By Teal Burrell
A few years after writing his first book, Michael Chorost “felt the squeeze.” He was freelancing for magazines and had received a decent advance on a second book, but still, he remembers, “It was tough to make ends meet.” He had no choice but to do what he knew was a bad idea: He dipped into his IRA to pay the rent.
Chorost wasn’t trying to discourage the audience of the “Freelance Finance” session at DCSWA’s 2015 Professional Development Day. Rather, as the moderator of the session, he was hoping people would learn from his mistakes. Although freelancers would rather chase stories than think about taxes, liability insurance, and living wills, understanding these topics is the necessary tradeoff for the freedom to pursue one’s own interests and set one’s own schedule.
Mark Stinson, a certified financial planner and accountant, advised avoiding problems like Chorost’s by having at least six months’ expenses saved for an emergency. Stinson discussed the importance of clearly defining financial goals for both the short term and long term, and suggested calculating three months’ expenses to evaluate what needs to change to align with those goals.
Stinson also suggested tracking the hours spent on each story, not just the dollars made. Piggybacking on that concept, Emily Gertz, one of the authors of the personal finance chapter in The Science Writer’s Handbook, suggested running a simple timer—hitting pause for breaks to get a snack or check Twitter—to see how long each assignment really takes and whether it’s worth it in the future.
Gertz encouraged freelancers to “think of yourself as your own top client” and to prioritize personal financial and health needs. If you haven’t been paid for weeks—or months—you need to be ready to stand up for yourself.
She also urged freelancers to take advantage of the Affordable Care Act. “Don’t pay the fine; get insurance,” she said, noting that you can’t work if you are sick. Using her own experience of having to go on a few months’ disability leave as an example, she reminded everyone that you never know when something unexpected will happen. “I’ve been disturbed by how many people are just counting on luck—something they’d never do for a story.”
In addition to health insurance, freelancers also need liability insurance. If you are working and receiving checks in your own name, people can come after your personal assets. For additional protection, Stinson said almost all freelancers should form a limited liability company (LLC); the alternative—an S corporation—is for a small business with multiple partners. The downside of an LLC is that you may have to pay extra taxes, but it is worth it, Stinson said. Some clients even strongly prefer to send payments to an LLC.
During the question-and-answer session, audience members asked about their personal situations—possible tax deductions, setting up LLCs, and disability insurance. But rather than advise on specific situations, panelists converged on the most important piece of advice every freelancer should follow: Meet with an accountant and get all these things ironed out, now. Then get back to chasing stories.