookkeepers for fine-grained advice on how to file your taxes. You need to talk to a professional who can assess all the variables of your individual situation and tell you what to do. Or you need to get a program like TurboTax to walk you through it. Don’t give the IRS a reason to audit you, which would only land you in an accountant’s office anyway.

AFTERTHOUGHT: You may also want to read this post, on business licenses and the IRS definitions of “hobby” and “business.”

Got a question about self-employment or career change I don’t need a financial degree to answer? Ask away.

3 comments January 27th, 2008

Greatest hits: Freelance tax tips

It’s the most wonderful time of the year (that is, if you’re a CPA). That’s right, folks, tax season is upon us. And not surprisingly, I’ve had a couple requests recently for a round-up of this site’s past posts on paying your freelance taxes.

Before we get to the round-up, I’d like to take this opportunity to remind you that I’m a freelance writer, not a financial professional. Tax laws change every year, and no one knows their nuances better than your friendly tax professional. So although you can get some initial pointers from a freelance blog, I wouldn’t substitute them for the almighty input of someone who’s trained to fill out tax returns. Capiche?

OK, back to our regularly scheduled programming…

Additional resources:

6 comments January 24th, 2008

Ask the Harvard MBAs: I’m 23 — how aggressively should I invest my retirement funds?

onmyowntwofeet.jpgOver the past week plus, personal finance gurus Manisha Thakor and Sharon Kedar, authors of On My Own Two Feet: A Modern Girl’s Guide to Personal Finance, have kindly answered a bunch of questions on this blog, including the one that follows. You can read the previous Q&As here (part 1), here (part 2), and here (part 3). I want to thank Manisha and Sharon for generously sharing so much of their financial know-how on this blog. This concludes the question-and-answer part of the program, girls and boys, but if you want to learn more about Manisha and Sharon’s book, visit their website,

Annie asks: How aggressive should I be about investing my retirement funds in the current economy? I’m 23 with a brand new 401(k). I know I shouldn’t be afraid to choose riskier options at my age, but I’m worried this option might backfire pretty badly in the short run. I hate to sound like an alarmist, but what do you recommend as far as how to invest during uncertain times? Thanks!

The MBAs answer: Great question! The conflicting economic news these days is enough to make any sane person’s head spin. You are wise to raise this question. The key to answering it is two-fold: (1) This is your RETIREMENT money, and (2) You are VERY YOUNG.

In other words, the money you put in your 401(k) is money you should not plan on touching until you are at least 59 1/2 years old. (Yes, there are certain circumstances where the government will allow you to access that money penalty-free before then. But heck, the point of that money is to fund your retirement, so best to stay away from that cookie jar in the interim.)

As such, you very well may see your balance go up and down — in fact, up and down quite a bit at times. However, until you close in on retirement, until you hit age 50, we think it’s best to keep that investment gas peddle to the floor and stick with those more aggressive investment options. Remember, you won’t be SPENDING that money between age 23 and age 59 1/2, so it’s ok if its upward trajectory is a little wild.

The reason is that no one can predict where the market will go — but when when it does move up, history has shown us that it tends to do so very quickly and with no advance warning. For instance, if you look back over the last 10 years, studies show that 90% of the return you made in stocks came from less than 10% of the trading days. But alas, no one knows for sure which 10% of the days those big moves will come on. That’s why for years smart investors have said investment success is about “time IN the market,” not trying to “time the market.”

Our favorite keep-it-simple option if your 401(k) plan offers it is a target-date retirement fund, which is a mutual fund that will adjust to “right” level of aggressiveness based on your age. But the most important thing is that you are participating in your 401(k). At your age, that puts you solidly in the drivers seat on the path to financial nirvana. Go you!

Add comment January 14th, 2008

Ask the Harvard MBAs: Should I save for retirement while paying down credit card debt?

onmyowntwofeet.jpgLast week, personal finance rockstars Manisha Thakor and Sharon Kedar, authors of On My Own Two Feet: A Modern Girl’s Guide to Personal Finance, kindly answered a bunch of questions on this blog. You can read the Q&As here (part 1) and here (part 2). Manisha and Sharon also agreed to answer five questions from you. So far, we’ve only received one (answer below), which means we get four more freebies. If you have a personal finance question for these two Harvard MBAs, post it in the comments by Monday.

Rachel asks: I’d love to hear some advice on how all these savings and retirement ideals fit into credit card debt. My income has stabilized but I’ve got a little debt from starting my business — should I be stashing money anywhere else besides into paying this off?

M & S answer: Ahhh, your question warms our heart. It’s such an important question that we actually devoted a whole chapter of our book (Chapter 10) to it! The short answer is that your goal is to balance the two rather than take an all or nothing approach. Our argument is that while focusing solely on paying down your credit card debt is mathematically the hands-down answer, practically, if you wait to start saving until all your debts are paid off, odds are high you won’t get there. (It’s like saying you’ll start dieting AFTER your local grocery store stops selling premium ice cream in your favorite flavor!) We go into much more detail in our book, but our favorite plan of action is the following:

  1. First and foremost, make the minimum required payment ON TIME, EVERY MONTH on all outstanding debts.
  2. Save $2,000 as a “starter” emergency fund.
  3. If your employer has a 401(k) type plan that offers a “match,” contribute as much as you need to get the full match.
  4. Continue to build up your emergency fund to at least 3 months (ideally working up to 6 months) of your essential living expenses.
  5. Now pay more than the monthly payment on any credit card debt. (If your debt is $5,000 or less, pay at least an extra $50 a month EVERY month; if your debt is between $5,000 and $10,000, pay an extra $100 EVERY month; and if it’s over $10,000, pay an extra $150 EVERY month until all that debt is wiped out.)
  6. Now if you want to buy a home, you can start saving for a down payment.
  7. If you don’t want to buy a home (or already have one), keep saving for retirement.

One important caveat: These are rules of thumb. The final choice is always up to you. If your credit card debt is making you dry heave every time you think of it, well, by all means swap steps (4) and (5) and accelerate the debt pay-down first. Our primary point is that getting in the habit of saving is like starting to floss your teeth. Once you get going, you wonder how you ever did without. This is why we think it’s so important to do at least a little saving while you are working off your debt. Finally, go you for being interested enough in your personal finances to ask us a question — that speak volumes about your mojo!

Have a personal finance question for Manisha and Sharon? Post it in the comments by Monday.

4 comments January 10th, 2008

Next Posts Previous Posts

Who I am

Hi, my name's Michelle Goodman and I've been freelancing since 1992. I'm author of My So-Called Freelance Life and The Anti 9-to-5 Guide. Read my full bio here.

Books I've written

My other blog

Popular articles

My Twitter handle

Posts by category