As a seasoned freelance writer and marketer, I've come to realize that the key to a successful freelance career lies not just in creative prowess or client satisfaction but also in understanding and respecting our cost of living. This financial awareness is crucial for setting fair and sustainable rates that allow us to thrive, not just survive.
Let's dissect our cost of living into its fundamental components:
Monthly Fixed Expenses: These are the non-negotiable costs that form the bedrock of our financial obligations – rent, utilities, insurance, subscriptions, and other recurring expenses. These constants demand a steady slice of our income pie, ensuring our ship remains afloat amidst the fluctuating waves of freelance income.
Variable Expenses: While fixed expenses provide stability, variable expenses add vibrancy to our lives. Dining out, weekend getaways, or indulging in the latest tech gadget – these are the joys that make life worth living. However, budgeting for these variable expenses requires flexibility and a keen understanding of our monthly income patterns.
Annual Unexpected Expenses: Life is full of surprises, and our finances should be prepared for them. Unexpected medical bills, car repairs, or other unforeseen events can disrupt our financial plans. Therefore, it's essential to incorporate a buffer into our pricing models to accommodate these unpredictable expenses.
By understanding and accounting for these three expense categories, we gain a holistic view of our cost of living, enabling us to set fair and sustainable freelancing rates. This approach not only ensures financial stability but also allows us to enjoy the freedom and flexibility that drew us to freelancing in the first place.
Here's a practical approach to setting rates:
Calculate Your Baseline Rate: Start by adding up your monthly fixed expenses. Then, estimate your average monthly variable expenses. Finally, add a percentage for unexpected costs (10-20% is a good rule of thumb). This baseline rate represents the minimum you need to earn to cover your expenses.
Factor in Profit: Remember, freelancing is not just a job; it's a business. And a business that doesn't profit is a hobby. Add a layer for profit to your baseline rate, reflecting the income you desire beyond mere expense coverage.
Account for Non-Billable Hours: Non-billable hours, like project hunting, invoicing, and professional development, are essential but unbilled. Estimate the percentage of time spent on these activities and factor it into your rates.
By following these steps, you'll create a sustainable pricing model that reflects your true cost of living, ensuring a thriving freelance career built on financial stability and personal fulfillment.