How to Calculate Your Freelance Rate


Maybe you want to travel, so you need a sustainable source of income and you chose to freelance. Maybe you went freelance not because you planned to travel, but simply because you wanted a flexible career. 

Whatever the case is, you have tons of opportunities on this market. You’ll definitely start earning money if you’re committed enough. Needless to say, talent also matters. If you’re about to become a freelance writer, it’s almost impossible to start without any foundational skills.

When you decide to become a freelancer in any category, you have one main question to your mind: how much money will I make? Some of you might also wonder: how much do other freelancers make?

There’s only one definite answer to both those questions: It depends!

The amount of money you earn depends on two main factors:

1. The billable hours per week

2. The hourly rate you charge

This brings us to another question that’s probably circling your mind: what hourly rate should you set?

If you follow the rules of logic, it shouldn’t be too high, since that would make you uncompetitive. The freelancing industry is global, so people from countries with low economies can afford to charge less. But that doesn’t mean you should set $10 as your hourly rate just because that guarantees you more customers. If you set a really low rate, that isolates you from the really good gigs. 

We’ll give you a few tips on how to set your hourly rate.

The General Formula that Works

There is a general formula that allows you to calculate your hourly rate:

The amount of money you want to make / weeks you work per year / hours you work per week

Let’s illustrate that through an example. Your goal is to earn $20,000 on an annual basis. You plan to work 30 hours per week, and you’ll take 5 weeks off per year.

20000/ (52-5) / 30 = $14 per hour

52 is the number of weeks per year. We gave an example with 30 billable hours per week, since you probably want this to be a flexible career and you don’t want to work full office hours. However, you’ll naturally adjust the variables in that formula according to your preferences.

Pretty simple, huh? So you’ll charge $14 per hour and you’ll earn $20,000 in a year of freelancing. 

Hold on; it’s not as simple as it seems. Mario Roberts, career advisor from BestEssays, explains: “Freelancers often forget about the fact that they don’t earn straightforward money. They get $60 per day and they think that’s awesome. In reality, that amount of money is much lower when you consider taxes and all other expenses they have to cover. Yes; freelancers cover their own taxes, so they have to take that fact into consideration. There’s no employer to calculate it for you and then pay you a clean rate.”       

The Variables You Need to Add to Your Hourly Rate

  1. Sick and Personal Days

We already calculated vacation time in the equation above. Those are the 5 weeks we excluded. However, you have to consider that your clients won’t pay for sick days as a traditional employer would. You have to predict this factor in the calculation. Since most companies offer 5 sick days, let’s take that as our number. We’ll predict that you’ll have 5 sick and personal days off, so we’ll have to reduce one work week in the equation above.

This is what we’re left with:

20000/ (52-6) / 30 = $14.5 per hour

You might think that half a dollar per hour doesn’t make much of a difference. But that difference is $15 per week and $690 per year. Not bad, huh?

1. Health Insurance

If you had a traditional office job, your employer would cover the insurance. Your pay would be much larger than what you actually get, but you wouldn’t see those expenses. When you freelance, you get a total amount of money and you have to cover your own insurance. 

You’ll need to take the average annual health insurance for your region, and add it to the total amount of money you want to make per year. If, for example, you live in Texas, your annual health insurance will cost $2,868.

That changes our calculations:

22868 / 46 / 30 = $16.6

2. Life Insurance

You’re a responsible individual and you think about your future. If that’s the case, you probably want to get life insurance. The average annual cost of life insurance for a 30-years old non-smoker is $334.54 (we’ll use $335 to make it simpler). So let’s add that to our calculation:

(22868 + 335) / 46 / 30 = $16.8

3. Work-Related Expenses

Unfortunately, freelance work is not as simple as “all you need is the Internet connection.” You need solid equipment and a great Internet connection, so you can work without any interruptions. You’ll have to invest in a virtual private network (costs about $6 per year), a wireless mouse, a great keyboard, an excellent laptop, headphones to keep the noise away, software for doing your work, and a computer monitor if you want to see things in a larger format.

Since you don’t have to invest in most of these things every year, we’ll add a reasonable amount of $2,000 that you’ll be spending on equipment on a yearly basis. 

You’ll also have to invest in your workspace. You need a good desk and a great chair, so we’ll add $500 for those needs. If you plan to work from a co-working space, then you should plan to spend $200 per month ($2400 per year). 

The cost of doing business also involves accounting services. Let’s say you’ll be paying a minimal fee of $10 per month - that brings us to $120 per year. 

When we add all these expenses to the amount of money you make per year, this is what we get to:

(23203 + 2000 + 500 + 2400 + 120) / 46 / 30 = $20.5

That really makes a difference from the initial $14 we started with, doesn’t it? 

The Time You Spend Looking for Clients

If you search for clients and negotiate with them for 5 hours per week, they won’t pay for that time. You’re actively working, but you’re not getting paid. 

Let’s say you’ll be spending 2 hours per week searching for clients. Some of these will become regulars, so that time will reduce over time. We’ll take 2 hours as an average, so that brings us to this calculation: you should charge $41 more per week. That raises our hourly rate by $1.4 ($41 / 30 hours per week). 

So we end up with $21.9 as our hourly rate.   

The Math Is Still Pretty Simple. You Just Have to Do It!

Don’t be overwhelmed by the math. It does you well! If you don’t want to make all these calculations, we’ll make it even simpler for you: use the initial formula above and double the result. 

So we got $14 as an hourly rate with our first attempt, which didn’t include additional expenses except for the holiday. When we double it, we get to $28 per hour. That’s still a reasonable rate that allows you to earn your target amount without making you uncompetitive in the freelancing industry. 

Remember: you need a good plan! Otherwise, you’ll still be earning money, but you won’t even notice how you’re spending them.                                                                                                         

Guest post brought to you by Warren. He’s a marketing enthusiast and a blogger at, who loves music. If he doesn’t have a guitar in his hands, he’s probably embracing new technologies and marketing techniques online! You can meet him on Twitter and Facebook.