Sticky situations I’ve been in with money: I’ve run up credit cards debts of £20,000; paid HMRC £200 a month because I couldn’t afford to pay my corporation tax bill; lived on £50 a week; lived on a weekly shopping budget of £5 with my old flatmate. (There were a lot of tinned tomatoes, Tesco Value pasta and tins of tuna.) I’ve had an £8,000 business debt to pay, with no income to cover it. And I’ve sent the gas bill to the leccy company, and the leccy bill to the gas people (this shows you how old I am), so that – by the time they discovered it – I’d have the money to pay the bills, without being fined for a late payment. Those are just the examples I could remember this morning.
The one thing I’ve never done is default on my mortgage, but I’m unusual amongst my peer group for that. (I havepaid it on my credit card though.) But, the point is – while I definitely wouldn’t recommend doing any of those things – they’re not the end of the world, either.
A collaboration between University College London, the Open University and BBC Lab UK asked 100,000 people about their attitudes to money, establishing four similar traits – money as power (status spender), money as generosity (generous indulger), money as security (secure saver) and money as freedom (independence lover).
But we don’t really need stats and surveys to tell us this. The point is that money is so emotional. Our attitude to it is linked to our hopes, fears, aspirations and sense of self; our attitude to risk; it’s how we see ourselves, where we see ourselves and what we see ourselves wearing – and the same goes for our families and dependents. So it’s no surprise if you’re feeling bad about it. Something that can be reduced to numbers on a page has such an impact on our emotional state, our wellbeing.
And we’re really scared of talking about it.
We don’t talk about money in the workplace. We don’t ask how much our colleagues are paid, and we don’t ask for pay rises. That’s one of the defining factors in women being paid less than men for doing the same jobs, that we’ve seen beating the BBC, and plenty of others, over the last year.
Money’s tied up in so much of the stuff we do, and want to do. If you’re starting a business, ‘business advisers’ will talk to you about cashflow but, in truth, you don’t have a lot of control over your cashflow. You just have to ride out the choppy waters as best you can – and if that means a bar gig or cleaning job on the side, then that’s what it is. It’s an inevitable truth that bigger businesses than you will take ages to pay you; you’ll be faced by someone in accounts who’s working on a cycle of 30 or 60 or sometimes even 90 days – and that will be their job, so they just won’t understand the concept of you not being able to do a food shop, or pay the rent, if they don’t pay your invoice.
The most important thing I can suggest, I think, is to get someone who can do your accounts, or advise you on the financial side of your business (and life, to be honest) as soon as you can afford to. Not only is a massive relief, but it allows you to focus on what you’re good on (this applies to other people who can save you time too). Know that you’ve got someone whose job it is to focus on the money on your team. And ask for recommendations for them – use people you’re already connected to, or who work with other organisations you admire.
Needless to say, that’s no substitute for understanding your own finances. Whether it’s at work or at home, you’ll always sleep a lot easier at night if you have an idea of what’s coming in, and when; and what’s going out of the account too.
If you don’t think you can yet, have a look at some accountancy software. It’s not as expensive as you think – you can get packages from about £2 per month at the mo (have a look at our tools section). Not only will it keep things on track, it’ll make sure you’re ready for Making Tax Digital, which will affect every business, freelancer – or has an income from anything else – over the next couple of years in the UK. I’m a massive fan of Xero, but find what works best for you. You’ll also find that free invoicing chasing software like Satago plugs into most of them, so you don’t have to make those excruciating calls yourself if people aren’t paying up on time.
And once know how profitable the things you’re working on are, it’ll help you decision making as you take on more work. Not everything you do has to be massively profitable, but you still need to know that to make decisions with as much information as possible. You might decide that you want to take on a few more profitable projects to subsidise the work that really makes your heart sing; or have different rates for different types of organisations – one for commercial clients, and one for charities and social enterprises, for instance. But you don’t want to run around like a busy fool, only to discover you’re making no money from it, or you haven’t got enough to cover your tax bills.
Keep detailed records of the time you spend on things, otherwise you’ve got no way of knowing. Especially in those heady, early days of striking out on your own, where everything feels exciting and rewarding and life enhancing. If you don’t, it will sap you in the end.
Working out what you’re worth is one of trickier things you’ll have to do as you start a project or a business. Have a look online and see if you can find out what the going rate is. It’s very easy to say ‘know your worth, and ask for it’, when you really REALLY want some work. You’ll always find a reason to question your experience, or if you’re as good as the competition. But it’s hard to put your prices up later. It’s easier to give discounts if you need to, but help people understand that they’re not paying full rate, for whatever reason you decide on.
If you can, ask if a client has a budget. These days, I think it’s just a mark of respect. It stops people playing games where you inflate the price, they try and knock you down, and you all feel a bit weird. And it stops all of you wasting your time, if there’s no middle ground to meet in. They won’t always tell you, but the ones that do are worth sticking with. A good, open, communicative relationship is a keeper.
But this is really tricky, especially if you’re working on a side project alongside another job, and want to make that your full time thing, one day. People have a tendency to underprice things when they’re doing it because they enjoy it (and it’s completely natural to worry about what you’re worth – and what you can charge, when you’re new to it all and full of self doubt), which makes it difficult to work out a realistic price, taking into account any costs you have – for materials, and for your own time. But, if you ever want to make that jump from side project to freelance or full time business, you REALLY need to know. I can’t emphasise that enough. Know what your time is worth.
And learn to say no. This is hard. Especially if you’re busy looking for opportunities and collaborations. There are some people who will always want some of your time – to pick your brains, sit around drinking coffee or putting together exciting proposals and quotes for projects. And some of them will do this again and again; they might work in bigger organisations, where you think ‘oh, they could be a good contact’. And they could well be. But they may not have the same compunction to be efficient that you do; they’ve got more time to sit and dream up the big ideas, or talk generally about your industry. If their projects or meetings never seem to lead to anything, they’re wasting your time. And wasting your time, is wasting your money. They’re not paying you for the knowledge and skills you’ve built up, and that’s not on. I’m not saying don’t meet up with them; that’s your call. Just be aware of it. You’ll get to spot them.
And if they’re at the start of their careers, and they’re looking for advice, contacts, ideas and a bit of chat? Do it. We’ve all been there.
When it comes to investment, and bigger amounts of money, your options are more varied. The only businesses I’ve ever run are ones I’ve been able to build from a standing start – where getting some work in allowed me to get started, with the expensive bits – the websites, or the print – coming later.
I didn’t need big chunks of capital expenditure (money for buying or maintaining fixed assets, like land, buildings and equipment). But if you do, your planning needs to be different. It’s likely to be either a bank, social investment fund or crowdfunding platform you’re turning to – unless you happen to know anyone with a bit of lazy cash knocking around – but they all take another level of planning. You’ll need to really knuckle down on the money and be realistic about how much you need, how much you need to start with, how much you’ll be earning, and how long it’ll take to pay back (if it’s a loan you’re going for). Even if you’re planning on crowdfunding your dream, you’ll still need to make the people buying into you aware of the risks of your venture. So arming yourself with business plan makes a lot of sense.
If you can build more slowly, you have the time to see what sticks with people – what they’re prepared to commission you to do, and how much they’re prepared to pay for it… Or, if you’re in an online environment, what gets readers, and any micro-payments from ad revenue. It’s certainly not true that you need a lump of cash in the bank to start a business, but you’ll be able to focus more on it if you know how you’re going to pay the rent for the next three months, or know that you’ve got a reliable, if modest, income from your bar job to tide you over. But if you’re reliable, meet deadlines and do what you say you will, something will come up. Plan ahead and work out the smallest step you can take towards launching your dream.
And put money aside for taxes – I know that this is simultaneously obvious, and also a tremendous luxury. It’s taken nearly 15 years of running a business to get to the position where I can do this. But I sleep better knowing I have.
The only other thing I can say is that only experience makes any of this feel alright. Not very helpful, perhaps? But the only way you know you’ll get through the next thing is because you got through the last thing. And you will. When you leap, you’ll fly. So spring.