Get Shameless About Money

#272 BONUS: Take Charge of Your Finances | Deliberate Freelancer with Pamela Capalad

June 29, 2023 Brunch & Budget
Get Shameless About Money
#272 BONUS: Take Charge of Your Finances | Deliberate Freelancer with Pamela Capalad
Show Notes Transcript

BONUS: Take Charge of Your Finances | Deliberate Freelancer with Pamela Capalad

Today’s guest is Pamela Capalad, a certified financial planner and accredited financial counselor in Brooklyn. Pam created this really cool program called Brunch & Budget, which helps people who feel ashamed or embarrassed about money have a safe and friendly place to talk about their finances—over brunch with Pam. I think this is genius. It makes people more comfortable and really open up to Pam, whose mission is to make financial planning as affordable as possible for the communities who need it most.

We didn’t get into it in this episode, but Pam and her husband teach hip hop and finance workshops to kids, teens and college students across the country through a program called Pockets Change. They also host the Brunch & Budget podcast, where they discuss how personal finance and racial economic justice intersect. And—if that’s not enough—they started a financial planning program designed for the needs of people of color called See Change.

In this episode, learn how Pam went from working in wealth management to financial planning—first, for her friends. A conversation with a friend led to Pam’s business, Brunch & Budget. While the first meeting is usually an in-person brunch, Pam then meets with clients virtually every month to help them put together a financial plan and to actually implement it.

Pam goes over the most-asked questions she gets from freelancers, which includes issues related to quarterly taxes and an inconsistent income.

Pam also helps freelancers figure out how to raise their rates.

Pam gives us the scoop on new IRS rules that benefit freelancers—the IRS won’t be charging penalties if you didn’t pay your 2018 taxes on time every quarter. And going forward, they’re going to less strict about freelancers paying taxes every quarter as long as you get all the taxes paid by January.

Pam explains why it’s important to build a good relationship with an accountant who works with freelancers.

Pam is a big believer in creating a 12-month cash flow projection of how much money you anticipate you will make and what your income goals are. It’s important to have monthly, quarterly and annual goals, partly because a freelancer’s income can be inconsistent. That cash flow projection will help you notice income patterns as income ebbs and flows throughout the year. Then, you can plan your action steps around your income goals and track and measure whether you’re hitting your income goals.

She also encourages freelancers to take a VACATION when the months are low.

Pam talks about how imposter syndrome relates to money—and sometimes increases as you get more successful.

When you are setting your rates, you need to figure out how to take the emotion out of it. Pam admits undervaluing herself when she first started providing her financial planning services.

But then Pam took the emotion out of creating her rates by making herself stick to a rule that every time she gained two or three new clients, she had to raise her rates for all future clients. She also recommends coming up with the “least I’m willing to take” rate.

If you do take a project below your rate, consider what non-monetary things you can negotiate with the client—a referral, a longer contract, additional projects.

Pam helps us figure out how to commit to a savings account. She recommends a “high-yield” savings account so you can gain a bit more interest than what you would at your local bank. Know what your minimum personal expenses and your minimum business expenses are each month. That way when you exceed those, a chunk of that money can go directly into your savings account.

Make sure you have a separate savings account just for taxes. That money is not yours. Set aside 25–30 percent of whatever you make and pretend that money doesn’t exist.

From there, take your monthly inc


Hi, and welcome to the deliberate freelancer, the show for those who want to build a successful freelance business. We are not about the hustle. We are not about the feast or famine cycle. We are about building a freelance business deliberately. I'm your host, Melanie Padgett, powers. Hey, everyone. Welcome to episode number 28. Today's guest is Pamela capellan, a certified financial planner and accredited financial counselor in Brooklyn. Pam created this really cool program. It's called brunch and budget. And it helps people who feel ashamed or embarrassed about money, have a safe and friendly place to talk about their finances, over brunch with Pam, I think this idea is genius. It makes people more comfortable and probably really open up to Pam who's super nice. By the way. Her mission is to make financial planning as affordable as possible for the communities who need it most. Right now brunch and budget is based in New York. But Pam also does virtual brunches with clients. And she has plans to expand her program to my area, the DC area next year. And then who knows where I'll show go. We didn't really talk about it in this episode. But Pam and her husband teach hip hop and finance workshops to kids, teens and college students all across the country through a program called pockets change. They also host the brunch and budget podcast, where they discuss how personal finance and racial economic justice intersect. And if that's not enough, they started a group financial planning program designed for the needs of people of color called sea change. What Pam and I did talk about in this episode, well, so many things, she gives so much great financial advice here. It's geared toward freelancers. And it really comes with an empowering message. I actually plan to implement several of her strategies soon, you're going to get a lot out of this podcast to really allow you to take control of your finances and get more comfortable with dealing with money. So let's get to this episode. Hi, Pam, welcome to the show. Hi, thank you so much for having me. I'm excited to be on. Well, this is great. I think this is going to be really helpful for a lot of people. And but I did want to start more with your origin story. Can you tell us how you first started working for yourself? Yeah, absolutely it. It wasn't something that I planned so much as people kept asking for it. I guess I was working in wealth management. I worked in wealth management for about seven years. I started in 2008. And when I moved into doing more financial planning, and more and more of my friends found out that I was their only finance friend, I found myself getting pulled aside at parties and people asking me questions about their 401, k's and their credit and debt and budgeting and saving money and all of these kinds of things. And it was really interesting when I thought about it, because when I was in wealth management, so I couldn't help my friends. Because in wealth management, you have to have at least$250,000 for anyone to talk to you. And the other thing too is I realized that people were afraid to talk about their money. They were pulling me aside at parties, because they didn't know who else to ask. And they also didn't know when or how or what kinds of things to ask in the first place. So I actually had a friend at a party once who basically said, she pulled me aside, she grabbed my hand and she was like, Pam, I really need your help. I have so much credit card debt. And I have no idea what to do. But I'm so scared to look. And I just said do you want to do it over brunch or something just casually like that. And she was like, Oh, okay. And it completely changed the tone of her conversation. Her face change, her body literally relaxed. And I was like, Oh, I wonder if there's something to this. So we actually ended up meeting for brunch to talk about our finances. At first it started off with me just meeting with my friends and trading food for advice. And then they were telling their friends and they told their friends and on and on and on. And it was a point where I realized that a lot of people my age, not only were afraid to talk about their finances, but even if they were ready, they didn't have a place to go. They were people who didn't really want to serve them and we're part of a big artists and creative community. My husband is an MC a rapper and hip hop educator. So we have a lot of friends who are creatives and a lot of friends who are artists, and freelancers. And it's something where they definitely had no resources. So that's really where Brendan budget started. And brunch and budget became something that at first I thought was like kind of a fun gimmick and turned into a space for people to for the first time feel comfortable talking about their finances. You know, sharing food is something where we can really find common ground where we can really, you know, change the tone of the conversation so that people can let their guard down a little bit. Finances is so stressful to think about for anyone. And if we can change the setting and put food in front of people and make them feel comfortable. I feel like that's something that has been a really valuable thing with this business model. That's awesome. Yeah, it's funny how many hang ups we all have about money? Yeah. Oh, yeah. So many. And it's it's one of those things to where I'm a big believer that it's because money has been such a taboo our whole lives, you know, we're not taught in school, our parents don't talk to us about it. Parents are more afraid to talk to their kids about money than about sex or drugs. So it's become this huge, big thing over our heads where you don't learn in school, you don't get a conversation from your parents about it. And then you become an adult, and everyone's like, you know how to do this right? Um, can you talk a little bit more about the details of brunch and budget? How does it work? Is it just in the New York area right now? Yeah, so the in person brunches are just in the New York area. So if you want to meet in person and sit and have a meal, we can do that. But I also meet with brunch, with brunch and budget clients virtually for our first brunch. So I do a lot of virtual brunches. And we're actually we just hired an associate financial planner who next year is going to be expanding to the DC, Maryland, Virginia area as well. So the plan is to have ultimately, like a handful of satellite cities, where we meet with people for brunch in person. But really, the first brunch is the only time that meet in person. But clients that I work with on an ongoing basis, they pay a monthly subscription. And we meet virtually, for like 15 minutes to 30 minutes every single month, or every single quarter, to put together a whole financial plan for them and help them implement it. One thing that I've really found with a lot of our clients and a lot of people in general is you get the advice. You are super excited. You take all these notes, and then you sit down and you try to do some of this stuff, and you get stuck. And then you never revisit it, right? You're like, oh, I should open an IRA. And then they ask you this weird question. And you're like, Oh, I'll figure that out later, then you never go back to it. So yeah, we really want to help people make sure that all of this stuff gets done, which is why we put together the plan to give you advice. But the crux of what we do is we really help people actually do all of it. Yeah, that's so important. I remember when I was an employee, they'd have like the financial retirement guy come in, and it was exactly that they tell you all this stuff. And I'd take all these great notes and be like, All right, and then exactly what you said they'd ask a question, I'd have no idea how to answer that. I just wanted someone to do it for me. Yep. And now as a freelancer, I did get a financial advisor for my retirement and I go in and I hand him papers, and he sometimes calls, you know, people for me and puts us on speaker and I give them him them permission for him to do everything for me. And he just does it. Yes, that is so very best. Yeah, we call them financial advocate calls. We've been on the phone with clients and collections agencies, student loan servicers, investment accounts, 401 k companies when they're trying to roll over their old 401 Ks. If you need to get on the phone, someone and you're nervous about a conversation. That's a big part of what we do. Because we know like you said, like, part of it is just knowing what questions to ask right? When you get on the phone somebody? Yeah, absolutely. What are freelancers asking your help for? Yeah, a big thing. freelancers are asking for help. Or I'd say there's several things. One is taxes. So often, for the first time, especially if you're new to freelancing, nobody tells you that they don't take your taxes out when they give you those checks, right, being a 1099 contractor is a huge shift for a lot of freelancers, a lot of freelancers also come to me because their income is inconsistent, not just the nature of freelance work. And so tracking your income tracking your expenses, really getting a good idea of what's coming in, and what's going out is something we work with a lot on freelancers with as well. And then the other thing too, that I actually spent a lot of time talking to freelancers about is how to make sure that you're giving yourself a raise by raising your rates on a regular basis. A lot of freelancers, especially if they're new, they have a handful of clients. They're trying to market they're trying to do sales, and trying to figure out what their value add really is to the clients that they're serving. So we have a lot of conversations with freelancers about that as well. And then we get into the really the nitty gritty about what kind of insurance you need as a freelancer how to save for retirement as a freelancer, basically, like how do you build your own benefits package? Because you're working for yourself? Right? Because all of that stuff was taken care of when you were an employee. And now it's, do you have to set up payroll? Do you have to set up a business structure? Do you have to get a bookkeeper? What kind of insurance do you need, you know, what kind of retirement plan should you set up? And those are the kinds of things that we really talk about with freelancers on a regular basis. I want to talk a little bit more about taxes because, ya know, I knew I was supposed to pay quarterly taxes and I paid quarterly taxes but there's a little bit more to it than that. cuz as you said, our incomes are inconsistent. And yep, I got kind of caught up on Oh, wait, do I track? How do I, you know, do I track what I invoice? Do I track what came in that quarter? How do I do all that? So do you have some tips for us on the quarterly taxes? Yes, for sure. Well, one thing that's interesting is the IRS just changed the rules on us in favor of freelancers. One is they decided that they won't be charging penalties for 2018, if you didn't pay your quarterly taxes on time, every quarter. And another thing that they're changing going forward is, they're not going to be so strict about needing to pay your quarterly taxes every quarter, as long as you get all of your quarterly tax payments in by January of the next year, then you're not going to be penalized. So one, that's an amazing change. And hopefully, it addresses a lot of inconsistent income things that we've been seeing. Because you're right, as a freelancer, how do you know what quarterly taxes you need to pay to make sure that you're covering your bases, you're not getting charged penalties, and that you still have money left for the next quarter to actually run your business, right? Because quarterly taxes do take a big hit on a lot of things. One thing that I usually recommend when it comes to quarterly taxes, is there's two ways that you can calculate quarterly taxes. One is you can estimate your income for that quarter for that year, take 90% of that amount and pay the quarterly taxes, then the other way is you can calculate what you paid for last year divided by four, and make that same payment every single every single quarter. And what that means is because you know what you paid last year already. To avoid penalties, all you have to do is make sure that you paid what you paid last year, or pay 90% of what you paid this year. So it may be easier for a lot of freelancers, if you know what you paid last year, to use that as a baseline for your quarterly taxes should be and anticipate, okay, I might owe a little bit more money in April, because I made a little bit more money this year, but you know that you're not going to get charged penalties. So that might be the easiest way to do it. If you really want more exact numbers, I definitely recommend working with an accountant. And having them help you figure out what's going on. I think, especially for freelancers, it's important to have a good relationship with an accountant, someone who's going to at least touch base with you every quarter, and send you reminders and ask you about what your retirement planning is because retirement planning impacts your taxes. But also, the quarterly tax situation is something that a good freelance tax accountant will stay on top of with you. And so that's something that I really recommend. Yeah, I have a great accountant. And he and I don't use them all the time. You know, we use them at tax time. And I check in with him each quarter. But the thing that has been really helpful is I realized, when I was getting ready to pay my quarterly taxes, I didn't know how to divide it between federal and state, huh, yeah. And I did that. I didn't know if there was a trick to that. But I basically just email him and say, This is what I made. And he tells me what to pay. Yeah, that's it. That's what I do with my accounting. I'm like, Here's the money. Here's what I made. Here's what I spent, tell me what I'm supposed to do. And it gets even trickier in New York, because there's also in some situations local tax that you have to worry about as well. So there's like so many different aspects that accountants will kind of know, the nuances on. But the Yeah, the federal and state tax thing is tough, because you can kind of figure out your federal tax, but the state tax, the state tax rate is on a different scale. And so it's something you'd have to Google and calculate and look up and honestly, an accountant can just do it in like three seconds. So that's why it's so valuable to have a good one around. Yes, absolutely. I want to ask you too, about specifically about financial goals. You know, it can be challenging as a freelancer to know how much money is going to come in each month, as we said, Should we be setting monthly goals or quarterly goals? How do we go about doing that? Oh, man, this is my favorite question. I I'm a big believer, especially for freelancers in putting together 12 month cash flow projections. And projecting month by month over the course of 12 months. What you anticipate you're gonna make and what your income goals are, I actually have a spreadsheet and I'll share a link with Elon so that people can have a template set up with formulas and things like that. But the spreadsheet, the way that it looks is basically it's like, every every single column is a different month. So from January through December, and then there's a line item for every single source of income that you have. And what you do is you project out what you anticipate you'll make for that source of income per month, throughout the year. And the reason why it's super important to do that is it's important to have monthly goals, but it is also important to have quarterly goals and annual goals because the income is so inconsistent. A lot of freelancers if you've been doing this for a long time you probably have an inkling of what your seasons In a sense of high spending or high income are and what your seasons of low income are, right. And those are the peaks and valleys that all freelancers live through. And that's why it tends to be like feast or famine. Because in the times where the income is low, you're just trying to figure it out, you're scraping it by maybe you're living on credit cards in some situations. And then when the time comes, where you get those big checks, then it's like scrambling to catch up from the last couple of months. And so if you can hedge your bets, and actually see what the annual income is going to be, and get an idea of when those high income months are and those high income seasons are, then you can plan ahead and say, okay, so I know that in the summer, the income is high, which means that this income needs to get me through the fall in the winter, right. And so you can do a couple of things by knowing that one is you can plan out what expenses you have, that you need to save up for. So all of that summer income gets set aside into savings, to be able to be spread out over the next several months, whatever it is, the other thing that you can do is either decide, hey, I'm going to ramp up my marketing and sales in preparation for the summer, because I know that's when the work comes. Or, Hey, I've never thought about what kinds of things I can sell and produce in the fall in the winter. Because I've been so focused on summer, let me figure out what other income streams I can create in the fall in the winter to supplement that income. And to be able to plan like that, I feel like the only way to do that is to really projected out over what the next 12 months are going to look like. Because then you'll be able to recognize patterns, you'll be able to change your marketing and sales strategy. And also a huge thing that I think freelancers really need to do is set income goals. There's Yes, I know that this client comes in every month, yes, I know that this gig happens, you know, every July or August or whatever it is. But also, there's going to be a line item that I encourage all freelancers to set up where it's a goal for other business that you want to bring in. And it's going to be kind of made up, right, you're, that's when I first did my cash flow projections. Everything was made up. I was working with a business coach, and I was working on quitting my job and transitioning doing brunch on budget full time. And he asked me to do these 12 month cash flow projection. And I started doing them and I came back to him and I was like, so all of these numbers are fake. Is that okay? And he was like, yes, they're going to be made up for now, because I hadn't run my business yet. Right? But doing the cash flow projections and telling myself Okay, what would it look like? If I got two new clients a month? On average? What would it look like if I got three new clients a month on average, and also helped me decide, oh, what would I have to charge to make this work, I was able to kind of do all of that planning and all those projections, before I even started pitching my business or trying to sell my service to people. And that gave me a baseline of okay, this is what I need to be able to charge to eat. And these are how many clients I need to get to actually make this cash flow work. And when you are able to set income goals, then you're also able to work backwards from there and plan your action steps around those income goals, and also track and measure if you're hitting those income goals on a regular basis. I feel like a lot of freelancers, there's this kind of nebulous, like, Oh, I hope that I make enough money this month feeling. But if you can take control of that, right. And you can take control of that and really see what the year is going to look like you see over 12 months, oh, actually, I am going to make enough to eat for this year, I am going to make enough to cover all my expenses and have a and have a successful business year, then that gives you the peace of mind to say, okay, I can I can work on these income goals. I can track these I can track this income. And also I would recommend as a freelancer that in the months where the business is low, that you go on vacation. Yes. Yes, say it again. Vacation, freelancers. No, I preached that so much. And you know, and I know people that are whether they're hitting their income goals or not, you know, I say we'll take a staycation you need you know, a break. You can't be you're gonna burn out. You just can't keep going at that pace. Yeah, I really can't. I love that. What everything you just said like, it sounds so simple. And I mean that in the best way, because you've explained it so well of how, and I like, you know, just a simple Excel spreadsheet just laid out there in front of me, you know, by the month and I'd love that. For those that aren't just into Excel like I am. Are there other tools that you think are helpful for us to track those goals? So the thing that's tough is the reason why I use Excel is because I haven't found anything that does cash flow projections for individual freelancers. There's a lot of software that will do big cash flow projections for corporations and things like that. And you know, we'll pair it with QuickBooks and all of this stuff, but there's nothing that's is like a simple tool to show a freelancer Oh, this is what I think I'm going to make. And this is what I actually made. Unfortunately, someone build that out there. If you're listening, make an app for that. Right? All you entrepreneurs out there. There you go. There's an idea. Well, that's great to know, too. Sometimes Sometimes we get overwhelmed with all of the apps and all of the tools. And sometimes it's just a simple Excel sheet. Yeah, absolutely. I think too. We know freelancers often struggle with figuring out what to charge and especially as you talked about a bit earlier, how to raise their rates. Do you think this ties back to all the hangups we have with money? Oh, my gosh, absolutely. Absolutely. I've done a lot of studying on the concept of imposter syndrome in general. And it's a huge thing that I feel like all of us have, and it never goes away. And I feel like it gets worse as you get more successful. Because it's that feeling of like, Oh, my God, someone's gonna find out that I'm totally a fraud. Right? Why are people paying me this much? Why do people think that my work is worth this much? You know, I'm making more money than I have, working, working as an employee, what do I do? You know, and I think that these kinds of stories that we tell ourselves and these narratives that we tell ourselves go through our head, and I think a big part of it is because, you know, we weren't taught how to talk about this, as kids, we weren't taught how to talk about this, as adults, and we were discouraged from speaking to each other about it, you know, the idea that we don't have an easy way to set our rates, the idea that companies can just blindly say yes or no, and set the market rate for the work that you're doing doesn't make any sense. The fact that we can just make something up and you can do the exact same amount of work as the person next to you and be getting paid half for it, either as an employee or as a freelancer doesn't make any sense. But it happens because there's no transparency. And so when it comes to things like setting your rates, part of it is trying to figure out how to take the emotion out of it. And what I mean by that is, is something that I had to do. As a freelancer setting my rates too, is I, I was afraid to charge anyone anything. When I first started, I was like, people want to pay me for this, I don't think so I super lowball myself, I actually started off charging$20 a month for my financial planning services, oh, my gosh, I feel, but I was like, will people pay me anything. That was literally where my head was, and had no idea. You know, what, what value is bringing to them. Even though I knew that at the end of these brunches, people felt relieved, they felt empowered all of those kinds of things, right. But I didn't know how to make it tangible. And one thing I will say is, you can start off with a low rate that you're comfortable with just to get a few clients in the door to get your confidence up to have a clear idea of what your value actually is. And then what I did was I gave myself a rule that every time I got two or three new clients, I would have to raise my rates. And so that was my way of taking the emotion out of it was saying, all right, every time I got a couple new clients, I would have to increase my rates by XML. And then I would just pitch the higher rate. And then I would continue to pitch the higher rate every two or three clients. And now my minimum rate is 199 a month, it's 10 times the amount of what I started with, you know, and it goes up from there. And so I think that if you can give yourself some kind of guideline or rule, you kind of have to make it up yourself, and you have to be good about sticking to it. But if there's a way for you to take the emotion out of raising your rates, that's something I highly recommend. Another thing too, that would be helpful to think about is coming up with a standard rate and coming up with the least you're willing to do the job board. So I think one thing that's important to articulate as a freelancer is what the value of your work actually is, right? Whether or not someone can actually afford to pay it is one thing. But people need to know upfront that the value of your work is actually x amount. And you are giving them a deal, you are discounting it for them. So if you really do want to work with a company organization, for instance, and they tell you that they can't afford your standard rate, one, they know what your standard rate is. And to that's where you can start negotiating and asking for things that are non monetary that are also valuable to you. So it's really important for you to be able to articulate your value, regardless of whether or not you're able to get it early on. And that's something to that will help take the emotion out of it is you can say, hey, this is my standard rate. I don't know what your budget is like. It'd be great if you could pay this rate, but I really want to work with you. I see this as a long term, ongoing partnership. So if you need a little bit of wiggle room, let's talk right. So it gives you that baseline of saying upfront, this is what I usually charge. But hey, let's be friends. Like let's figure out we can do together right now. Yeah, it kind of gives you the ability to to Have that wiggle room and work with people you want to work with. And also to be able to say no to people you've kind of don't want to work with, you're like, This is my right take it or leave it. Right? Yeah. And I think that's so helpful to know ahead of time, I have a lot of different services. So I have to know what it is, you know, I might be creating a proposal and you know, the numbers are made up, and you're trying to figure out what to put in the proposal. But I like to tell myself, okay, if they come back, under what I've, you know, offered, this is my, you know, this is my limit, I will not go below this, because I think you get caught up, like you said, in a motion, especially on a phone call. You're like, okay, I guess I could do it for that. And then you hang up and you're like, Well, I don't want to do it for that. Why did I just say that? So knowing that number ahead of time really can help stop you from doing that. Yeah, absolutely. And I think another thing to think about too, is if you are doing work for reduced rate is what other non monetary things can they give you access to? Can they give you referrals? Can they give you access to an audience who normally wouldn't have access to? Can they you know, can they guarantee the next couple of jobs? For instance, can they extend your contract for a longer period of time. So that's something to to think about, as a point of negotiation is the company or organization that you're working with, also has resources, and also have relationships that you might want to be able to tap into, and it doesn't hurt to ask for them to do a favor for you since you're doing a favor for them? Yeah, that's a great point. I really liked that as well. So I want to talk about savings. You know, I think we should have sometimes we hear that, you know, you have to have this sort of savings account, the OH CRAP life happens, you know, when your appliances fail, or whatever your car breaks down. But, you know, what do you how do you feel about savings? And what do you talk to your clients about? And also, I want to talk, you know, we have this talk now of this upcoming recession. So should we be bragging about that as freelancers? Yeah, so savings as a freelancer is also going to be inconsistent, because the nature of your income is inconsistent, right. And I think that's probably the most difficult thing to figure out. The rule of thumb is to have at least three to six months of living expenses in a savings account, consider a high yield savings account, because it's paying more interest like Barclays or Ally Bank, Wealthfront, or betterment, or there's a lot, if you just Google high yield savings account, you'll find a bunch of them. And it just means that they're paying higher interest. So they're paying usually 20 times more than your regular bank, like a chase or Citibank or whatever it is. So I would first of all, consider opening a savings account that's separate from your other bank accounts. Because that psychologically helps you think of that savings as something that is your you're going to use later, potentially, as a freelancer, you know, the the rule of thumb that I mentioned of three to six months, may or may not always be possible, again, with the inconsistent income. Part of what you're saving for as a freelancer is those lean months, right. And so the thing to think about with saving is, it's important for you to know what your minimum personal expenses are and what your minimum business expenses are every single month, because that way, you know that when you have a surplus of income, that a good chunk of that can go to savings. So first with savings, make sure that you have a tax savings account, that's super, super important, I recommend having a tax savings account. Usually where you keep your regular bank account, we keep your regular business bank account or your personal bank account, where the freelance income comes in. Because that money isn't yours. Unfortunately, that money is going to go to the IRS, or your state taxes. And that is something that before anything else, I would recommend setting aside, I usually say as a rule of thumb 25 to 30% of whatever income you make, and just pretend that money doesn't exist. And then from there, you can take your income that you make every month. And especially if you're tracking your cash flow, this will be easier and easier, is you take the income that you make every month, you subtract the minimum business and personal expenses, and the rest of it can go to savings. And for freelancers, that number is going to be different every single month, a lot of things with freelancers is it's not super easy to automate things, at least at first, until you really have an idea of what the patterns are. And when it comes to savings. Unfortunately, automating savings is not always possible, but not in the same way that like an employee with a steady paycheck is able to do so you really have to be diligent about making sure that you save your excess income in the months where the income is high so that when the income is low, you have that savings set aside to be able to draw from it and you don't feel like you're scrambling every single month when you have those lean months. So saving for a freelancer in general. That's how I would think of it with the upcoming recession too. I mean, it's hard to say you We've been saying there's been an upcoming recession for like the last three years, right? Like the recession is coming. Exactly. So planning for a recession or planning for an income loss in general is something that having that savings cushion is going to be really good for. I think that we can't plan for things like a recession, we can plan for things that affect us directly, like losing income, losing a client losing a gig, something like that. There's also I'm a big believer in diversifying your income streams, not just having most of your income come from one client, or having your income sources come from multiple types of services and products and things like that. Because if you lose one of those, then there's still all of these other things that you're able to get income from. And that also can help supplement your savings and also help protect you in an economic downturn where people are, you know, not necessarily having the funds to hire freelancers to do these other things. But yeah, when it comes to saving, it is going to be inconsistent as a freelancer as well. And it's really about being diligent with knowing how much you can set aside every single month because it is going to be different. Do you have tips on just how to be diligent for those of us that aren't great about that? Like, is there? Should we put it on our calendar? Should we connect it to something else we're doing that month, like paying bills, or? Yes, I love that, yeah, one of the big tenants that we have is to pay yourself first. And what that really means is you need to think about your savings as another bill, it needs to be something that you do as part of the administrative work that you do with the rest of your business is to set aside money into a savings account. So as you're looking through your expenses, you know, as you're sending quarterly tax numbers to your accountant, as you're looking at your cash flow, that'll be a good time to say, okay, good, I have an extra$1,000 This month, let me just plop that in a savings. Because again, you can't automate it. So it really is about finding a time that fits in with the rest of your, you know, business administrative stuff for the freelance work, that you can also implement some kind of savings plan. I love what you said about thinking about savings, like it's another bill. Because I don't we don't do that really, you know, we think it think it often gets down at the end of that priority list, and we pay all the bills, and then we have a little cushion. And then we you know, maybe we treat ourselves to something and we don't think of it as a required thing. Yeah. And it all goes back to that idea of putting yourself first right and self care, because that's really what savings is. savings is self care. And self care is not usually fun, right? Getting a massage is not self care. It's nice, it's a treat. But really like self care is about taking care of your future self and making sure that if something happens, you don't have to panic financially. That's great. Yeah, I like that. Are there any other tips are anything that we haven't talked about that you want to mention? Oh, I feel like the big 101 thing, if you haven't done already, and I know a lot of freelancers you know are on the fence about this is, I do recommend having a separation between your personal and business expenses. If you don't already, it's something that I'm I think a lot of freelancers hesitate to do. Regardless of how much income they've made, I've seen freelancers where the income runs the gamut. And Freelancer is making six figures and everything is still kind of, you know, put in one account and commingled and all of that. And it's really difficult to be able to do your taxes and to track your business income and business expenses when everything gets mixed in with all your personal stuff. So if you can set up a separate checking account, and it doesn't have to be a separate business checking account, you don't have to get all formal and you know file, a business structure, anything like that. It can just be a separate personal checking account, you have two personal checking accounts. One of them gets all of the business income and pays all the business expenses. And then the your personal checking account, the one that pays all of your personal bills and things like that is something that you can send money to from this business checking account that you open. And the reason why that is valuable is one tax time is going to be way easier you and your account are gonna be way happier. Having that separation and that line in the sand to freelancers are 10 times more at risk for audits and corporations because the IRS knows that people tend to commingle their personal and business expenses. So if you were to get audited, you're able to actually say, Hey, this is my business account. Here's all the books for that. Don't even worry about all this personal stuff I've been spending money on. And the other thing with the personal expense having separating your personal your business is you can pay yourself like a regular employee, right if all your business income goes into this business checking account, then you can essentially send yourself a paycheck every single month that covers all of your personal expenses. So ends up being a really great way to budget your personal expenses as well. Like having a separation between your business, your business account and your personal account. That's a great tip. And I am that classic freelancer who has not done this. And I've made every excuse, you know, like, I'm good with money. I know, you know, I can separate it easily. And but I'm actually my husband, who is usually not the one with all the money advice. Actually, the other day said, Listen, you need to get a business credit card, so you can at least separate it. And the impetus for that was, so I could keep track of my receipts easier just by looking at my credit card statement. Yeah, yes, absolutely. Absolutely. I feel like because you can't use your credit card statements for an audit. But it is something that it is something that an auditor will look through. It's also something that your accountant can look through easily, and link to whatever financial accounting software they have, if you're like, oh, this credit card is just for business expenses. I love that that's such a great way to start. If you're not ready to kind of open that big new checking account. It's like, well, let me just have a credit card that has all my business expenses to dip your toe into that, well, I will I will stay here I will open that second checking account because I'm already sort of on that way. So I know I know I need to do it. I love it. So this has been so helpful. And each episode of our show ends with a Biz bite. And biz bites are quick tips to help you with productivity, efficiency and work life clarity. So do you have a biz bite for us? I do my biz bite is to hire out for work that you hate. Great. So if it's Oh, I hate keeping track of my books, hire an accountant, get a bookkeeper or pay somebody $50 a month to do your books for you, right? If you hate social media, pay someone 100 bucks a month to manage your social media. If you hate sending out invoices, if you hate, you know, if you hate kind of managing, like the day to day of the business. If you don't like the administrative work, whatever it is, you by continuing to try and do everything, including the stuff you don't enjoy. You're stifling your ability to do the work that you love and actually get more business. And I've seen this personally because I am a control freak. And I am very bad at delegating. And I feel like I can just do it all myself. Because technically I can write technically, we can do it all ourselves. Sure. Tality is that even if you can, that doesn't mean that you should. And so it's really important to again, take care of yourself and also focus your energy on the things that you're actually good and you actually enjoy, because then you won't get burned out and you'll actually enjoy doing your business more and most likely make more money to pay for these. These folks that you end up hiring. Yes, absolutely. That's a great tip. So Pam, this has been really great. I really appreciate you coming on the show. Yeah. Thanks for having me. Yes, this was been wonderful. Thanks so much. Thanks so much for listening to the deliberate freelancer and a very special thank you to Pam for coming on the show. You can get the show notes at deliberate and the show notes include a 12 month projection template that Pam mentioned on the show. So Thank you Pam for sharing that. And I also include a bunch of links of how you can connect with him online. If you enjoyed deliberate freelancer, please tell a freelancer friend, sharing the word on social media or in person helps other freelance business owners find the show. And please subscribe to the show. It's free, but subscribing means you'll get the new episode automatically every Thursday. You can always find me on Twitter. So I'd love to connect with you there at Mel edits. Until next time, have a great week.