If you’ve read my post on side hustles, you’d know that I make a living by providing services in different sectors and industries. Some industries pay by project, some by daily or hourly rates, and then there’s other rates specific to translation and transcription work.
Asking someone to work smarter and not just harder probably sounds like an advice coming from someone lazy, but it really isn’t. Before I elaborate on it, let me highlight a conversation I had with J, who is a full-time employee and whose mindset is different from that of a freelancer slash self-employed person (SEP). This will help non-freelancers/SEPs to better understand this post.
For context, I was commenting about the price of small succulent plants in Singapore as compared to Seoul.
Me: So expensive lor. I remember I bought that cute lil thing in a nice pot for a few thousand krw (less than S$6). Here, it costs ten, twenty bucks for something similar. For most people, it means spending one hour working to buy that small lil plant.
J: aiyo, why you calculate like that
Me: That’s how freelancers calculate things. Everything is about the per hour rate. It’s the same as how full-time employees calculate how many months they’d have to work to afford a Hermes bag.
When I shared this idea with another friend, who claims he doesn’t know any other freelancer except me, he was perplexed too.
Most of us grew up thinking of money in terms of monthly salary. Study hard, graduate from a good university and get at least $3000 monthly salary for your first job. That’s how we’ve been brought up to see the value of money and hence most full-timers have no idea what their hourly rates are. They think about money in terms of monthly salary or maybe annual salary especially if they have low base salaries and depend on commissions and bonuses. At most, they’d know how much they’re worth a day, since that’s the amount they’d be losing if they took unpaid leave. They are paid to work fixed number of hours per month and might not be paid for working overtime if they’re executives or managers, so there’s just no compelling reason to figure out how much an hour of their time is worth.
On the other hand, most part-timers are paid by the hour and have a better understanding of how much an hour of their time is worth.
So why am I harping on the importance of knowing how much you’re worth per hour?
Because time is money.
We all have the same number of hours in a day. What will differentiate us is not how hard we work but how smart we work.
If you could work 2 hours a day to earn what others would take 10 hours a day to earn, would you still think that working hard is the way to earn more money?
Let’s do some maths to show you why the hourly rate is important.
If a project pays $2000, but you spend 168 hours (12 hours for 14 days straight) working on it, 2000 / 168 = $11.90 per hour.
Now let’s compare it to a full-time employee who works 8 hours a day at a comfortable pace. (Although this also means little to no chance of breaking that salary ceiling.)
2000 x 1.2 (employer CPF contribution) = $2400
$2400 / 160 (8 hours for 20 days) = $15 per hour
Now, that $2000 project doesn’t sound like a lot of money any more, does it? The number of hours you clocked working in that two weeks turned out to be more than what a full-timer clocks in a month. And you still have to put aside money for your mandatory medisave contribution, making your hourly rate closer to $10 in terms of disposable income. If the project doesn’t benefit you by adding to your exposure, portfolio or experience, it’s not worth the time.
Of course, you could say, but I have two more weeks left in that month and I could possibly double the amount I earn! Well, you could. But you’re also sacrificing your other aspects of life, especially your health.
Let’s put it in another way.
A full-time job offers you $2500 per month. And you have the opportunity to work part-time for $25 per hour. Which seems like the more logical choice?
Without doing the maths, most fresh grads would instinctively take up the full-time job, simply because there’s more perceivable “job security”. Yet, if you do the maths, you’ll see why the part-time job could be a better option.
$2500 x 1.2 = $3000 (including CPF)
$3000 / 160 hours = $18.75 per hour
Part-time jobs paying more than $500 per month are CPF payable. Hence,
$25 x 1.2 = $30 per hour
In order to earn $3000 a month, you will only have to work 100 hours. That leaves you with 60 work hours to look for other freelance or part time opportunities, increasing your overall productivity and earnings.
Is 100 hours of part-time work difficult to achieve? Let’s say you work 8 hours per day.
100 / 8 = 12.5 days
Doesn’t sound too unachievable compared to the standard 20 working days, right?
Generally, as a freelancer, a project is worth taking up only if your hourly rate works out to be at least $50 per hour. That sounds like a lot, but it really isn’t. Especially since you’ll have to put more money aside than a regular full-timer would need to. Don’t forget you’ll also have to do your own admin work and marketing.
This brings me back to another post where I talked about charging a premium for your services or products. Either that, or make it free to bring in more business in other forms. There is nothing wrong in wanting to earn more money and enjoying a better standard of living while providing real value to others.
You can only help others when you have the time and money to do so.
If you’re a freelancer like me, set aside money to improve your services and invest in equipment that lessens your workload or improves the quality of your work. Think twice before you spend $45 on an expensive meal, if that means you will have to work for 3 hours. Make the right choices with your money and invest in education if it helps to increase your hourly rate and/or reduces the number of hours that you’d have to work — so at least you have time to enjoy life even if you’re not earning more money. Or maybe build another source of income with the time freed up.
At the end of the day, my take is: Work smarter and make your money work for you.