Ask a Freelancer: What Formula Should I Use to Calculate My Freelance Rate?By Nicole Dieker November 25th, 2014
I’ve been hearing a lot about writing rates; they’re all different and I’m really confused. What’s the appropriate rate for a freelance writer who has been working since 2012?
Asking about the appropriate rate for a freelance writer who’s been working since 2012 is a fair question, but I’m going to reframe it with a few qualifiers. It’s a bit like asking “What’s the appropriate salary for a person who got her first office job in 2012?” The answer depends upon the industry and the type of job as much as anything else. For some positions, an appropriate salary is $32,000 per year, and for other jobs, it’s $150,000 per year.
Freelance rates are equally varied. Some esteemed publications pay low flat rates, while some specialty magazines you’ve never heard may pay one dollar per word. So what you need to do is change the question. Instead of asking, “What’s a fair rate for a writer with a few years of experience?” ask “What rate do I need for this job to be worth my time?”
Your ideal freelance rate should be greater than the following expenses broken down per hour:
— Living expenses
— Business expenses
— Enough left over to save for the future
Before you sit down to figure out what your fair rate should be, you need to know the details of these expenses. How much does it cost you, every month, to keep the electricity on and put groceries in your refrigerator? What are your bare minimum living expenses? What about your typical monthly living expenses, when you’re not only putting groceries in the fridge but also going out to eat once in a while and maybe catching the new Hunger Games movie?
What about business expenses? For most of us, that includes laptops, Internet access, and any transportation costs required to research a story.
And don’t forget about taxes, which take a significant percentage out of your gross income. (How significant? Some people advise freelancers to put aside 25 percent of their gross income for taxes, while other people suggest up to 40 percent. I have a CPA to help me with my tax burden, and I recommend working with a professional to take out any guesswork.)
To top it all off, you need enough overheard to save for the future. If you work with a financial buffer, you’ll be able to pass on low-paying jobs that take up your precious time. And you’ll also be able to think about long-term goals such as—you guessed it—retirement.
Right now, I want to earn around $5,000 per month—which gives me enough for comfortable living expenses, business expenses, taxes, debt payments, and savings. Assuming each month consists of four 40-hour workweeks, I need to be earn roughly $31.25 per hour.
However, because I don’t spend every hour of a workday typing articles—I also answer emails, do administrative work such as tracking invoices and depositing checks, and run a business—I tell new clients my minimum rate is $50 an hour. If they want to pay by the word or by the project, I do some math to break it down equivalently.
Your hourly rate should change as you become more experienced. My minimum hourly rate used to be $18 an hour, which was just enough to cover my all basic living expenses. As I got more high-profile assignments, I increased my value to potential clients and began increasing my rates. I used to tell people that my minimum rate was 6 cents a word. Then it became 10 cents a word. Now I tell new clients that minimum rates are 16 cents a word, or $50 an hour.
When calculating your value, it’s important to know how to deal with clients who are bounded by budgets. This point is where many of us make the mistake of accepting whatever rate is offered—after all, we need the money, right? What if this is the only client that ever wants to work with us? We had better say yes, and fast!
As a freelancer, you’re going to see rates come at you in one of two ways.
You will most likely see a client offer a rate in the form of a firm statement, such as “We pay $250 for 800 words,” or “We pay $40 an hour.” Remember that many rates can be negotiated, though not all negotiations will necessarily result in a higher rate.
You should also be prepared for clients to ask about your rates, which may be a way for a client to feel you out, as in, “If this person fits our budget, we might propose a project.”
In both cases, having your number ready—whether it’s $18 an hour, $50 an hour, or $100 an hour—helps you prepare to make smart choices. It lets you know whether you want to negotiate that $40 an hour rate into a $50 an hour rate, or whether you need to avoid the publication offering $100 for a 1500-word story that requires interviews and research.
And that’s how you figure out the appropriate freelance rate for a writer who’s been working since 2012. Or 2002. Or 1992. As long as you remember the rate is about balancing your individual finances with the larger market forces at play, you should be fine.
Nicole Dieker thinks the most important piece of advice in today’s column is to get a CPA. Seriously. Go get one right now. Then send your Ask a Freelancer questions to firstname.lastname@example.org.