What’s your cost of living? Don’t stop to think. Don’t calculate. Do you know the total of your bills and expenses each month?

“If you say “yes” and can spit out that number on demand, congratulations. You’re in a special class.

If you said “no,” you’re not alone. But you are a primary candidate for money problems. And, as a freelancer, you’re missing a key piece of information.

Why People Are Unaware

A lot of people can tell you the cost of things individually. Daycare is $150 a week. My car payment is $616 a month… But they can’t tell you the total of their monthly obligations.

Some people don’t know the grand total because it has never occurred to them that they should know it.

One couple I know constantly creates bills, are always behind on their bills, but they keep spending. To them, the problem isn’t the money, it’s the due dates.

For a long time, I used to think they must not know how much money they make. But I was wrong. The problem is they don’t know how much money they’re spending.

They don’t calculate income versus expenses. They calculate things based upon their paychecks.

He gets paid every two weeks and decides whether he can pay something with his first check or second check each month. She’s a freelancer with several long-term clients, so she decides whether she can pay for things from the payments she gets from Client A,B or C.

What they’ve failed to realize is their system only focuses on their primary bills. It ignores costs such as groceries, gas, hair cuts, medication etc… So their money always falls short month after month.

Other people don’t know what their expenses are because they’re hiding from the numbers. I can tell you what this situation looks like inside and out—from experience.

I used to spend and refuse to check my account balances. I couldn’t bear to see how  fast the money was going and that measly number left on the bottom line.

Since most of the month I was guess-timating about how much money I had left, sometime, I was often praying I wouldn’t overdraw my account. I didn’t stop spending, of course. And I didn’t check to make sure I was safe. What I did was refuse to check my balances until after I received more money. That way, if I did overdraw, I would be back in positive territory by the time I knew anything about it.

Living like this meant I gracefully took advantage of every grace period offered to me to allow time for more money to come in.

See Also: Why Invoices Are Not Money

I could have avoided a lot of stress by sitting down and adding up my bills and expenses. But I wasn’t about to do that. If I did, then I would have to face the truth. Avoiding the truth gave me a license to keep living recklessly.

I was young and dumb. I admit it.

But the point is I did realize it. I did admit it. And I have learned how important it is to know your cost of living and to manage your money instead of merely finding a way to stay afloat.

Why Cost Of Living Is So Important For Freelancers

If my monthly expenses are $1000, that tells me, at a minimum, I need to make $250 a week. So, I can take on a client that pays me $50 an article. I can write one article a day five days a week and take off on weekends.

If your expenses are $2,000 a month, you cannot afford to do the same. You’re either going to need to get a higher paying client, write more articles per day and/or work more days.

But if neither of us know our cost of living. We may take on a client that pays $50 an article and write 10 articles a month. Then, we may get another client who pays $100 a week for one blog post. By the end of the month we may feel like we’ve done good. But guess what? We’re both going to come up short.

Bottom line: Your cost of living is a key factor in determining if you’re taking the right jobs, charging the right rates and doing enough work. If you don’t know it, it’s time to figure it out.