How to Become a Freelance Writer: Money Management

The main drawback to being a freelance writer and editor is the insecurity and anxiety, especially about money. That doesn’t have to be the case, says Amanda Mills, a financial counsellor. If managed well, working freelance can be more secure than working in the corporate world. Based in Toronto, Amanda Mills specializes in working with people in the arts. After managing a theatre company in the 1980s, she began Artbooks, a financial management company devoted to people in the arts, and Loose Change, a financial therapy practice where people discuss and overcome their anxieties about money. She has advice for those who would like to take the plunge as a freelancer.

Starting a Freelance Business
"Be prepared for a slow start," says Amanda. The whole process of establishing yourself and getting stable clients can take years. The most important thing to do is to get that first client, she says. While this may seem obvious, people generally get caught up in the details of their business plans when starting out. The main concerns are to build a reputation and generate word-of-mouth referrals. For people who are currently working in-house and would like to freelance, try to work half-time, she suggests. In this way, there is a steady income while beginning the business. In fact, people who work at regular jobs and who also freelance have the best of both worlds. They have the health and dental benefits of an in-house job and are able to write off deductions such as their computer as part of their freelance practice.

The downside of freelancing in any field is the erratic pay. In order to protect themselves, Amanda recommends that all freelancers keep a financial cushion that will maintain them for half a year. To determine that amount, multiply monthly living expenses by six. That is the amount to ideally have in the bank. This cushion will help weather unreliable income cycles and will reduce the amount of anxiety about being a freelancer.

Deducting Writing Expenses
Writers are able to count a wide range of expenses as a deduction. These expenses include cost of research and inspiration. For example, a literary writer can name a writer’s retreat as a legitimate expense because it provides the necessary time and solitude so the writer can create. A journalist can count deduct the costs of travel if visiting another city for an important interview. Compared to being a writer, freelance editors are able to make relatively few deductions. The main deductions are office/work space, computer, internet, books, phone, and fax.

One area that has great potential for deductions is in soliciting business. Both writers and editors should develop what Amanda calls "the velcro hand." "Get good at collecting those receipts," she says. If a writer or editor discusses business over dinner with a potential client, the dinner counts an expense. If they take a client to the theatre, the cost of the tickets counts as an expense.

Making the Business More Profitable
Once established, freelancers could still re-evaluate their business from time to time. In this case, it's important to tally up hidden costs. For example, if there is a client who is difficult, and the editor needs a massage to handle the stress, factor in the cost of the massage in working with this particular client. This is what she calls the "real hourly wage" of the job. If the real hourly wage turns out to be low, then this client might be re-considered as part your business.

Freelancers are fortunate because they have the freedom to earn income from home, without being patrolled by a supervisor. They set their own hours and are their own bosses. They can also pursue their own particular areas of interest, be it freelance technical writing or writing for magazines. Amanda cautions, though, that not everyone is meant to be a freelancer. Some people are intimidated by the lack of structure in the workday. But for people who think out of the box, working as a freelancer can be truly rewarding.