Your Sustainable Wage
So let's dive right in let's get to the meat of this how much is your time worth and like I mentioned we have that freelance calculator that's a uh bonus with enrollment so all you have to do is click the r s v p button and you've got it uh it's totally free I recommend it um but if you don't have it and you just want a simple equation you're sustainable wage in a nutshell equals your business expenses plus your living expenses and then I sort of put off on the side here for the u s people times one point three why is that that ads in your approximate income taxes and self employment taxes self employment taxes are, uh, social security and medicare, right? If you work for a company um any regular company that you know takes taxes out of your paycheck they're paying for half of that themselves um and then they're taking the other half out of your paycheck before you ever get that paycheck to deposit in the bank. If you are a small business, you have to pay all of that yourself, so fifte...
en percent that would be point one five are yourself employment taxes, your social security and medicare and then another fifteen percent ish for income tax is obviously that's highly variable depending on what your income actually is but that's a good place to start um if you have your tax returns from last year and you can see what your income tax percentage was you can adjust that upper down so business plus living expenses divided by the number of hours you spend making and I mean the number of hours you spend making just making this does not include the amount of time you spend on your business in general this does not include the time you spend packing and shipping orders. It does not include marketing time. It does not include listing things on etsy. None of that just the time you actually get to spend making stuff. If you're lucky I would say you get to spend maybe at maximum half of your time actually making stuff for your business. The other administrative side is almost always at least half of your time, so if you work forty hours a week you spend twenty hours a week excuse me twenty or twenty five hours a week making things that comes out to around eighty eight hours a month. So this is even on the high end like this is someone who's really got their business together I'm not trying not to curse on here um and gets to actually make things eighty eight hours a month um so just as an example let's pretend that uh your business has a thousand dollars a month and expenses materials keeping the lights on your web hosting etcetera and that in your personal life you have four thousand dollars worth of expenses your house your food your car your you know day care education whatever it is um that works out to an hourly rate of fifty six dollars and eighty one sense this is this is pretty average right? This is not someone who's like I got a ton of expenses this is not someone who has a mansion and a yacht um this is not someone who has like a crazy huge business with a ton of um you know there's not someone who like deals in gemstones and has like really huge material expenses so what I would love for you guys here to dio is to just take this general equation think about it for a couple of minutes and it would be great if, uh people who are watching at home I would also like to participate in this um and just sort of guessed a mate let's just sort of try and get a ballpark number for what this freelance rate might be and then uh later tonight after we've wrapped up here today it would be great to actually go through the freelance rate calculator and actually figure it out for riel um this freelance rate calculator it's super detailed I mean, I went into absolutely everything like you know, there's a line on here for your pets right like how much do they cost you every month um I really tried to leave nothing out so that we can get this number as accurate as possible but just for the time being just sort of think to yourself well, you know I generally make whatever it is you know, forty thousand dollars a year were you know, fifty thousand euros or whatever it is um I managed to save let's say five thousand dollars a year so what does that mean? So that means I spent uh you know, thirty five thousand um think about the hours you spend making is it half the week? Is it a little bit less than that um and then see if you can come up with just a general broad guests now this example or did you take the one thousand a month plus the four thousand did you multiply that by one point three for this example uh for this example yes, I believe I did although I wouldn't swear to that maybe not yeah, I'm sure of it but we got to samantha's coming back and I'm a student saying I charge twenty two dollars an hour from my designs but I'm not sure that that is sustainable so she's looking forward to learning more about that in this course so she already knows what she's charging for she's a charity knows what hourly rate she's applying to the prices in her design yeah but feeling unsure that sustainable okay you get some more more background on that that's great I mean that's a good first step teo even try and assign a number um a lot of people think about this in terms of uh what they've made in a day job right like well, you know I made twenty bucks an hour at my day job I mean, you know whatever it was fifteen dollars and I was working retail I made twenty dollars when I was a barista um so I'm making twenty five dollars that's great um except that like we mentioned there are a lot of things that your employer might pay for that you will not as a small business um seven and a half percent right off the top in the us anyway um for those self employment taxes um so seven and a half percent that you now have to handle yourself maybe they were providing benefits maybe they covered your health insurance uh maybe they um you know, helped reimburse tuition or education expenses. There are all kinds of things that you need to take into consideration. Um they also paid for all their own business expenses right? That company pays for the lights to be on they pay for the printer paper but you now have to cover that so you're freelance rate as a um so proprietor or or other independent freelance creative professional is probably going to be at least around double what your hourly rate would be as an employee of someone else and I don't think a lot of people take all of that into consideration um confusing people, I think and maybe we'll get some clarification on this as well. There's obviously a difference between whether your single or apartment because obviously in a hurry on living expenses are then divided or should you just take what is your combined living expenses when you're applying it to the um equation that's a really good question and that depends of course on your particular situation so, um if you are living with someone like, say, a roommate on and you equally divide the rent then you should just be putting your portion of the rent on here. Um if you live with your partner in one apartment but you pay all of the expenses then you should still put them all on here or whatever it is I mean, everybody's got it different situation. Maybe one person in the household contributes um seventy five percent of the expenses or they pay for all of the food but their partner pays for all the rent. Um, so this is it should be just for you um if you're running your business with a partner and that happens to be the same partner that you live with, then I suppose you could combine the two um, but otherwise I would keep this as separate as possible and just put in your share. Yes, jackie, I'm just wondering, like, when you're doing this and you're calculating, like, is it like your actual living expenses or like your ideal living? Spence is, oh, that's, another good question, so I would start with your actual living expenses for right now, but at the end of the calculator, um, you've got sort of ah, miscellaneous section um, and you can put in, uh, you know, the amount that you would like to save, for example, like, so this is what I mean, we want you to get your sort of base freelance rate, this is what you need to continue operating at minimum, because I don't you have any wiggle room. I don't want you to calculate your ideal freelance writing, then feel like, like, dip a little bit below that because I can still make ends meet. The whole purpose of today is to use the actual numbers to find out what you can actually dio and then go up from there, right? We don't wanna leave any room for guessing, um, it's perfectly fine to do this twice to do it. Once for uh in order pay for everything right now and then to do it again um taking into consideration you know, like maybe I want to move and I want an apartment that I know is gonna cost me fifty percent more than what I've got now um or I want to have kids and I know that you know that's likely going to cost me an extra whatever twenty thousand dollars a year um and then figure out what you're freelance rate would need to be to cover those things but I definitely want to start with just what you need to pay for now so that you know never to dip below that so that you're never tempted when you're calculating other prices um or calculating your profitability to give yourself that wiggle room yeah that's a great question. Thank you. Um yes. So on here we have tons of uh categories we go through housing utilities, groceries eating out because that separate health insurance transportation any debt you might have um clothing, entertainment, et cetera and then business expenses and you'll see these come up again on the chart of accounts also uh you know your workspace utilities marketing your equipment, your supplies um any employees or contractors you have business travel taxes all that stuff is covered in there um so I would love to hear if anybody has had some time to put it together uh what your approximate freelance rate came out to just anybody want to share that either in studio or out in the whole wide world think mine was about thirty one dollars? I'm not sure if I did it right or not this's a guest? Yeah, we're going to have much more accurately later, but, um okay, anybody else want to share what there's came out to be? Did that thirty one dollars, surprise you in any way? Um, I've never even like, attempted to figure this off before, so I guess I'm kind of kind I think someone had a question about letterhead said that they just say that their numbers twenty two dollars, and so that's probably about what I've been doing, so I've never even, like thought about what it might be, I guess so, yeah, I'm kind of like, ok, great thirty one okay, do we have anybody in the larger out in the end saying eighty two dollars per hour, but that then she's also about digital products? That cell yes, and then my studio said her there right? Sixty dollars, fifty seven but that actually feels too high on lizards come in, said hers is actually way down twenty six fifty an hour, definite variance so there's a big range a lot of people have very different expenses