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How to Calculate Hourly Fees as a New Freelancer

The difference between going broke and not going broke as a freelancer? A little math. Photo by Amol Tyagi on Unsplash

One of the first things you have to do as a new freelancer is determine what you want to charge for your services, no matter your industry. If you’ve never freelanced before, this can be pretty intimidating, and all too easy to completely screw up. Set your hourly fee too low and you won’t be able to pay your bills. Set your hourly fee too high and you might not be able to find work.

For the first-time, full-time freelancers, here’s an easy way to calculate a starting, hourly fee.

Step 1: Determine Your Annual Salary

First things first. What do you want to make per year? Don’t pick a random number out of the air. What do you need in order to pay all of your bills, save, invest and put away money for retirement? What do you think you should make per year, based on your industry and experience? What are other freelancers making? Ask.

For example’s sake, let’s assume that you’re a young professional with only a few years of experience under your belt; you have few overall costs and little debt, so you determine you need an annual salary of $50,000.

Step 2: Add on Extra for Taxes

Depending on where you live and what deductions you have, your total for taxes will vary, but it’ll likely be somewhere between 30% to 40% of your income (freelancers are taxed an exorbitant amount, but that’s another issue). So, if you want a $50,000 annual salary, go ahead and bump that up by, minimum, 30%, to cover your taxes.

Your new total that you need to make is $65,000 per year.

Step 3: Decide How Much PTO You Want

Okay, so freelancers don’t technically get paid time off, BUT it is possible to take worry-free time off each year if you account for that time off when calculating your hourly fee.

Let’s say that you want, altogether — sick days, holidays, vacation, etc. — four weeks of PTO, or 20 days. That’s pretty generous compared to a lot of office jobs these days, especially for a young professional. This means you’ll be working 48 weeks out of the year.

Step 4: Decide How Many Hours Per Day You Want to Work

For some freelancers, they fully intend to work 8 hours per day, 40 hours per week. Others want to work less, so they can dedicate more time to family, leisurely pursuits, unpaid work in their field, whatever.

So let’s say you want to work 6 hours per day, 48 weeks per year.

Step 5: Calculate Your Hourly Fee

Now, a little math. You want to work 6 hours per day, 30 hours per week, 48 weeks per year. That’s 1,440 working hours per year.

If you need to make $65,000 to cover your cost of living/savings/investments, plus taxes, that means your hourly fee needs to be $45.13. Because there’s no point in charging a portion of a dollar per hour, let’s round that up to $46/hour.

That sounds like a lot to some, but keep in mind: you’re giving 30% of that to the government and “reserving” a portion so that you can take off four weeks a year without feeling guilty or worrying about money.

Step 6: Lastly, Do Not Marry Your Hourly Fee (But Keep an Eye on It)

You do not want to be rigidly married to your hourly fee, but you do want to keep a good eye on it. For example, during any given week, you may have a job that pays $80/hour, which allows you to then take another job that’s $30/hour (you’d really only want to do this, though, if that less-paying job is something really fulfilling, that you love; don’t take less-paying jobs lightly).

Things are further complicated when you accept jobs at a flat fee, versus an hourly fee. In those cases, you’d do well to charge slightly more than the amount of time you expect to spend on a job, just in case. So, for example, if you think a job will require 1.5 hours of your time, go ahead and charge a flat fee for 2, just in case and to keep your bases covered. You never know when an interruption will arise, and you don’t want to spend every day terrified that you’re going to end up behind and, therefore, losing money.

Beyond this, tracking your individual hours and fees can get really annoying once you’re to the point that you’re working with 20+ regular clients, all with varying fees and needs.

For this reason, I like to set a weekly required amount earned for myself. I know how much I need to make each week, based on how much I work each week, give or take a few hours, and so I aim to make that total amount, allowing for more or less work at varying hourly and flat fees. (Note: This overarching viewpoint ONLY works if you’re extremely careful to not accept any work at a rate below your required hourly fee.)

Making enough as a freelancer is easy — but so is not making enough. With a little thought up-front, though, you can ensure that you always have enough cash to pay the bills, plus more, without running yourself into the ground.

Holly Riddle is a freelance travel, lifestyle and food journalist and copywriter who dabbles in fiction. She can be reached at holly.ridd@gmail.com. Her website is hollyriddle.org and her twitter handle is @TheHollyRiddle.

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Holly Riddle

Holly Riddle

Content creator, full-time freelancer. Passionate about non-traditional careers. Published thousands of non-fiction articles and not one word of fiction.

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