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The Psychological Trap of Freelancing

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Re: The Psychological Trap of Freelancing

#171

Post by erik998 »

erik998 wrote: post #105

One thing I would like to add... I created my own solo S-corp and started on the path of contracting. I have been successful enough to minimize my payroll taxes using a solo 401k (~18k max contribution and then my company can contribute 25% of my w-2 salary). Now I am at the point where I am investigating how to setup a defined benefit plan for myself to defer 75-100k in payroll taxes. Most likely a cash balance plan…

Here is a good example of how you can max out a solo 401k and use a private pension plan.

https://www.watsoncpagroup.com/kb/Turbo-Charged-401k-Plans_3...

The dumbest thing in the world is working at FAANG at high salary levels. Unless your are in the C-suite you are always in a precarious position. It's not easy to justify the high salary at a competitor all the time.

The best strategy is to get good amount of revenue via a solo S-corp and minimize your payroll taxes. Hell your defined benefit plan can purchase all the FAANG stock it wants. You don't want to be the Sun employee with many stock options that are worthless in a downturn. At least you can dump your stocks and have some flexibility in your own defined benefit plan.

Re: The Psychological Trap of Freelancing

#172

Post by sovietmudkipz »

momirlan wrote: post #158

I have been a freelancer for 24 years, and had this problem. Here's how I solved it. I incorporated my business, and I am an employee. My corporation pays me a stable amount, so I'm not worried. When I put the business hat on, I make sure I project the yearly income and have a generous salary fund ( 6 months). No worries anymore, the most I have been without work has been 3months. If at the of the year I haven't spen…

That sounds interesting. What are the tax implications of such a setup?

Re: The Psychological Trap of Freelancing

#173

Post by gdubs »

“If we’re already in the time-is-money mindset, we can reframe our leisure time as something that enables us to be more productive in the future,”

It’s a bummer that we’ve gotten to a point that in order to relax and enjoy time off we need to somehow frame it as “productive”. I think it speaks to something deeper.

Re: The Psychological Trap of Freelancing

#174

Post by hopler »

nightski wrote: post #147
icedchai wrote: post #140

Earlier quoted context omitted.

Don't overthink this stuff. Most of the decades you wouldn't see a loss, so you're better off investing a good chunk. Keep 10 to 20% of your holdings in cash getting 2% interest if it helps you sleep at night.

I wasn't trying to overthink. But the market is volatile at the moment and the next decade is rather uncertain. Thinking you can just throw your money in and get 7% over the next decade and get to $1M may not be the best strategy. We aren't talking about losing sleep over volatility here. We are talking about a situation where someone specifically wants to hit $1M in a decade.

It's figurative language. "1Million" in "currency unspecified" for 10 years isn't the exact price or time cost of a good life.

Re: The Psychological Trap of Freelancing

#175

Post by Spooky23 »

icoder wrote: post #163
Spooky23 wrote: post #117

Earlier quoted context omitted.

Fixed fee is great as long as the scope is limited. Whenever I've hired companies to do stuff on a fixed fee basis, they typically lose due to unforseen circumstances.

One of my clients said the other day: "When working with a fixed fee there's always 1 party that 'loses'". I tend to agree, either it ends up more work than expected (freelancer loses), or (although in your experience that's less common) the freelancer learned from previous mistakes and overcharges. In addition, the upfront cost of specifying the job is also lost. This is not always trivial to 0do upfront, as both th…

The biggest thing is that flat rate doesn’t do is anticipate risk. If through nobody’s ill intent a task takes 5x longer or 5x less, it’s all swallowed up by the flat rate.

That’s a feature for a productized service.

It also works for well-scoped tasks. I wouldn’t pay someone by the hour to cut the grass.

Re: The Psychological Trap of Freelancing

#176

Post by hopler »

OJFord wrote: post #61
jpatokal wrote: post #43

Earlier quoted context omitted.

Yes, that's pretty much what the friendly article says: > “If we’re already in the time-is-money mindset, we can reframe our leisure time as something that enables us to be more productive in the future,” says Whillan. “When we’re conditioned to think of all our time as ‘on the clock,’ leisure time feels abstract and unsatisfying. But if we tell ourselves that leisure time is another means to achieve that goal or fin…

That's interesting, because I think (I don't freelance) I'd look at it the other way: work funds my leisure, so how much must I work to fund the leisure?

Sleep isn't fun enough to be worth 8hr every day. But we try to do it anyway because it makes non-sleep hours better. That's the sort of thing OP is talking anout.

Re: The Psychological Trap of Freelancing

#177

Post by hopler »

rb808 wrote: post #90
josefresco wrote: post #41

"I went outside to get coffee and ran into three different neighbors who wanted to chit-chat. I wanted to scream, ‘For every word that comes out of your mouth, I’m losing money!" This is a statement from someone who either hasn't been freelancing that long, or who hasn't realized that "brain down time" is just as important as raw coding hours. I've worked "for myself" for almost 20 years and for the first 5 I too pan…

The problem though is how do you bill clients? If you're "working" and surfing HN you could possibly bill that, but walking around talking to neighbours doesn't cut it.

What is the argument that goofing on HN is more justifiable to a client than walking and talking?

Re: The Psychological Trap of Freelancing

#179

Post by vitaflo »

mtberatwork wrote: post #161
gk1 wrote: post #148

Earlier quoted context omitted.

Not the person you asked, but... Yes. If you do things right and get a little lucky, you can make much more as a freelancer or consultant.

> If you do things right and get a little lucky, you can make much more as a freelancer or consultant. In the short term, but is it reproducible for the long term? How does the 10, 20, 30 year outlook look like? From my vantage point, it seems that most freelancers have pretty short shelf life.

When started contracting (I never use the term freelancing cuz I don't work for free) I was making 4x what I made as a salaried employee. I've been contracting for 10 years now, and have averaged about 35 hours per week billable over that time. It has been very lucrative.

The problem for most folks is they just don't build the network to get gigs, especially long term ones. The freelancer that takes 2 week projects is going to flame out quickly because there's too much churn. My minimum contract length now is 3 months and that almost always turns into a 6-9 month gig in the end. And my network is large enough now that I never have to look for gigs. I turn down way more gigs than I take.

I realize I'm in the minority, but it is possible, especially if you carry yourself as a business and not just as a hired hand. When you do that, companies look at you differently, and your value to them increases.

Re: The Psychological Trap of Freelancing

#180

Post by hopler »

mancerayder wrote: post #87
photoguy112 wrote: post #28

I went from hourly, to per project, to weekly billings. When I charged hourly I ended up working A LOT more than 9-5. Per project work was good but I ended up losing a lot of prospects in the quote. Since many of my projects ran into the 20-40k range, my closing rate was 1/10 (already pre-screened, what I deemed as high quality prospects). This made me feel like crap. Instead of per project, I decided to increase the…

Freelancing can be highly stressful and demoralizing, unless you take the steps to go into consulting or beyond. It's a ladder, just like your corporate gig, you gotta do the work to move up or suffer where you are stuck. I have one sticking point I'd love to hear what the HN crowd does to deal with it. I'm freelancing and I find gigs that are long-term via recruiters / LinkedIn. And never directly with companies. Wh…

You are describing that you want to want to get a job as a contractor. So apply for a job. Companies advertise that a lot, sometimes through an agency. You can't expect get the benefits of an agency without paying the fee or doing the work yourself.
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