Decision making on a lot of indie money topics

June,

I've been SE for 4 years as Architect/Environmental Design.

Notified a client of rate increase to $75/hour (undercharged at $50/hr for 4 years--my own fault for not knowing the minimum market rate in So Cal).

Employer came back with $120k/year direct hire employee offer.

Have not yet done '06 taxes (filed extension), still paying '05, none paid so far on '07.

Expenses too high in So Cal. Family of 5, keep house $28k mortgage interest deductions, or take cheap rental home (no mortgage deductions). Mid life and NO retirement.

Should I stay SE to start taking advantage of the SEP IRA opportunities, or go with $120k/year employment offer?

Thanks so much---REMARKABLE WEBSITE YOU HAVE HERE! Leslie from Mission Viejo, CA


Hello Leslie,

My goodness, you have a lot happening and it sounds like you have very little guidance. My first advice: Make no decisions until you get a lot more information. I will do my best to run down the line and deal with each element of your email but do keep in mind that this is an email answer to what appear to be life decisions!!

Many indies don't charge enough money. Every independent professional should call around -- or have a friend make the calls -- and ask the going rate for the kind of services you perform. Whether house painting or business card design or dog walking -- get a price. If you need to raise your fees do it incrementally and don't spring it on a client. For instance, in July send a carefully written notice to clients thanking them for their business and tell them that on September 1st your fees will go up XX% or to $XX.

You say your "employer" came back with an offer. If you're an indie the person to whom you provide services or sell products is not your employer. Only employees have employers.

$120,000 per year divided by 52 weeks divided by 40 hours per week = $57.69 per hour. What benefits are being offered? Keep in mind that business expenses are not as tax advantageous to an employee as they are to a self-employed so that makes that offer less than you are earning at $50 per hour.

Owing money to the government is not terrible. It doesn't mean jail it just means a lot of penalty and interest but at a cost of a lot less than credit card interest.

Rent vs own in your situation is not a snap decision. Your entire financial picture must be looked at and analyzed.

"No retirement" -- well, you don't say how old you are nor at what age you want to retire so that may or may not be a problem. There are many pension plans for indies in addition to the SEP-IRA that you mention. However, you have a lot of other areas to straighten out before you decide on a pension.

I am so glad that my website has helped you. Thanks for letting me know. Be sure to look to the left here on my blog at the various categories. There are 23 posts on "Being Self-employed." I think they will help you in your current situation.

Best regards,
June