11.

Increase Revenue and Cut Expenses

In the freelance world of the 21st century, in which all of us are always hustling for work, you have to begin treating yourself as a business. This is a lifelong practice. I used to say that you only have to do this until you retire, but since most of us won't be able to afford to retire, you only have to do it until you die. After that, you're off the hook.

We need to become more conscious about how to handle money. Many of us have not been trained to deal with it effectively. We don't know how to plan for the future by creating a budget—or even how to balance a checkbook. Consumer bankruptcies consistently exceed 1,000,000 every year, and the average college student is more likely to drop out of school due to financial hardship than academic failure.

There are two ways to make money: increase revenue and cut expenses. I'll begin with increasing revenue. (Reminder: Be aware of the difference between gross and net. When you earn a paycheck, you take home the net, roughly 70 percent of the gross.)

If you ran a company, would you have just one client? Of course not. If for some reason the client went under, so would your company. To protect yourself, you have multiple clients. If you consider your freelance work your “business,” then ideally you want multiple ways in which to generate income, all connected to and feeding off of one another. I call this the “multiple income streams approach.” If you're a visual learner, imagine spokes on a wheel with your brand at the center.

I'll use myself as an example. I'm a career mentor. That's my brand. I can derive revenue for that brand in the following ways:

• Providing career counseling for individuals
• Teaching college courses in career development
• Leading workshops
• Leading seminars
• Consulting for colleges and universities
• Authoring articles and books
• Public speaking

This logic runs counter to the 20th century idea of one job, one boss, one paycheck. But structuring your career in this way will help you survive and flourish in the new world of work.

As for reducing expenses, you need to look at the cost versus the benefit, which can be difficult to decide. For example, do you attend a networking meeting or stay home and email your client base to learn if they have any upcoming work for you? In this case, it may be a crapshoot: You might attend the meeting and find it was a waste of time. Then again, you might go to the meeting and make a contact that changes your life. You'll never know unless you go. (Sometimes you can make yourself crazy worrying about this. Just know that inevitably you will waste some of your time on meetings and proposals that yield no revenue, and that that's okay.)

Focus on distinguishing needs from wants. Think of your business as being like the human body. When you get cold, notice how it's your extremities that freeze first. That's because your body heat is being used to protect your vital organs. As the owner of your own business, your needs—your vital organs—include rent, utilities, and business supplies. Some of what you think are needs (that latte every morning, expensive dinners) are really wants. This becomes clear when you're forced to choose between paying the rent or going out for dinner. The truth is, you have no choice; you must do the responsible adult thing (paying the rent) and postpone the extras (going out for dinner).

Just as a car needs both an accelerator and a brake, so, too, do you—and you need to take on both roles in your own life. That means being the gas pedal to move things forward and being the brake pedal to avoid crashing into a wall. Freud called these the “id” and the “ego,” respectively; you can also think of them as the child and the adult. You need to become your own parent, meaning that there are short-term wants you will need to sacrifice for the longer-term commitments you've made to manifest your talents in the world.

Lenny Bruce (1925–1966), the brilliant standup comedian, social critic, and satirist, died of a drug overdose when he was only 40. At the time, it was said that “Lenny sinned against his talent.” Don't sin against the talent(s) you were given. The world needs your gifts; you have no right to be self-indulgent.

The first rule of freelancing (running your own business) is to keep your overhead low. When developing your monthly budget, be aware of the following categories of expenses, and begin to always look for ways to trim them.

• Education (tuition, books, supplies, etc.). Can you buy books at half price, rent them, or borrow them from your classmates?
• Entertainment (eating out, cable, movies, concerts, theater, sporting events, downloads, apps, books, magazine subscriptions, vacations, etc.). How often do you go out? Can you cut back? Are you watching the premium channels you're paying for? Can you look for vacation deals?
• Food (groceries, lunches, snacks, alcohol, etc.). Can you shop somewhere less expensive? In bulk? If you spend $10 per day for lunch five days a week, for 48 weeks a year, that's $2,400 annually. If you buy lunch one day a week and bring your lunch for the remaining days, you will save $1,920 annually. Oh, and why are you drinking so much? It's not healthy. Some of us treat our cars better than we treat our own bodies. As Shirley said to Laverne, “When are you going to start treating your body like a temple instead of an amusement park?”
• Grooming (clothing, makeup, hair, nails, laundry, dry cleaning, etc.). Can you buy at outlet stores? Are you addicted to designer labels? Can you have a friend do your hair? Can you do your own nails rather than go to a salon?
• Health care (insurance, medication, gym membership, etc.). Is there a group insurance plan offered in your field that you can join? Would it be cheaper to buy weights and use them at home rather than joining a gym?
• Housing (rent/mortgage, insurance, utilities, cell phone, texting, Internet, cleaning service/supplies, etc.). Can you get a roommate? Are your utility bills going up for reasons you don't understand? If so, call the company. How much are you spending on your cell phone? Can you get rid of the cleaning service and clean your own home?
• Transportation (car payment, gas, insurance, maintenance, repairs, parking, registration, bus pass, etc.). Is it time to get a cheaper car? Can you really afford that Mercedes?
• Other (pets, credit card payments, interest, loans, cigarettes, birthday gifts, etc.). Can you consolidate your credit cards? Why are you still smoking? It's expensive, and will kill you. Are you saving any money? Create a cushion for birthday gifts and emergencies.

As noted by the Los Angeles Times in an article called “Increasing Financial Literacy: What You Don't Know Can Hurt You”:

We must learn to save and budget if we want to keep buying more stuff...We must understand the concept of compound interest—how it hurts us when we pay only the minimum on our credit card bills. We must learn that low monthly payments don't equal affordability. We must be aware of the seductive power of marketing and separate our wants from our needs...that brokers, bankers, and salespeople aren't necessarily our friends. We must [also] understand that opening bank accounts and establishing credit are prerequisites to success in the twenty-first century.

Review your budget every six months and trim the waste or find new sources of revenue. If and when you actually have your own business, you'll be doing that every month. Get conscious and start a new habit.