Competing on Upwork as an Argentine Freelancer
I'll share essential financial management tips for freelancers, with a focus on hidden costs that are often overlooked.
Highlights
Freelancing offers freedom but comes with challenges like unpredictable income and managing taxes.
Financial management is key – set rates, track expenses, and build a savings buffer for stability.
Review finances regularly to adjust fees, control costs, and plan ahead.
Congratulations, you have been promoted to CEO, CFO, product manager, marketing specialist, sales manager, and intern all at once! Now, you are in charge of your destiny, so there is no pressure whatsoever. Welcome to the life of a freelancer. But wait, don't panic. At least we have flexible working hours.
Are you already sweating over managing your finances as a freelancer? You're not alone. Many newbie freelancers find this aspect of their business particularly challenging. Unlike established companies, freelancers typically don't have an accounting team to handle their finances. As a freelancer from Argentina, I've navigated these challenges and found a balance that keeps my business organized and profitable. In this article, I'll share essential financial management tips that every freelancer should know to achieve the same success.
The Life of a Freelancer
Freelancing is rapidly growing in the US, with the number of freelancers projected to reach 90.1 million by 2028. This growth underscores its increasing importance to the economy. With more people seeking flexible work arrangements and companies looking to tap into a diverse talent pool, freelancing has become an important and viable career option.
Before we start, we need to agree on some basics. Freelancing offers a unique blend of freedom and challenges. Understanding both the benefits and drawbacks can help you navigate this career path more effectively.
Benefits of Freelancing
Flexibility: Set your own schedule and work from anywhere.
Diverse Projects: Work across multiple industries, enhancing your skills.
Skill Development: Invest time in professional growth without office constraints.
Financial Control: Adjust your fees based on your expertise and value.
Drawbacks of Freelancing
Uncertain Income: Inconsistent project flow can lead to unpredictable earnings.
No Corporate Perks: Miss out on benefits like paid leave and health insurance.
Tax Management: Handling taxes independently can be complex and time-consuming.
This lack of structure and predictability of when and how the next check will come requires the organization to cope. Let's look at some of the necessary actions you will need to take if you want to survive in this environment:
1. Establish Your Rates
Setting your rates is one of the first steps in managing your finances as a freelancer. You want to charge enough to cover your expenses, taxes, and savings and reflect your value and skills. To determine your rates, research the market, consider your experience and expertise, and take into account your overheads and profit margin. Take into account hidden costs such as health insurance and PTO, usually included in traditional jobs. Adjust your rates based on each project's scope, duration, and complexity.
Many well-known freelancing sites, such as Upwork, offer configurators and guides to help you calculate your rates. Finally, remember to take into account regional particularities. Twenty dollars an hour may not seem like much in the US, but for Eastern Europe or South America, it is a very attractive salary.
Having a "rate card" is fine and good. However, being flexible and able to negotiate your rates will allow you to land more jobs. Sometimes, it's better to be paid a little less than to miss out on a job entirely. Also, providing value to your clients increases the chances of retaining them for future services, allowing you to "bump up" your rates as you prove your ability and value.
I can't emphasize enough the importance of introducing retainers when working on medium-and long-term projects. Retainers assume upfront payment for a set number of hours or deliverables. Charging retainer payments at the beginning of the month ensures enough cash flow to keep you going until end-of-month payments arrive.
2. Track Your Freelance Expenses
Freelancers must track personal and business expenses meticulously to ensure timely reimbursement and effective financial management.Â
Due to operating expenses and taxes, freelance income isn't entirely yours. Learn to differentiate between gross profit and net income. Gross profit is the money left after service delivery costs, while net income is left after all expenses. I recommend having a spreadsheet listing your expenses to better understand your cost structure. We have an excellent article to help you do this.
Here, I want to focus on some hidden costs that are sometimes overlooked and can be a stumbling block.
Hidden Costs:
Freelancing website fees
If you use sites like Upwork, Fiverr, or Workana to connect with clients, you should be aware that they charge for their services. Either through a commission on your hourly rate or through a fee for withdrawing money from the platform, these platforms, besides helping you, also take part in your earnings. Be aware of these fees (which vary between platforms) when quoting your work, as these hidden costs are rarely considered.
Payment processing costs
Most payment processing apps tout an approximately 3% fee for invoices and card payment processing. That's harmless, right? Well, it is not. Because many payment businesses are built to generate money from transaction processing fees, they will always look for ways to maximize those, usually by sneaking in some "hidden" charges.
For instance, PayPal has a wide range of payment processing fees that change depending on the payee's location, payment method, or account currency. So, you'll often end up with a per-transaction rate close to 5% rather than the advertised 2%- 3%.Â
Research carefully which payment processing platform you will use to minimize costs.
Business subscriptions
Automating some parts of your business is essential for staying productive. And freelancers have no shortage of apps and tools to choose from and for a small cost. But hoarding subscriptions can quickly become more than $100 spent on things you don't actually use. Identify what programs you need to complete your job and dump the rest.
3. Understanding your market: Savings & Emergency fund
Self-employment can be unpredictable and risky. You may face low or no income periods, unexpected expenses, or client problems. A buffer fund is an excess or extra fund you keep aside during your high-earning months or years of freelancing. It can sit in your savings or an investment account — and you don't touch it.Â
A buffer fund keeps your freelancing business unaffected during the cold earning days. Having a sufficient financial runway eliminates the stress of constantly booking new work and accepting projects that don't excite you. It empowers you to say "no" to nightmare clients or low-paid work and instead focus on your ideal clients and well-compensated tasks.Â
Understanding seasonal variations is very important. In Summer, people usually take vacations, so freelancing jobs are also reduced, while in the last quarter, everyone is looking for sales and buying for the holiday season; which also increases freelancing jobs. Therefore, a freelancer must not panic when things are down and use that downtime to improve skills and vacation to keep balance in life. On the contrary, if you know your business cycle, you can plan accordingly to make the most of the busy season and relax during the slow season.
Tips and tricks: Do you consider how much time you spend looking for your next job or gig? Those hours usually remain unpaid. A wise move will be to add a buffer to your hourly rate to take into account.
4. Review your finances regularly
The last step in managing your finances as a freelancer is to review them regularly. Every freelancer should make this a habit. You should check your income and expenses, evaluate your fees, assess your tax situation, and update your budget and goals. Reviewing your finances regularly will help you identify your strengths and weaknesses, spot opportunities and threats, and make informed decisions. You can review your finances weekly, monthly, quarterly, or annually, depending on your needs and preferences.
We have a detailed article on how to approach financial planning, along with some useful tools to get you started.Â
5. Competing on Upwork as an Argentine Freelancer
Competing for business on Upwork as an Argentine freelancer can be challenging, but it is certainly achievable with the right approach. It is essential to communicate your unique value proposition on your profile page. What do you have to make yourself stand out? It's not just a question of skills and professional experience. Here are some tips that I have found useful:
Highlight your skills and experience and what sets you apart from others. Showcase your fluency in different languages to appeal to a broader client base. Being fluent in English and Spanish, I am able to communicate with roughly half of the world's population. Not too shabby.
When structuring your rates, consider not only world market rates but also the cost of living. Living in a place like Argentina can allow you to offer competitive prices while maintaining a good profit margin. Be transparent about your rates and describe what clients can expect when contracting your services.
Be sure to convey the advantages of hiring a freelancer like you. Because of my geographic location, I often emphasize the benefits of the time zone, especially for clients from North America and Europe, where their working hours can overlap significantly. I also highlight the Argentinean workforce's high level of education and professionalism and assure clients of their reliability and commitment to delivering high-quality work.
Remember: you're in charge!
The financial side of freelancing can be intimidating, especially if you've never considered yourself particularly good with numbers. But remember that your career as a freelancer will ultimately depend on your ability to stay in charge. Remember: you are the boss of your business and your money decisions. Act like it. Take responsibility for making sure you apply the best rates, spend wisely, and save enough to continue to prosper in the future.Â
