09.01.15 how much should you pay yourselfWhen I first started freelancing on the side, back in 1994 or ’95, I remember thinking, “If I can just bring in two thousand a month, I can quit my job!” I chuckle now at my naivete.

To be perfectly blunt, I didn’t make it as a full-time freelancer the first time I tried. I had no idea what I was doing (there was no resource like RN2Writer to guide me), and I washed out quickly. Back to middle management for Beth.

But, you know, the fire to create never really leaves a true writer. Freelancing was always in the back of my mind. So, around 2001 I decided to take another stab at it. My goal remained the same: If I could just make $2,000 a month, I could quit my job. It didn’t occur to me that I would need to be responsible for funding my own withholding, retirement, and so on. But at least I had a goal, something specific to shoot for.

Low overhead means more money for you

One great thing about freelancing is you can start on a shoestring. You can start with virtually zero overhead, which means you can keep nearly 100 percent of every sale. (I personally set aside 27 percent of every sale in a separate bank account to cover taxes and retirement, and I recommend you consult an accountant to determine a prudent set-aside for your own tax requirements.)

My point is: In these salad says of freelance life, your pay rate will basically equal the amount of sales you can make. You will pay yourself first because you have no overhead.

Freelance salary issues at mid-career

But as you become more expert in your job–better at selling, faster at production–you will reach a point where your business finances become more complicated. You’ll start asking questions like:

  • Should I get a virtual assistant?
  • Can I afford to hire a professional web designer?
  • Do I need contact management software?

At that point, the issue of what to pay yourself gets murky. Your salary doesn’t necessarily come first. You might decide you want rent a co-working 09.01.15 What you should do is construct a businessspace to get out of the house, and that expense takes priority over your own pay. Or you might decide your goal is to max out your retirement contributions, even if it means paying yourself less per month.

There’s no right or wrong way to figure out how much to pay yourself. What you should do is construct a business budget that meets your business goals, including all of the things I mentioned above.

But I will say this: don’t underpay yourself.

Shifting from subsistence mode to an abundant mindset

When I returned to full-time freelancing the second time, I was able to make a go of it. I finally did achieve my goal of bringing in $2,000 a month in gross revenue. It was a great feeling of accomplishment, and it enabled me to take my writing career to the next level.

Unfortunately, when I reached that next level I forgot to account for my own financial needs. I was pulling down much more than $2,000 a month in gross income, but I was still paying myself subsistence wages. I got demoralized in my job. It felt like a real grind. I started questioning my decision to freelance full-time and asked myself questions like, “Why am I doing this if I can’t enjoy the fruits of my labor?”

A personal financial crisis led me to scrutinize my business books. I realized I could pay myself almost double what I’d been drawing. That’s when the lightbulb came on. No wonder my freelance life was a drag. No wonder I felt tired and discouraged! I was grossly underpaid.

Since that time I’ve reviewed my salary every year. I construct a business budget that allows me to enjoy the money I’m making as a freelance writer. Isn’t that the point?

How did you decide how much to pay yourself as a freelance nurse-writer? Tell us in the comments!

Wishing you well,