Myth #20: I Can’t Charge What I’m Worth

Not everyone reading this blog is self-employed, but this chapter is specifically for those who are. Many of my self-employed clients charge less than what they are worth. Many people do not charge market rate for the services they provide, or even close to it.

Mary is a client of mine who works for a large business-consulting firm. For her services, the firm charges $350 an hour. No one even flinches at this rate, because it is the going rate.

Another client, David, is the sole proprietor of his own business-consulting practice. He does work comparable to Mary’s, but he charges $85 an hour. Granted, there is a distinction between a sole proprietor and a large consulting firm. You would expect the large firm to charge more, as they have access to more resources and have to cover a higher overhead. But $265 more an hour?

David does quality work, but he works too long and too hard. I have encouraged him to raise his rates. I told him it would not be at all unreasonable to charge $150 an hour, and if he did, he could cut down the amount of time he spends at work by a third or more, and still earn the same amount of money.

Rarely can self-employed people offer me any information about what rates the market is charging. I get, “That’s what my clients are willing to pay me.” Or, “I can’t charge more than that!” Their comments are based on their own subjective opinions, which are often wrong.

I tell people, “You should charge as much as you can get out of your mouth and not choke.”

If you are charging $65 an hour and you know your competitors are charging $125 an hour, you have undervalued yourself. Is it because you are only half as capable as the other person? Not likely. Even if you have a hard time getting yourself to bill at that higher rate, you could easily charge $95 an hour. That would be almost a 50% increase in your billable rate, and that adds up to a lot of money on an annual basis. It might make the difference between just getting by and being able to afford some of the goals you are passionate about.

Here is the process I use with my self-employed clients. We first do research on what the market is charging for comparable work. Then we go through an exercise that asks the person to determine the value of his or her own work, based on the going rate and market conditions. We discuss what they really need to make and what they feel they deserve. Based on our research, we arrive at an amount that the person is comfortable with. If it’s $125 an hour, I tell them, “Okay, in the next week, I want you to say out loud 100 times, ‘I charge $125 an hour.’”

You can say it to the mirror, in the car to yourself, to your husband, or to your dog. But you have to get it out of your mouth 100 times: “I charge $125 an hour.”

For the first three attempts, most people often can’t even say the words without stumbling. They offer up a tentative half-sentence that they are not really committed to. After about thirty times, it gets easier. By seventy-five times, it begins to feel like a favorite pair of slippers. By the hundredth time, the person is ready to say to their next client, “I charge $125 an hour.”


Myth #19: It’s Selfish To Spend On Yourself (part 2)

Larry and Colleen have a daughter in high school. Although they are not wealthy, they make a good income. They came to see me to put together a Personal Spending Plan.

Colleen is a very dutiful parent, attending to her daughter with the utmost of care. She concerns herself with her husband’s wellbeing, and she is always doing things for other people.

She also has her own passion—Colleen is fanatical about raising and training border collies. She travels with them in order to let them do what they love to do—herd sheep into corrals. Whenever the subject turns to border collies, she has the enthusiasm of a girl with a new doll, and she can talk for hours about them.

However, she was always apologizing to her husband about the money she was spending on vet bills, dog food, training classes, and equipment. When she wanted to breed a dog, it cost money. As her number of dogs increased, it became necessary to add to her flock of sheep so there would be enough to herd. Competitions cost money to enter, as did the barn and the feed. There were never-ending expenses that came with her passion. She was always apologizing for how much she was spending. She didn’t feel she could just go spend that money on her passion without apologizing.

The fact was that her husband and her daughter completely and enthusiastically supported her. But she wouldn’t allow herself to acknowledge that fact. She believed that it wasn’t okay to spend money on herself.

We put together a spending plan that included all the necessary expenses for the family, the retirement savings, college savings, and other long-term goals. When we got to the line item concerning raising her collies, Colleen began a litany of excuses and apologies.

“Wait a minute,” I said. “Let’s first find out what this really costs.”

When we added it up, and she saw the actual figure, she was surprised. “Well, we can certainly afford that,” she allowed. For the first time, she stopped trying to justify it.

I said to her husband, “Is it okay with you for Colleen to spend $175 a month on the dogs?”

“Absolutely!” he said. “She’s so alive when she’s training her dogs. She is a joy to be around. Our daughter is so proud of her that she brags to all of her friends. Of course we want her to spend that money! It adds so much richness to her life!”

Awestruck, Colleen looked at him and said, “Really? You really mean that?”

“Of course I do,” Larry said. “I’ve told you that before. It’s okay. In fact, I don’t want to live with you if you don’t do the things you love. It’s okay, honey. Go for it!”

Colleen was speechless.

Before that moment, Colleen had never let herself believe that it was okay for her to do what she wanted—to spend money on her passion.

In that moment, Colleen realized it was not selfish to spend money on herself. She saw that it was actually a contribution to the family. When she was involved with her dogs or in talking about them, she became so lit up with enthusiasm that it became contagious. Her husband and daughter loved being around that kind of energy. The family was better off when she was taking care of herself. By following her passion, by enjoying her genuine interests, she was an inspiration to others.

Maybe what you really want to do is raise orchids, but you don’t do so because the expenses seem too much. Maybe it’s building model railroads. But you don’t do it because you think your spouse won’t approve. Of course you haven’t talked about it; you just assume that you can’t. It might be climbing mountains, taking accordion lessons, a weekly trip to the spa, a yoga retreat, new clothes, a concert, or a sumptuous night out.

What would you love to do? What would you give yourself if you were your best friend? What would you do that at first glance might seem selfish—but if you did it, you might feel more alive, more fulfilled, and more pleasant to be around?

I have a client who started out with one dance class, one night a week. Now he is taking salsa, tango, and swing dancing. He can’t get enough. The people in his life love the enthusiasm this has created in him. He tells me he has more energy, and he is more positive and sure of himself. He has more to give others, because he is doing something for himself.

This point is not an excuse to ignore the needs of others in your life or to be irresponsible, nor is it promoting “retail therapy”—the buying spree to try to overcome unhappiness or loneliness. Blindly consuming only for yourself is not the answer. You should, however, spend money on things or experiences that truly restore you, that energize you and give you the opportunity to be more helpful and generous to others.

Now that you can see through this myth that it is selfish to take care of you, what is it that you could do for yourself? What can you do to take the first step? Take it. Go ahead, do something truly special for yourself. The only person’s permission you need is your own.

Myth #19: It’s Selfish To Spend On Yourself

Some people harbor a deeply-ingrained belief that it is not okay to spend money on themselves. They won’t hire a baby-sitter or a house cleaner to give them a much-needed and well-deserved break. They wouldn’t think of indulging in a massage or surrendering to the need for a counseling session, and they rarely treat themselves to a concert or a movie. These are people that go for two years without new clothes.

These same people give their kids everything, but they deny themselves the simple pleasures of life.

Where did this idea come from that it is not okay to spend on ourselves? Why do some people single themselves out for a life of deprivation?

The practice of sacrificing oneself for the greater good often shows up in the person who is in charge of managing the family budget. Understandably, the one charged with the task of trying to balance the family finances has a sense of duty and responsibility. Unfortunately, this can sometimes lead to self-denial.

The problem with “everybody else is first” is that, over time, it can lead to a feeling of resentment. Beneath the surface, some reward is expected in return for all this giving—but it seldom or never comes. The person making the “sacrifice” may gradually become unhappy, because he or she is not attending to his or her own deepest personal needs.

People who respect themselves and treat themselves well have much more to give, while a person who continually denies himself or herself eventually runs out of steam.

People often use money as the excuse for not taking care of themselves. “We just can’t afford it. I have to get the kids ready for the new school year. We’re just not getting ahead—I’ll make these shoes last another year.” However, the true issue is often not money, but an unwillingness to replenish oneself.

The most successful caretakers are those who do not deny their own needs, and everyone has needs. Maybe it’s a massage or a facial, a new CD, a weekend camping trip with the guys, or a new leather coat. These are the little things that reward our efforts and restore us.

It is not selfish to take care of yourself. It is a great investment. You may feel you can’t afford that weekly massage; however, if the result is that it makes you feel centered, gives you peace of mind, eliminates your resentment toward work or home life, and restores your energy and happiness, then perhaps you can’t afford not to do it.

One client continually denies herself for her children or her husband. She attends to their needs constantly and expends great effort to make their lives easy, convenient, and trouble-free. She buys them everything they need and everything she imagines they need. On top of this, she works in a highly demanding profession.

One afternoon she told me, “I don’t know if I am Cindy the Mom, Cindy the Wife, or Cindy the Manager. Who is Cindy? That’s what I want to know.”

I said, “If you want to discover Cindy, then do something nice for yourself. Take a walk every day and smell the roses. Go for a weekend by yourself somewhere.”

There is an adage that you have to give to receive. But, did we leave ourselves out in the process? Maybe it means that we also need to give to ourselves in order to receive the strength and stamina and energy to give to others. If we don’t invest in ourselves from time to time, then we will have less to give to others. We need to recharge our batteries.

Myth #18: I Have To Save, Save, Save (part 2)

Many people have no plan at all. They save an arbitrary amount each month, say $500 for college or some other long-range goal, but they fail to base this amount on reality. They know they need to save—but they have no clear idea of how much money is actually needed to meet their goal, and therefore don’t know whether or not they are on track.

To these people especially, an analysis is in order. There is no telling how much sacrifice and deprivation they may have imposed on themselves in order to make their savings goals—goals that may have been reached long ago.

When she was fifty-two, Diane came in to review her investments. She was working as a buyer for a fashionable department store, and one of her financial goals was to retire in three years. She had worked for the company for thirty years and would qualify for retirement at age fifty-five. She came in hopeful, but I could tell she was worried underneath. I asked if she wanted me to run a retirement calculation for her, but she turned me down. I didn’t press it—she had other priorities in her life that were more imminent and that needed attention.

Diane was the classic example of someone who did not want to confront the numbers about retirement because she was afraid of what they would tell her. It took her almost until the eve of her retirement date to come in and say, “Okay, I guess I’m ready to look at the retirement calculation. I hope you tell me I can retire.” The results showed she had more than enough money to allow her to retire. In fact, she had enough to last her until she was 110 years old!

For Diane it wasn’t a matter whether she could have retired any earlier—she had to work until age fifty-five in order to qualify for her pension. But imagine what her last ten or fifteen years would have been like if she had known that she was going to have plenty of money in retirement. She could have used some of the money she had been saving for retirement for other goals in her life!

Consider the psychological peace of mind she would have gained had she evaluated her retirement plan earlier. For the last ten or fifteen years, she had lived in constant worry that she wouldn’t have enough even though she had plenty—and then some!

Your savings plan might be for college or for retirement. It might be for a down payment on a home, the purchase of a new car, or an exotic vacation. By checking your savings plan periodically, you may discover that your rate of return has been higher than you projected. If you are reaching your goal faster than originally anticipated, you can make a downward adjustment in your monthly savings and have money available for other goals.

Every year, review your progress towards accomplishing your goals. Look at how much you have saved to date. Based on the rate of return you have earned and you expect to earn for the ensuing years, you can project how much you will have in the future. Determine how close you are to achieving your goals.

You may discover that you no longer have to lie awake at night worrying, or that you can do some of the things you never thought you would be able to. You may find inside your savings plan for college or for retirement that you have a cruise to the Caribbean waiting for you—right now.

Myth #18: I Have To Save, Save, Save

A few years ago, Yvonne and Leon came to see me. We did a comprehensive financial analysis of their situation. We inventoried their goals, took a look at their insurance policies to see if they were sufficient, evaluated their portfolio, did a retirement projection, and completed a college tuition calculation for their two kids.

Given the ages of their kids, the colleges they had in mind, and how much they had already saved, we determined they had to save $250 per month for each child until their kids started college. They committed to that level of savings and religiously put that money in the bank. They also agreed to save an extra $400 a month for their regular investments, and another $375 a month to put into IRAs.

Recently, they came in to see me, and they were a bit forlorn. “Our income has dropped off,” they said. “The company we work for has reduced our benefits package, and as a result, our disposable income has gone down. We are going to have to make some changes. We don’t know where we’re going to come up with the $500 a month to fund our kids’ college.”

“Well, let’s take a look at it,” I said.

We compared how much they had saved to date to the amount needed for their kids’ college. Because they had saved religiously and because the return on their investments had been higher than we projected, it turned out that they had already reached their goal. I had assumed they were going to earn 5% after taxes, but they had actually earned 13%. I ran the numbers on three different computer programs, and in each case, the results showed that they had already saved enough.

“I have some good news for you,” I said. “You don’t need to make any more payments into the kids’ college funds.”

They were ecstatic, to say the least. Instead of saving for years to come, they could stop saving for their kids’ college expenses now.

They had been prepared to make significant lifestyle changes to have the $500 per month they had agreed to save for college. They were thinking of selling one of their cars, were prepared to stop eating out at restaurants except on rare and special occasions, and were considering cutting back on their retirement savings.

However, they didn’t have to alter their lifestyle even though their income had gone down!

Their story is a perfect illustration of the importance of reviewing your savings plans regularly. If you set up a savings plan for a specific purpose, you need to revisit it periodically to compare its actual performance to what you planned. Otherwise, you won’t know whether or not you are on track.

Myth #17: I Can Plan for Retirement Later (part 2)

I’m not knocking “here and now” living. We should enjoy life, but that notion alone is not good retirement planning. Eventually, the future becomes now, and that’s when you will wish you had planned for it. Let’s face it—starting a savings plan just before retirement doesn’t make a lot of practical sense. You can live in the here and now, but you still need to make adequate preparations for the future.

Our parents didn’t have to plan for retirement, but we do. We have to get out the map and chart our course.

Sometimes, people without a clear picture of their retirement needs and funding ask me how to begin. The first step is to gather information about how much you are currently spending on a monthly basis. Look at what expenses may go up after you retire and which may go down. This exercise will give you an idea of how much money you will need in retirement. Then take a look at what income you can expect, and from which sources: Social Security, your 401(k), your pension plan if you have one.

If you are comfortable with spreadsheets and financial calculations, you can use this information to calculate how much you will have at retirement, and how long it will last (be sure to factor in inflation). If you are not conversant with financial calculations or are intimidated by all this, take the above information to a Certified Financial Planner™ professional and have him or her do the calculations for you.

No matter what the numbers tell you, you’ll be glad you took the first step. The numbers will tell you what you need to do, whether it is to increase the amount you are currently contributing or to reassess your projected retirement age or desired income level. You might even be pleasantly surprised to discover you’re right on track.

The first step is always the most important. By taking it, you will have stopped putting off retirement planning for later. Regardless of how old you are, sit down and take an honest look at your retirement planning. If you’ve waited a long time, the reality may be jarring—but less so now than it will be next year or the year after.

Get started now. No one else will do it for you.

Myth #17: I Can Plan for Retirement Later

Often we are afraid to plan for retirement, because doing so forces us to come face-to-face with our future, and we may not be comfortable with what we see. It fosters thoughts of dying, aging, losing vitality, and having to live on a lot less money—perhaps of not having enough. So the easy way to deal with this dilemma is to put it off. We just don’t think about it or deal with it. It’s the same reason we put off making wills; it forces us to confront the fact that we really are going to die.

Baby boomers, especially, tend to harbor a “live for the day” attitude. “I’m right here, right now, and that’s what matters. The future will bring what it brings. Things will work out somehow. Life is here to enjoy.”

The Employee Benefit Research Institute reported in their 2006 Retirement Confidence Survey that only 70% of workers are saving for retirement. More that half of workers who do save for retirement report total savings and investments of less than $50,000. Seventy-five percent of workers who have not put money aside for retirement have less than $10,000 in total assets.

The personal saving rate, which measures personal saving as a percentage of disposable personal income, was -1.4% in the first quarter of 2006. The rate has been declining since the 1980s.

If people would only do something about their retirement now instead of later, it would make a tremendous difference. Assuming a 9% return, a person who is twenty-two and saves $2,000 per year for nine years (for a total of $18,000) will see this amount rise to $580,000 by the time she is sixty-five. If this same person waits until she is thirty-one to begin, she will have to save $2,000 a year for thirty-five years (for a total of $70,000) to even accumulate $470,000 by age sixty-five. In other words, that person would have to save $52,000 more in order to end up with $110,000 less.

I love it when my clients in their twenties and thirties start funding their retirement. The amount they need to save on a monthly basis is so much smaller than my clients who put it off until they are in their fifties.

Many “Generation Xers” have no problem with saving for retirement. They say, “I see what’s happening to my parents. That is not going to happen to me. I am going to start planning and saving for my future now.”

Ron and Jonna work in the publishing industry. They are both in their thirties and are just getting started on their careers. As a couple, they are making about $60,000. They asked me to show them what it would take to retire at age fifty, and also at age sixty-five. They want to know now what they need to be putting away. They don’t even think about buying new cars or the latest upgrade because they’re focused on their long-term goal of retiring at age fifty. It shapes their entire lifestyle.

They don’t feel deprived of anything. They are very satisfied with the lifestyle they lead, and they gain a great deal of peace of mind by having a retirement savings program in place that will accumulate into a substantial amount by the time they retire, potentially at fifty.