It takes money to make money.
Last year, I spent approximately $8,064 on computers, Internet and phone service, dues and subscription, insurance, accounting and other expenses related to my freelance writing business.
Need a good reason why you shouldn’t write for free or for sites that pay pennies a word or a fraction of that per click? You’re never going to cover those kinds of expenses if you do.
And if you want a thriving freelance business, you’re going to have those kinds of expenses.
In honor of the current tax season, I’ve been looking at my 2009 income and expenses, to understand how both changed due to the recession and to the changing economics of the media industry.
Last week I wrote about how the recession affected my income. My annual income dropped 17 percent, mainly because two big clients, a trade magazine and the website of a national business magazine, cut their freelance budgets substantially.
With less money coming in, you’d think I would have put the breaks on business-related expenses.
On the contrary, I made a conscious decision to ramp up spending in some areas of my business, to do a better job marketing myself, improve my productivity and keep up with the times.
Those investments are already paying off: new opportunities started opening up in Q4 – for lots of freelancers, not just for me – and the first quarter of 2010 was my best since going solo in 1995.
What were those investments? Last year I:
- Bought a netbook – the first portable computer I’ve ever owned (embarrassing but true).
- Upgraded to a smartphone, partly for better access to email, the web and texting from my phone, but also to familiarize myself with what is fast becoming an important news platform.
- Paid out of pocket to attend a journalism seminar, for professional development purposes. I also split the cost of a conference in an industry I cover that I attended to report several stories.
- Paid for web hosting, domain names and website design, all to better brand my blog and my business, and so I could start using my blog as a revenue stream (something I wasn’t allowed to do while I was still using WordPress.com‘s free blogging platform).
Here’s how my business expenses broke down by percentage of the total:
- 1. Travel (33%) – A bit misleading because more than half these expenses were reimbursed by clients
- 2. Computer hardware and software (12%) - Includes a netbook, smartphone and accessories, webcam, a couple software programs and some miscellaneous electronic gadgets.
- 3. Online services (12%) – Includes monthly broadband access fees and all the website costs I listed above.
- 4. Insurance (9%) – I bought errors and omissions insurance for the first time in years when I started a freelance editing job and felt I needed the safety net of an insurance policy should I run into some unexpected trouble.
- 5. Dues and subscriptions (9%) – Includes dues to three professional organizations, subscriptions to a half-dozen newspapers and magazines (the print kind) and the odd magazine or book I picked up at a newsstand or bookstore throughout the year.
- 6. Telephone (7%) – Land line and mobile phone charges.
- 7. Conferences and seminars (6%)
- 8. Accounting (6%) – Represents my share of the accountant my husband and I hire to check over our annual tax return (we’re both self employed, it’s a complicated return.
- 9. Office supplies (3%)
- 10. Shipping/postage/faxes, meals, parking (Less than 1% each) – What can I say, when I’m in town I don’t get out much.
I should note that I didn’t itemize a couple things freelancers regularly include in their business expenses, such as a deduction for my home office and the portion of utilities that could be associated with a home office.
If you’ve finished doing your 2009 taxes, how did your expenses break out differ from last year? Did you spend more than usual in a certain category for a specific reason? Please share.