One of the most critical steps involved in planning and growing your freelance business is setting your rates. However, when you are charging for a service, this is easier said than done and getting it wrong (either way) can compromise your worth, your cash-flow and your business.

Here are three tips for setting your freelance rates, structuring your pricing, and negotiating with clients.

Setting Your Freelance Rate
Pricing the service you provide as a freelancer isn’t easy and is influenced by several factors:

What is the going market rate?
What experience do you have, both in your line of work and in working with clients? Both are a significant part of your value – someone with experience can command higher rates and clients want to know that you are also self-directed and able to work well on your own.

What rate do you feel comfortable with and will sustain your business?
If you are coming out of full-employment and starting on your own, a good rule of thumb to follow when determining your hourly rate is to:

Calculate what your annual salary equates to as an hourly rate ($x divide by 52 (work weeks), divide by 40 (week work hours).

Then mark it up 25-30%. This piece covers both your value and experience, but also takes care of our business costs such as networking, proposal writing, and other administration, not forgetting your self-employment tax obligations and healthcare insurance costs.

Project Rates versus Hourly Rates
Many factors determine whether it’s better to price by the hour or by the project. For example, if you have a stable relationship with a client and regular work coming in, quoting work by the hour can work in your favor because there is consistency in work flow and therefore cash flow.

However, if you are good at what you do and work quickly and efficiently, pricing work by the hour can potentially result in under-cutting your own revenue opportunity – simply because you can get done in one hour what others take three to complete. Of course the flip side is that the client simply loves you because you deliver quality work in less time and at a lower cost than other freelancers might.

Pricing a flat project fee, regardless of the hours involved also has its risks and benefits. If you are working with a new client, you probably need more time to come up to speed on the project and the client’s work methods than you would do with an existing client. In this case, pricing your work on a project basis can give you the wiggle room you need to research and produce quality work. It also gives the client the benefit of knowing they are working with a fixed cost. However, this can play against you if “project creep” rears its head and you find yourself putting in more hours than you originally anticipated, essentially cutting your profit margin.

A good rule of thumb is to price your work with some structure built-in that clearly lays out the scope of what you will deliver. For example, if you are a freelance copywriter and a client wants you to price out the cost of researching and writing a product brochure, you might structure your pricing proposal as follows:

Research: 2 Hours
Produce First Draft: 4 Hours
Incorporate Edits and Produce Second Draft: 2 Hours
Incorporate Final Edits and Produce Final Copy: 1 Hour
Total : 7 Hours @ $x hourly rate = $x

Use your normal hourly rate to calculate the flat project fee and only state how many hours each stage of work will take if the client asks for it. By putting some parameters around the project, the client can agree to a clear scope of work at a fixed price.

If you are presenting this type of project-based pricing, be sure to add a caveat that any work done over and above this scope of work will be charged at an hourly rate.

Negotiating Your Rate
Negotiation your rate with a new client is always tricky. There often comes a perception that freelance services come at a low rate, and economic factors invariably mean that clients will try to negotiate you down – whatever number you put on the table.

If you value the new relationship and the opportunity that the work brings, always be open to negotiation. If your client counter-offers your rate but you still feel that it is too low for you to compromise your time and your perceived value, try to stand your ground (if you just accept the lower rate you will always feel that you had to compromise yourself, not to mention how hard it will be to re-negotiate a rate-hike down the line). If the client won’t budge, consider potential compromises – if you are a writer, could you write a shorter, less well researched piece at a rate slightly above what the client proposes. That way you maintain your cost-efficiency with the potential for more work down the line.

Alternatively try to agree to a “ramp-up fee” that gives you a chance to come up-to-speed on the project and the client’s product or service. This can sweeten the deal for you, especially if this is a client who you have no pre-existing relationship with, and who you otherwise might turn away.

Once you have built a foundation of work and decide that this is a client you want to continue to do business with, you may want to negotiate a long-term rate that is a little less than your advertised rate. BUT – only go this route if you think your new client is able to provide you with a solid pipeline of future work.

Remember, freelancers can go for long periods without work and quite often, swapping less work at a higher rate for consistent hours at a lower rate can make good business sense.

Breakeven analysis

A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.

To calculate your breakeven point, you will need to identify your fixed and variable costs. Fixed costs are expenses that do not vary with sales volume, such as rent and administrative salaries. These expenses must be paid regardless of sales, and are often referred to as overhead costs. Variable costs fluctuate directly with sales volume, such as purchasing inventory, shipping, and manufacturing a product. The formula for determining your breakeven point requires no more than simple arithmetic.

Helpful Resources:
BPlans Break Even Calculator

“The start of a new year is a great time to begin making smarter financial decisions,” said investor education expert Gerri Walsh. To help keep your finances on course, try these 10 tips:

Start a Rainy-Day Fund. Set aside one month of your current salary (and work up to three months) in a federally insured savings account.

Handle Credit Cards with Care. Keep credit card spending in check and try to pay them off in full. If you have holiday debt, pay it off as quickly as possible.

Check Your Credit Report and Score. Request a copy of your free credit report. Call (877) 322-8228 or visit http://www.AnnualCreditReport.com. Make sure your credit history is accurate and correct any discrepancies immediately.

Shop Around for Financial Products. Comparison shopping for financial products is as crucial as shopping around for a television or phone plan.

Don’t Leave Money on the Table: Contribute to Your 401(k). Too many workers leave money on the table by not contributing enough to their 401(k) to get their full employer match. Taking advantage of a match can significantly increase your savings.

Avoid Payday Loans and Other Money Drains. Alternative forms of borrowing, such as auto title or payday loans, usually have higher interest rates than those charged by banks or credit unions.

Don’t Overdraw Your Checking Account or Debit Card. Overdraft protection may seem like a helpful feature but overdraft fees can add up. Consider opting out of programs that automatically approve ATM and debit card transactions.

Do a Background Check on Your Financial Professional. Investing a few minutes to take this free and easy step could save you time and money. You can use the FINRA Foundation’s FINRA BrokerCheck, a free tool for checking the professional background of individual brokers and firms. The Foundation is a not-for-profit resource dedicated to financial health.

Diversify Your Investments. Spreading your investments both among different asset classes—meaning stocks, bonds and cash—and within each class can reduce your risk.

Save for College Using Tax-Advantaged Accounts. Consider using such tax-advantaged savings accounts as 529 plans or Coverdell Education Savings Accounts. Compare options and learn more at FINRA’s Smart Saving for College resource center.

For more resources, visit http://www.SaveAndInvest.org.

Almost everyone knows that you need a business plan, but one of the most difficult questions to answer when developing that business plan is how much start-up costs will be. There are so many factors to consider, including business licenses and incorporation fees, patents and trademarks, business insurance, leases for an office or production facilities, and many more.

So many, in fact, that it is almost impossible to accurately calculate business start-up costs. Even adding a new location to an existing business can produce wildly different start-up costs when compared to the original start-up experience.

So is it useless to plan? Not exactly, says Theodore Bolema, a professor at South University’s Novi, Mich. campus and director of the business program. Bolema, who holds a Ph.D. in business as well as a law degree, says planning is important – but so is being realistic about the accuracy of your forecast.

“A decent rule of thumb is to figure out what you think your costs will be. Then double it,” Bolema says.

There is a good reason that it is nearly impossible to accurately predict these costs, according to Bolema. “Determining fees, equipment purchases, inventory and the like is relatively easy for most businesses. What’s much more difficult is knowing what your cost of time will be.”

The “cost of time” is an important concept for all businesses, but especially for start-ups. If a business is obligated to pay an office lease or employee salaries while it is not yet able to do business – or a regulatory agency is holding up its ability to do business – then start-up costs will add up quickly.

And don’t expect government agencies to operate with your costs in mind. Even the best-run agency will not move with the same urgency you would like, Bolema says. After all, it may be your lifelong dream and your life’s savings at risk, but to them, you are just another file folder stacked on the desk.

So while you are waiting for an agency to act, or a supplier to supply, or an advertising firm to get that mailer in your customers’ mailboxes, you’ll be paying building leases, business loan payments, utility bills, payroll and all the rest – all without any revenue to offset those expenses.

It can be frustrating, but it certainly will be less frustrating if you build a business plan realistically and raise capital accordingly.

“It’s better to tie up capital in a cash reserve than to have an inadequately funded business plan,” says Bolema.

As in life, there is plenty of uncertainty in business. So hope for the best and plan sensibly, including how long things will take, not just how much they will cost.

One possible choice is a “safe haven” asset such as physical gold. Gold can act as a potential hedge against inflation and a falling dollar and is often an asset of choice during tumultuous economic and political times.

What to Ask
Before getting into the gold market, however, there are a number of key questions about your goals, your present portfolio and the economic environment you may want to consider first. For example:

Does your overall investment portfolio include assets that provide a potential hedge against inflation and a falling dollar? According to the U.S. Dollar Index, the dollar has lost 37 percent of its value since 2001 and that decrease may continue based on current monetary policy. If you are concerned about future inflation and the weakening dollar, it is worth considering gold.

Will having a physical asset-something you can hold in your hand-provide you with greater comfort about your portfolio? Gold has intrinsic value.

Are you in a position to invest in gold for the long term? Gold needs to be treated as a long-term investment: one with a three- to five-year—or, better yet, five- to 10-year—time horizon. You should be prepared to hold the investment for that long without liquidating it, although markets may dictate a longer or shorter holding period.

What’s the right amount of gold to own? Gold should be viewed as a diversification strategy, not a “bet the ranch” strategy. It’s prudent to allocate 5 to 20 percent of a total portfolio to gold, though others may recommend a different allocation.

Would you like to hold physical gold-such as coins or bullion-in your IRA? Physical gold can help diversify an IRA just as it can help diversify any other portfolio.

Is it the right time to buy gold? “A number of analysts continue to see a bullish trend for the price of gold, but we do not believe it’s wise to try to ‘time the market’ for gold,” said Scott Carter, CEO of Goldline International, a leading source of physical precious metals. “If you can treat gold as a long-term component of a larger investment portfolio, now could be a good time to get started,” he added.

Free Kit
To get a free gold investor kit and read important risk disclosures, visit http://www.goldline.com/learnmore. Goldline recommends that you review its account and storage agreement and risk disclosure booklet, “Coin Facts for Investors and Collectors to Consider” (both available in Goldline’s Investor Kit and website), before purchasing. All investments, including coins, currency and bullion, involve risk and past performance does not guarantee future results.

Many banks offer financial alerts to customers for no additional fees and deliver them by text, e-mail or both. There may be a carrier cost associated with receiving the alert on a mobile phone, but that fee is charged by the customer’s mobile carrier.

Manage Your Money
If you have multiple financial accounts, such as a checking account with a linked debit card, major credit card, student loan or mortgage, financial alerts can help you monitor activities in each and every one. Banks can notify you daily, for example, when:

• A transaction on your credit card is above a threshold clear, such as $50;
• A credit card bill is due;
• Your CD account will mature; and
• Your payment to your mortgage account is due.

If you are a parent, you can monitor the accounts of your children. Financial alerts may be particularly useful for parents who have students away at college.

To learn more about alerts from Wells Fargo, visit https://www.wellsfargo.com/wfonline/messages.

Protect Your Money
Credit card fraud is an increasing problem and alerts can help.

Rapid Alerts by Wells Fargo let customers monitor their Wells Fargo Visa® credit card account activity and are typically sent near real-time of a completed transaction. Rapid Alerts are triggered when the transaction meets certain criteria previously selected by the card holder and delivered via text message or e-mail.

For example, if a customer requests notifications for foreign transactions, Rapid Alert messages can contain the amount, time and date of the transaction, as well as currency conversion and information relating to the merchant. Customers can also choose to be alerted when credit card payments are declined, which helps remind them of recurring payments they may have forgotten to update due to a reissued, lost or stolen card.

To learn more about Wells Fargo’s Rapid Alerts, visit http://www.wellsfargo.com/rapidalerts.

However, the survey, conducted quarterly by Javelin Strategy & Research, also has good news.

“In spite of the difficult economy, Gen Y is engaging in smart financial behavior to help build their better future,” says David Shapiro, senior vice president, Western Union. “This survey shows Gen Y using tools such as online banking and online bill pay to manage their budget and credit standing.”

Here are some tips to get you started:

Credit and Debt Game Plan:
Establish the Base. Open a bank account, and start saving and paying down debt: online banking, online bill payment, automatic deduction and mobile banking are helpful tools.

Establish a Budget. Check out online budget management tools to get your budget started. Also check the applications available for smart phones.

Establish Credit. Approximately 30 percent of your credit score is based on bill payment history. Look into scheduling automatic payments through your banks or biller.

Establish Credit — Part II. Even if it’s just one bill payment, establish credit in your name.

Check Your Credit Scores. Know how to obtain your credit scores and read them. Forty percent of Gen Y-ers have not seen their credit scores in the past year, and 44 percent have never seen them. Check sources such as http://annualcreditreport.com and http://myfico.com for how-to’s.

Set up an Emergency Fund. Set up an automatic rainy-day savings plan now.

Work It Both Ways. Understand there are two paths to financial success. Make more money and save it. Or spend less money and save it. Or do both.

That could be because many of us don’t fully grasp the mechanics of credit scores and credit reports. You may realize that having good credit can profoundly affect your financial health, but you may not be sure how to take control of your credit.

Fortunately, it’s not difficult to demystify credit management. A few simple steps can put you on track to take control of your credit this year.

Know where you stand
Your first step toward a healthier credit future is to get a clear perspective on where you are now. If you haven’t looked at your credit report in a while, now is the time. Websites like http://CreditReport.com allow you to obtain and review your credit report – a move that can empower you to make better financial decisions. You’ll get your free credit score as a reward for enrolling in Experian’s credit monitoring product, a membership that can help keep you abreast of changes – both good and bad – in your credit report and score.

By monitoring your credit report and score on a regular basis, you’ll be better equipped to make financial decisions, and will be more aware of your ability to use credit. Get educated on what’s on a credit report and how credit bureaus use that information to calculate your credit score. Generally, credit reports include detailed information of an individual’s payment history with various creditors. Among other factors, bureaus consider three key things when calculating your score – the length of time you’ve had credit, the ratio of available credit to credit used, and if you pay your bills on time.

Manage your debt
At a time when debt is high in many American households, it may be difficult to remember that not all debt is bad. Debt that is secured by a tangible asset, such as a home loan, or that builds your family’s future, like a college loan, can be good debt as long as you manage it wisely. When looking for a mortgage or college loan, start out by knowing your credit score, then shop around for the best rate and terms. And be sure to avoid borrowing more than you can comfortably repay.

Pay down credit card debt, which is generally perceived as higher-risk – and higher interest – debt. Avoid using credit cards to pay for things that you should be paying cash for, such as groceries, utilities, restaurant meals or vacations. If you use credit for these things, which rapidly get consumed, and you can’t pay off your bill in full right away, you could wind up in debt very quickly.

If you already have credit card debt, never pay just the minimum balance due each month; it would take years to pay off just a few thousand dollars at that rate and you’ll pay much more in interest than the amount you originally borrowed. Always pay more than the minimum, and concentrate on paying off cards or loans with the highest interest rate first.

One exception to the pay-it-off quick rule may be your mortgage. If you’re able to make your monthly mortgage payments without struggling, concentrate on paying off other, higher interest, unsecured debt first. The interest you pay on your mortgage may be tax deductible, but the interest you pay on credit cards is definitely not. If your mortgage’s interest rate is high, look into refinancing to lower the rate.

Between closing your books on 2010 and preparing for 2011′s tax season, knowing how creditors and others perceive your business may not be top of mind. Yet, now is the perfect time to verify the information in your business credit report and update it with current and relevant facts about your growing business.

It can help you better prepare your business for the coming year. The credit experts at Experian offer some insight into the factors that affect your small business credit report and business credit score, and why it’s important to your business.

Why it matters
Does your business credit report really matter? Absolutely. It paints a picture of your small business for the world to see. Outdated or incorrect information can give the wrong impression about your business, resulting in unfavorable decisions by potential lenders and creditors – which can negatively impact your bottom line. Plus, anyone, including partners and investors, can view your business credit report for any reason.

If your business has grown or changed over the last year, it’s important to update the data reflected in your report and know the score. There are several factors that make up a business credit score, including but not limited to previous payment history, industry type and business size.

An accurate business credit report and a good business credit score can:

Save you money because lenders usually offer their best interest rates to businesses with good credit.

• Reduce your personal liability and protect your personal assets by enabling you to obtain business credit without the need for a personal guarantee.
• Help you offer your customers competitive prices by passing your interest savings on to them, while still keeping a larger margin of profit for yourself.
• Get you the money and capital you need to keep your business running.

What’s on your report?
Your business credit report provides an up-to-date, objective overview of your business and how it manages financial obligations. It can include information on your payment history, public records about your business, background on the company, collections information and comparative information that places your business payment history in context with your industry.

You can find out how your business compares to others like it across the nation in terms of business credit with an interactive map by visiting http://www.businesscreditfacts.com/map.

Managing and monitoring
Web-based services are a great way to monitor and manage your business credit report. Sites like http://SmartBusinessReports.com and http://Experian.com/SmallBusinessCredit not only allow you to view your own business credit report and score, but also provide useful information on how Experian arrives at your credit score and how your business practices affect your score and report. These sites also allow you to check the business credit of your suppliers, customers, prospects, partners and competitors.

Your business credit information is as important to your business’ financial health as your personal credit information is to your ability to borrow money privately. While you’re wrapping up last year’s financial matters and preparing for the coming year, now is a good time to think about your business credit and how you’ll manage it throughout the new year.