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Freelancers: Your income is gross

By: Jess Perez

I remember the day I realized I only actually ‘took home’ about 50% of my earnings. I had already been modeling for a while so I don’t know why it took me so long to arrive at that conclusion. It’s probably because it’s common practice for freelancers to think about their income as the gross number they earn. Since we have to report gross numbers to the government, it often feels like that is in fact what ‘we are making’. Or maybe it’s because we are in a state of denial and subconsciously inflate our numbers so we feel better about our day rates. Either way, financially speaking, it’s a dangerous mindset to live with.

As a fashion model, it’s possible to earn pretty high day rates that are mostly unmatched in other industries. If you’re doing well as a model, it’s not uncommon for your agent to call you and tell you that a client has booked you at the rate of $3,000 for a day’s work. What you agent doesn’t tell you is, “that’s actually $3,000 for the day minus 20% agency commission, minus 30% for taxes, so your real earnings are closer to $1,500. Oh and be prepared to shell out a minimum of $450 a month for health insurance and if you want to add a retirement account, you’ll have even less disposable income. “Boo hoo, that’s still a ton of money for one day of work,” I’ve heard people say. To those people I tend to say, “That is a lot of money unless that’s the only job that a model has for a month.” But the issue I’m describing here isn’t whether anyone deserves to make that amount of money for a day of work or not. The problem is that there are a ton of people freelancing that spend as though they are going to end up with that gross amount of money in their pocket. That way of thinking sooner or later leads to financial disaster.

In order to help my friends who freelance think about their finances more prudently, I’ve proposed a change of mindset and methodology: always think in net number and only allow yourself access to that net amount of money. I believe embracing the reality of the situation psychologically is the first step. When I book a job, the first thing I do is divide the rate in half and tell myself that that’s the money I will be bringing home. I then set up systems to prevent from spending more than what is ‘mine’. When I receive a paycheck, the first thing I do is transfer what I will owe in taxes into a savings account labeled “Taxes”. That way I don’t run into the problem of spending money I will owe the government later on. Overall, every freelancer should be more congnizant about how their day rate actually translates into their financial reality.

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