1. What’s your Target Income?
The average income of US Workers is $47k.
However, don’t be afraid, to ask for more. If you don’t value your time, nobody will.
Consider that more than 30% of freelancers in the US earn more than $75k / year, including part-time freelancers.
Who says, Freelancers don't earn as much as people in "regular" 9-to-5 jobs?
In fact, the percentage of Freelancers, who make more than $75k a year, doubled within the last 5 years. #Infographic #FreelanceHeroes pic.twitter.com/JqVsVD7rEC— Rich In College (@Rich_In_College) December 5, 2019
2. Which Costs Come With Your New Self-Employment?
The calculation above might seem a little exagerrated, since you propably don’t need a new iPhone every year and a new Mac Book every other year. (I have mine for 6 years now, and it still works perfectly, although I use it all day, everyday. Not kidding.)
However, it’s better to calculate for more expenses, than you’ll actually need. You never know, what happens.
No-Fun-Fact: Somobody stole my brand new iPhone two weeks ago at the bus. Who would expect that?
But remember, that there are also costs, that you might be able to reduce, by working remotely. Consider commuting costs, for example.
3. What’s Your New Adjusted Salary?
This one’s easy: Target Salary + New Expenses = Adjusted Annual Salary
Yes, you can set your own salary. Amazing, right?
No wonder, all the cool kids, want to become freelancers.
Did you know, that 92% of Millenials say, they wanna work remotely? What about you? #INFOGRAPHICS pic.twitter.com/dHko1gp1R7
— Rich In College (@Rich_In_College) December 5, 2019
Don’t panic, if this number seems to be completely out of reach.
It will be much less intimidating, once we broke it down into an hourly rate.
4. How Many Hours Per Year Do You Work?
Let’s say, you work a regular schedule of 40 h / week.
Take these 40 h and multiply them by 52 (for the 52 weeks of the year).
40 h / week x 52 weeks / year = 2.080 h / year
Now, consider your days off:
– 3 weeks of vacation: 15 days
– 7 U.S. holidays
– 5 sick days
= 27 days off (= 27 x 8 h = 216 h)
Which all comes down to: 2080 h – 216 h = 1864 h / year
But don’t stop here!
Up until now, we assumed, that you can bill your clients for every hour you’re working. Of course, that’s not true.
Non-Billable Activities
– Finding new projects
– Signing clients
– Phone Calls
– Emails
– Website / Portfolio Management
– Marketing
– Improving Your Skills (Reading, Taking Classes and more)
– Taxes
– …
Let’s assume, that non-billable tasks account for 25% of your working hours.
How Many Billable Hours Do You Have?
Billable Hours = Working Hours x 0.75
With the example above, we’d have: 1864 h / year x 0.75 = 1.398 billable hours.
Not bad, is it?
Remember, to Make Your Own Schedule
Obviously, everybody’s schedule is different. You might work more or less than 40 hours / week, or you want to take more weeks off for vacation, but are willing to work 50 h / week, when your home.
Depending on where you work right now, you can propably also turn your commuting time into active working hours.
Just in case you needed another argument, why #remotework is awesome.👌 pic.twitter.com/59bk0wZCwb
— Rich In College (@Rich_In_College) December 5, 2019
Consider, how your schedule as a freelancer would look and remember to be realistic. Of course, you can always adjust your hourly rates, when you figure out, that your schedule doesn’t work.
5. Calculate Your Hourly Rate
The last step is easy.
Now, that you know, how much money you’ll need / want and how many hours you can work, all you have to do is divide you adjusted annual salary by your billable hours per year.
Back to our example, this makes:
$97.513 / 1.398 h = $69.75 / h or $70 / h
Doesn’t sound so intimidating anymore, does it?
According to this 2019 Freelancer Study, it’s actually just below average.
Seems like Freelancers can make a damn good living in the U.S.👍 #freelance #freelancer #INFOGRAPHICS
Head over to my blog post about How to Calculate Your Hourly Rate as a Freelancer: https://t.co/bTuEYOC7bS pic.twitter.com/8N1ebDs4mX
— Rich In College (@Rich_In_College) December 5, 2019
Bonus: How to Earn More and Work Less as a Freelancer
Eventhough, the earning potential of freelance work isn’t bad at all, your ultimate goal should be, to stop trading hours for dollars and start making passive income. That’s freedom.
To do this with a freelance business, you need to get clear about your processes, streamline them and outsource as much as you can.
Outsourcing your work might seem intimidating now, but once you get used to it, you’re life will never be the same again. Read Tim Ferriss Bestseller The 4 Hour Work Week* to learn everything about how to outsource, and how this will effect your work and life.
‘Cause, lets be honest: Who doesn’t want a 4 Hour Work Week*?
How To Calculate Your Hourly Rate As A Freelancer
Save
PrintDefine Your Target Income. Consider how much you’ll need for:
- Your rent / Downpayments for your home
- Food
- Clothes
- Travel
- Insurances
- Taxes
- Entertainment
- Your family
- Your pets
- Paying off debt
- Savings
Calculate your new yearly costs, related to self-employment. These include:
- Laptop
- Smartphone
- Office Space / Starbucks Coffee
- Printer + Other Office Supplies
- Internet
- Web Hosting
- Domains
- Accounting + Invoicing Software
- Project Management Tools
- Tools + Software for Your Work
- Marketing
- Accountant Fees
- Health Insurance
- Taxes
- + 2% of Uncollected Payments
Calculate Your Hourly Rate
- Add the yearly costs to your target income to define your adjusted annual salary.
- Decide, how many hours per week and how many weeks per year you’re going to work.
- Multiply your working hours by 0.75 to get your billable hours.
- Lastly, divide your adjusted annual salary by the billable hours. This is your hourly rate.
Bonus
- Use this Link to join Scribd and get 2 months (insted of 1 month) for free.* Scribd is an incredible platform, where you can read and listen to as many ebooks, audiobooks, magazines, snapshots, sheet music and more.
- Read / Listen to The 4 Hour Work Week* by Tim Ferriss (for free on Scribd).
- Write down 20 Ideas, how you can streamline and outsource your freelance work.
- Try at least one of them at your next project.
