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The Psychological Trap of Freelancing

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Re: The Psychological Trap of Freelancing

#231

Post by hash872 »

erik998 wrote: post #171
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 revenu…

> 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.

I don't think you know what you're talking about. An engineer making $200k+ at a FAANG can leave that company and.... probably make the same (or more) at another large tech company. Their salary is determined by basic supply & demand, if they have skills worth $200+ at one company, they'll find similar compensation elsewhere. (If it's not easy to justify their salary at a new company- why exactly is their current company paying them that much? Are they running a charity or something?)

I don't understand your obsession with payroll taxes. I'm self-employed too, everyone knows you avoid payroll or self-employment taxes by setting up an S Corp and paying yourself disbursements on top of a salary. Anyways, for an employee they're really not extremely high, so I don't understand building a whole strategy just to avoid this 6% tax. Being a FAANG employee comes with a ton of non-cash benefits & perks- the 401k match alone is probably double whatever you're losing in payroll taxes. The value of the health insurance is probably more than payroll taxes.... Sounds like you're not really properly accounting for any of this

Re: The Psychological Trap of Freelancing

#232

Post by lrrrrrrrrrrrr »

We thought of life having a serious purpose, and the thing was to get to that end, success or whatever it is, maybe heaven after you're dead. But we missed the point the whole way. It was a musical thing and you were supposed to sing or to dance while the music was being played. -Alan Watts

Re: The Psychological Trap of Freelancing

#233

Post by jammygit »

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…

"I've worked "for myself" for almost 20 years"

What were the early years like? How did you get clients, and how long was it until you started making decent money?

Re: The Psychological Trap of Freelancing

#234

Post by erik998 »

hash872 wrote: post #231
erik998 wrote: post #171

Earlier quoted context omitted.

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 revenu…

> 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. I don't think you know what you're talking about. An engineer making $200k+ at a FAANG can leave that company and.... probably make the same (or more) at another large tech company. Their salary is det…

It's not 6%. Im not talking about the employer's portion of social security taxes.

Go to http://www.esmartpaycheck.com/FreeCalculator/ Change cycle to annually (2019) and in column cp put in 250k.

the taxes I am talking about are: Federal Income Tax Withheld $61,363.50 State Income Tax Withheld (CA) $22,103.55

That's where you can make a substantial amount of savings by diverting that into a solo 401k and defined benefit plan. You need to pay taxes but you can knock that down quite a bit.

So from 250k down to 150k is your take home... imagine you can structure your business to save a substantial amount of that.

Health insurance ... ehh yea can be expensive but you can use an HSA and high deductible plan... That's why keeping obamacare laws are helpful. As long as you can get bumped off for pre-existing you are ok.

Screw the non cash benefits... Im sure many Sun and IBM employees enjoyed those same perks too. No FAANG company has a 25% match policy, they usually have 3% or some small matching percentage across the board for their 401k safe harbor provision... The same match for all employees.

People are catching on and making these calculations... Sure moving around FAANG companies might seem easy but just because company A pays you X doesn't mean company B will pay X+Z... It may seem like it in the hype but ask any former Sun employee making X why they can't find X+Z.

Options... that's where you might get real lucky. You got me there. That's something I am still learning about... But in your defined benefit plan you can just buy a basket of FAANG stocks.

Take a look at https://watsoncpagroup.com/kb/turbo-charged-401k-plans_302.h...

Re: The Psychological Trap of Freelancing

#235

Post by shhehebehdh »

celeritascelery wrote: post #129
shhehebehdh wrote: post #55

Earlier quoted context omitted.

You can’t directly increase your income by working one more hour if you are salaried . But you can certainly affect your growth trajectory by working harder/longer/smarter. You trade the marginal hour in a way that has a lagging, probabilistic increase on your salary.

> working harder/longer/smarter. You trade the marginal hour in a way that has a lagging, probabilistic increase on your salary. I feel like that has a really poor ROI when you look at from a time spent perspective. The amount of extra hours/effort you have to put in to get a small increase chance of a promotion seems a very bad trade. Obviously I don’t have any data to back that up, but I feel that a lot of people i…

If it’s only a small increase in your chance, then yeah the roi is bad.

Re: The Psychological Trap of Freelancing

#236

Post by hash872 »

erik998 wrote: post #234
hash872 wrote: post #231

Earlier quoted context omitted.

> 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. I don't think you know what you're talking about. An engineer making $200k+ at a FAANG can leave that company and.... probably make the same (or more) at another large tech company. Their salary is det…

It's not 6%. Im not talking about the employer's portion of social security taxes. Go to http://www.esmartpaycheck.com/FreeCalculator/ Change cycle to annually (2019) and in column cp put in 250k. the taxes I am talking about are: Federal Income Tax Withheld $61,363.50 State Income Tax Withheld (CA) $22,103.55 That's where you can make a substantial amount of savings by diverting that into a solo 401k and defined ben…

> Federal Income Tax Withheld $61,363.50 State Income Tax Withheld (CA) $22,103.55

I think there's some confusion around terminology- that's not payroll taxes (the 6%), that's regular income taxes. Anyways, you realize you do have to pay taxes eventually on your deferred income, right? I agree they will probably be lower rates, but you're not 'saving' yourself from these income taxes, just deferring for a few years....

Health insurance costs $6k+ for a not-great plan with a kinda high deductible (source- this is what I have). The type of HS offered by a FAANG is ultra-premium, literally everything is covered. There is so much financial value there man, especially if you have a medical emergency and actually use it- not to mention that they cover your family too. Minimum value is $10-20k and could be way, way, way higher depending on your usage or your family's usage in a given year.

Yes, FAANGs will match 401ks 10% or above (!). 3% would be poor in any industry or sector. Your information is incorrect.

Not interested in arguing with you about FAANG salaries, you're simply wrong. If you're worth $200-300k at one of them, you're extremely in-demand and worth that at a lot of companies.

I want to argue respectfully, but you have some awful weird financial ideas just based around tax avoidance (which is really just tax deferment). There is absolutely no way the tax benefits of contracting with a defined benefit plan even come close to the $ amount of the benefits from working at a FAANG, you're not even in the ballpark. More proof that taxes just make some people crazy and lead some to absolutely bizarre financial decisions (like people who commit tax fraud and go to real prison- the risk/reward there is completely out of whack)

Re: The Psychological Trap of Freelancing

#237

Post by bonestamp2 »

porker wrote: post #189
bonestamp2 wrote: post #153

Earlier quoted context omitted.

What is your change request process?

> What is your change request process? I have done everything from formal documentation of changes, requiring pricing and sign-off for every variation, to vaguer schemes. The change request system sucks; it loses sight of why we're building the software and turns into a war of attrition. The issue is always they say the spec is open to interpretation and they meant this, or they expect it to work this way (which is s…

Ya, fair enough. It sounds like you've exhausted the paths that every waterfall developer exhausts before moving on to some kind of agile framework (ex. Scrum).

Clients don't like it as much of course, but the we can do is convince them that it fits the way that everyone works better -- nobody knows exactly what they want up front, and if they do, then they're wrong because as soon as they get to use the thing the never existed before, they'll discover things that don't feel right and they'll want to change them.

But working (and billing) in weekly Sprints seems to work very well once you've convinced your client that the framework is the right way to do it. Client want a quote, but we tell them we can't really give them any sort of estimate until we see how they work (with us). So, a two week trial period is often a good way to get that going.

Re: The Psychological Trap of Freelancing

#238

Post by cerberusss »

icedchai wrote: post #152
nightski wrote: post #147

Earlier quoted context omitted.

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.

The past decade was also quite volatile. So was the previous. Volatility is normal and timing the market doesn't work, so DCA in and forget about it.

I'm all for buy-and-hold, but you do realize that there's a group of people for which this is very hard? Psychologically, they'll have trouble staying the course when seas are rough.

Re: The Psychological Trap of Freelancing

#239

Post by nicky0 »

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.

Charge for the project. "You logo will cost $5,000"

Hourly billing is for chumps.

Re: The Psychological Trap of Freelancing

#240

Post by porker »

wetwiper wrote: post #207
porker wrote: post #189

Earlier quoted context omitted.

> What is your change request process? I have done everything from formal documentation of changes, requiring pricing and sign-off for every variation, to vaguer schemes. The change request system sucks; it loses sight of why we're building the software and turns into a war of attrition. The issue is always they say the spec is open to interpretation and they meant this, or they expect it to work this way (which is s…

Are you not maybe specifying too much too early on? Back when I did some freelancing gigs, the general advice I got was to spec a high level, general proposal which included all the client's requirements. Broadly. Then decide on iterables, with the spec (and timeline and effort and payment) for each iterable being done prior to commencing work on it. The key being to have a working system after each update. Sound fam…

> Are you not maybe specifying too much too early on?

> Back when I did some freelancing gigs, the general advice I got was to spec a high level, general proposal which included all the client's requirements. Broadly. Then decide on iterables, with the spec (and timeline and effort and payment) for each iterable being done prior to commencing work on it. The key being to have a working system after each update. Sound familar ;D

This is exactly how I want to work! The pushback I get is that the company's board of directors won't sign off on a project where the total cost isn't known.

I have explained all in your third paragraph, and even when the manager/CTO/CEO 'gets' this, the board don't. Because it's beyond their understanding as non-technical, and sounds like being taken for a ride (and I get it; if my garage did this, I would expect I was being fleeced).

This is what I need to break-through.

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