Working for yourself is one of the best things that you can do for yourself. We have learnt this first hand and not only are you able to better your mental health but you can be totally in charge of your finances too. We even have more time to pamper ourselves (see video below). Click here to see what a day in our lives as freelancers look like.
When we work for ourselves, we open up a whole world of benefits. The chance to shake the 9-5 is worthwhile in itself, not to mention that this is perhaps the best opportunity to work a job that you love. But, when it comes to pay, going it alone isn’t always a cut-and-dry issue.
When we go for any other job, a salary or an hourly rate of pay is a crucial aspect of negotiation. Yet, where self-employment is concerned, especially with regards to setting up a company or enterprise, many of us are so blinded by the freedom that we forget about pay altogether. This is a problem because, often, it means that we’ll forgo our own salaries in place of keeping our companies afloat. In fact, average self-employment salaries can be as low as £8.85 per hour – not even as good as most entry-level shop jobs. Yet, the money, and more importantly time, that you’ll be putting into that pursuit most definitely won’t reflect such a lowly level of pay.
Of course, in the early stages, this low income is to be expected. But, as your business grows, it’s crucial to make sure that you’re paying yourself an hourly rate that at least matches what you’d be making in a 9-5. Here, we’re going to help you do precisely that by considering how exactly you can make sure of a decent hourly wage regardless of your self-employed status.
# 1 – Keep your hours at a reasonable rate
If you’re working every hour under the sun then it’s no surprise your income is stretched thinner than an Italian pizza. This makes it far more likely that, in actuality, your hourly income will fall well below the level of minimum wage, even if your overall salary isn’t too bad. To overcome this, it’s essential to stick to reasonable hours. Obviously, an 8-hour workday is something of a pipedream when you’re branching out alone, but 15+ hours of work each day simply isn’t sustainable or lucrative.
If you’re guilty of sitting at your desk from the moment you wake up to the moment you go to bed, then you must make a change, either by bringing an employee on board to offset your workload or by taking the time to find a live answering service or other outsourced assistance that means you’re clocking off by no later than 8 in the evening. As well as ensuring that you’re more productive and thus profitable when you do get down to work, this makes it far more likely that you’re able to earn enough to equate a pretty decent hourly amount for the time you do put in.
# 2 – Take the guesswork out of your salary
Often, we underpay ourselves because we never actually sit down to work out what our income looks like, especially at an hourly level. This guesswork can be a real problem, not only in terms of undercutting ourselves but also in terms of preventing informed or driven business growth and projections.
Unfortunately, simply looking at the money coming isn’t enough to sort this issue in light of losses, expenses, and deductibles. Instead, working out a decent rate of pay for yourself is entirely dependent on your ability to understand your accounts overall, and to consider not just profit overall, but the amount of money you can transfer directly to yourself outside of business accounts.
Hiring an accountant, or investing in decent accounting software, is the best way to achieve this goal. That way, you’ll be able to understand not only how much you’re paying yourself right now (which might come as a surprise,) but also what you can do to increase that rate of pay.
# 3 – Don’t undervalue yourself
If you have team members or intend to bring them on board in the future, the chances are that you would never dream of offering them rock bottom salaries for what are clearly valuable skill sets. Yet, self-deprecation and a failure to take our own needs into account, means that we too often object ourselves to this unimagined fate.
In reality, though, just like your employees, you’re bringing incredibly valuable skill sets to the table, putting in the hours, and knowledge, necessary to turn some harebrained scheme into a viable business. A manager would pay big bucks for that kind of skill, and so you really shouldn’t be shy about paying yourself a decent amount. Yes, it’s embarrassing to say ‘I think I’m worth this,’ but the chances are that you would do it with any other manager, so you should most definitely have that talk with yourself.
# 4 – Make deferrals official
Sometimes, high expense months and low profits mean that your salary might get pushed aside in place of paying employees, covering outgoings, etc. BUT, just as you wouldn’t settle for a manager who simply refused to pay you one month, you should never just defer your pay and forget about it. Remember, you’re worth more than that!
The best way around this issue is to simply make deferrals official. Always write an official document to state the money that you owe yourself (you’ll know all about that thanks to your improved accounting,) and store it in your to-pay invoices as you would with any other service. Then, with this information very much in the system, you ensure that even a deferred payment comes back to you at some stage, even if that simply happens through a trickle of income here or there when you have that money spare. Make sure, too, that you don’t defer more than once at any given time to ensure a backlog that you actually stand some chance at clearing.
Self-employment, and all of its financial challenges, can be much harder to deal with if you’re earning even less than you would in a job that you didn’t have to stress about. Make all that hard work worthwhile by taking these steps to improve your financial position with an hourly pay rate you can relax into.
It truly is a good thing when you are in charge of working out your wages.
See the ways we get the time to pamper ourselves while we work from home.