One of my developer friends told me recently over lunch that he wants to propose to his long-time girlfriend, and that’s when I realized he didn’t know his real survival number or his thrival number.
“What’s stopping you?” I asked.
“Well, I have to save up for a ring,” he replied. “It’ll probably take me six months.”
At his current rate of $125 an hour, Brady needs to sell 40 hours of work to pay for a $5000 ring, in addition to the hours that cover his regular monthly expenses.
There’s a problem with this scenario: Brady should have more work than he can handle. Jim, my account rep at Stack Overflow Careers, told me that for every one senior developer in the U.S. there are five six-figure jobs. Flashback for a second to Economics 101: When demand exceeds supply, inflation shows up on the scene.
And when demand is five times greater than supply, it’s no wonder that talented software engineers can clear $1,000,000 a year.
Brady’s skill set is currently one of the most prized and valuable in the United States. If demand is through the roof, why can’t he raise his prices and buy the ring in six weeks instead of six months?
Here are several hypotheses:
- Brady may have a pricing problem.
- He may have a sales problem.
- He may have a billing problem.
- He may have a confidence problem.
He most certainly has a focus problem.
It’s hard to hit Mars if you shoot for the moon. It’s hard to hit a sales goal you haven’t set.
Like most freelancers and creatives, Brady has spent most of his career focused on making only what he needs to pay his bills. That’s a fact, not a criticism. I’ve been in the same boat.
“Accountant? Who can afford an accountant?”
“Emergency fund? Very funny.”
“My oldest friend? Let me see… Probably Credit Card Debt. Have you ever met him?”
- I wasn’t outsourcing my accounting to a bookkeeper and CPA.
- I wasn’t maxing out my ROTH IRA.
- I wasn’t saving money aggressively.
- I wasn’t earmarking funds for new equipment, new networks, and new relationships.
- I wasn’t setting aside the appropriate percentage of my earnings every month to pay taxes quarterly.
I was doing my best to get by.
Every year, April 15 snuck up on me. “What?! Where did taxes come from? This is ridiculous.” And when the motherboard in my ancient MacBook finally gave up the ghost, I had to put a new one on a credit card. For most people, using a credit card is synonymous with overpaying. Thanks to interest charges, the poor get poorer.
The funny thing about budgets is that there is no such thing as a typical month.
Your hard drive, which you’d been meaning to back up for months, poops out. You have to ship it to California and pay a nerd $1500 to extract data from the ashes. Bonus!
Your car needs new tires. Oopsy. No budget for that.
Or you land your biggest contract ever and need to fly down to Turks and Caicos to kick things off. The night before you fly out, you realize your passport is expired. You have to take a red-eye flight to Boston to get a same-day renewal. (True story.)
Bills, bills, bills, ya’ll.
There’s no such thing as a typical month.
The question then becomes, how much does your life really cost?
- Mobile phone.
- Entertainment (This is a must-have, right?)
- Minimum debt payments (Love you, Citibank!)
- Gifts and giving (sporadically).
- Passport renewal.
- Random, impossible-to-predict expenses.
Most creatives and freelancers have an approximate number that they shoot for. It covers essentials, the odd movie, and several $7 lattes. It keeps creditors at bay.
But when you unwrap that approximation from its fancy paper and gold foil and give that skinny, naked figure a cold stare, you see that it looks an awful lot like living paycheck to paycheck.
Photo Credit: Maya Carreno via Unsplash
Subsistence. You feel guilty because other people have so little, make so much less. Yet, despite the earning gap, your head is barely above water. Sure, working from coffee shops is cool. That way, you can mince up your workday into ten- and fifteen-minute conversations and watch those deadlines pass you by. Sure, it’s sweet having the freedom to make your own schedule.
Do you know what’s bitter? The stress and anxiety that accompany a chronic cash shortage.
But what are you really spending?
(And what do you really need to be earning?)
The first step to thriving is to recognize your survival number for what it is: surviving, not thriving. The survival number for my family of four living in Knoxville, Tennessee, is $5875.
What’s yours? What are your bills?
- Set aside fifteen minutes.
- Go to your online banking account.
- Download your most recent statement.
- Log in to all of your credit card accounts.
- Download your most recent statements.
- Open a new Excel spreadsheet or Google Sheet. Or download my template here.
- Input all of your expenses. Yes, every single one. No one said being responsible was fun.
- Regroup columns and cells so that you can create categories, such as Food, Entertainment, Insurance, Transportation, Housing, and Health.
- Use this function to calculate totals for each category: =sum(cell:cell). You can find a step-by-step process in this mind-numbing article from Microsoft.
Now you know what you spent last month on your personal expenses. (We’ll get to business-related expenses later.)
Just surviving isn’t sustainable. You have to commit to making the changes necessary to thrive.
It’s time to shoot for Mars, not the moon. Let’s remedy that nagging focus problem.
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