Understanding what to charge per hour
Updated
Why calculate your hourly rate
Freelancers often set prices by looking around: what others charge, what the client seems willing to pay. But that skips the main question, which is how much you need to earn for the work to be worth it.
Think of a restaurant that prices a dish only by the cost of the ingredients. It forgets the rent, the power bill, the cook’s salary and the nights the dining room sits empty. At the end of the month it sells a lot and still has nothing left. The same thing happens to freelancers who forget their costs and the hours nobody pays for.
The math behind it
Hourly rate = (Monthly income goal + Fixed costs) ÷ Billable hours per month
The secret is in the billable hours. Not the hours you’re working, but the hours you’re working on something a client pays for. Emails, quotes, learning, social media and paperwork all take time and never make it onto an invoice.
An example with real numbers
If you want to take home $6,000 a month, have $1,000 in costs (internet, software, accounting, insurance) and can bill 80 hours (4 hours a day, 5 days a week), you need to charge $87.50 an hour.
If the same person did the math with 160 hours, as if it were a full-time job, they’d land at about $44. They’d work the whole month and earn half of what they need.
The most common mistakes
- Counting every hour of the day as billable. Almost nobody bills more than 4 to 6 hours a day.
- Forgetting vacations, holidays and sick days. Nobody pays for your rest, so it has to be built into the price.
- Forgetting taxes. Self-employment tax is a fixed cost like any other.
- Not charging for extras. Materials, travel and help from other professionals belong in the client quote, the second part of the calculator.
What the math doesn’t show
Many people know the right number and still charge less, out of fear of losing the client or a feeling that they don’t deserve that much. That voice saying “who am I to charge this?” is more common than it seems, even among very good professionals. Having the math ready helps you answer with the number instead of the insecurity. We talk about that hunger for approval in the career illusion.
Frequently asked questions
Charge by the hour or by the project? Both can work. Even when you charge per project, estimate the hours and multiply by your rate to check that the price holds up.
What if my rate comes out above the market? That’s a signal to review your costs and billable hours, or to look for clients who value your work more. Dropping the price until the math breaks doesn’t fix anything.
How do I know my billable hours? Track the time you spend on paid work for two weeks. The number usually surprises people.
Next step: see how much those earnings could grow with the compound interest calculator.
