The Rates Calculator

Chapter

Get Paid What You're Worth

Experience

Just Starting OutBooked My First 3 ClientsGrowing & Scaling

Format

TemplateGuideExamplesWorkbookVideo

Lesson Description

A step-by-step guide to calculating your baseline hourly rate using the Rates Calculator — so you know exactly what you need to charge to cover your expenses, taxes, and savings goals.

Suggested Order

Tags

Rates

Est. Time to Complete

‣

Video Transcript

Welcome back, everybody. This is a financial management dashboard. If you've not already made a copy of it, go ahead and do so.

The link is listed below, but it's also in the previous lesson. It's in Google Sheets. It should be pretty easy for you to make a copy of it.

Before you start filling it out, I'm just gonna give you a quick tour, and then I'll have you pause the video to go ahead and fill it out for yourself. So right when you walk in, there's a couple of quick links to these other tabs if you wanna use them. Your personal expenses, business expenses, debt monthly minimum payments, and debt totals will show up here once you fill in your spreadsheet so you can see a quick overview of where your finances are at.

Oops. Your personal expenses is just a tab to fill out your personal expenses. There are fixed expenses, savings and investments, and variable expenses in here that are suggested that you track.

If you have other things that you wanna custom enter, you can fill them in down here at the bottom. Anywhere where there's a zero over here is an auto-populating row, so you should be fine to add options items to that. You're gonna fill in the monthly cost when it's due, and it will auto-populate the annual cost.

I always put the account it comes out of, so whether that's my checking account or my credit card or whatever. You can choose whether or not it's a variable expense or a fixed expense. Just for a quick glance.

And then you can also choose whether or not it's on auto-pay. If you have any fees associated with this bill, you can put it here. I put the account email and password that I log in with along with a link to where I can change my account so that if I do wanna make changes, I can quickly do it, like say I don't wanna do Spotify Premium anymore or whatever, I can just click that link.

My login info is here, and I can go make that change quickly. There's no excuse or procrastination to not change something on auto-pay. I also have a company column here.

Actually, I only use this for my water bill because it's through a weird company and there's no link, you have to call. So that's there if you want it. Business expenses is the same thing, but it's for your business.

These are some suggestions of things that you might have to pay for for your business. I wanna make sure you include your debt in your plans for your rates because debt payoff is really important and we shouldn't just ignore it. So if you have debt, pop it in here.

It will auto-populate your minimum monthly payments into your rates as well. So the last tab is the rates calculator. In the calculator, you're gonna input how many hours you wanna work per week and everything else will fill in on its own.

So these will all be transported over from your other tabs. And then this will automatically add, this will automatically sum up these three options. So your business expenses, your personal expenses and your debt minimum.

And then it will add 30% automatically. And then it will do the math for you to find out your minimum hourly rate, your goal rate and your reach rate. So before we keep going, I just want to note that the taxes in this calculator are automatically going to add 30%.

But anything between like 15 and 30% should work for your first year of freelancing for your taxes. It's like highly unlikely that even if you're making $10,000 a month, you're actually gonna end up paying 30% of your income on your taxes in your first year. But to be safe, if you're doing this math on your own, not in the calculator, make sure you add at least 20% to your baseline annual income.

In the text of this lesson, there is information on how to do this without the rates calculator, how to decide your baseline rate without using the rates calculator. So if for whatever reason, you don't have access to it or you wanna learn how to do this without help, I would definitely recommend reading the lesson below. So I also wanna talk to you about your hours in here.

This box that you're gonna fill in is for your billable hours. How many billable hours per month do you want to work? So I do not recommend you schedule more than 120 hours of work per month, okay? That's 30 hours a week of billable work. You will burn out if you do that, okay? If you do more than that.

I also wanna make sure that you are accounting for any jobs you already have and your own self-care hygiene. And also if you have kids, make sure that the time that you need to spend with them is also accounted for before you put in the amount of hours you want to work. It does not matter how many hours you wanna work.

What matters is that you're taking care of yourself. We can work around any amount of hours that you need to work and if you're struggling to get to a rate that you feel comfortable with in the rates calculator because of how many hours you put in, let me know and I will talk to you about it so we can figure it out. If you want an example, I would say mine usually hovers between 15 and 30 hours a week as a freelance writer.

So as someone who's working part-time, I used to do about 10 to 15 more commonly. So fill that goal in in your spreadsheet and it will automatically calculate your rates. Your baseline hourly rate is mostly what you'll charge starting out.

It will pay your bills, but it will also allow you to get clients that will help you to start honing your writing skills and learning how to run your business. We'll talk about this more in the sustainable scaling chapter later on in this course, but I'd recommend you charge your baseline rate for your first three months of business just to get clients in the door and then get experience on your plate and figure out what's gonna work for you and what isn't. You're probably gonna find that you want to change the services you wanna offer, maybe change your niche, and you'll have enough experience with actually writing and running a business to start charging more after your first three months of full-time freelancing.

If you're freelancing part-time, you might wanna wait six months, but that is up to you. So before we move on to the next part of this chapter where we'll talk about what the difference is between your hourly rate, your goal rate, and your reach rate, and also these types of freelance writing rates down here, I want you to go ahead and take a quick break, go for a walk, stretch, do some dishes, whatever, just like step away, take a few deep breaths. Money can be hard for some of us, and that's okay, and I wanna make sure that you are treating this sort of objectively and secondarily, like getting some space from it and understanding that this is just facts, like this is just the amount of money that you need to make, and it is not, it has nothing to do with your self-worth, and it doesn't mean anything about you personally.

Take some time before you start filling this out to envision how your life is gonna look with the income you wanna make. Think about the money mindset workbook that you just did. How did it feel or how would it feel to be making enough money to invest in retirement or travel full-time or get the best healthcare you can or do that thing for your kid that you've always wanted to do, right? Take a moment to sit with it before you move on.

Once you click off this video, go ahead and fill out this spreadsheet. Before we leave, if you want to, you don't have to watch this, but I'm just gonna give you a quick tour of my personal spreadsheet so you can see what it looks like filled out, and if you don't care, go ahead and just skip on out of here to the next lesson. So this is my personal financial management dashboard.

It has my monthly expenses, my business expenses, debt total, and debt monthly minimum. This does not have my student loans in it. Sorry, y'all.

I am just gonna ignore those until the student loan embargo is done. So my personal expenses are all in here. I've hidden all of my other information from the right over so you can't see that because it's personal, but this is where obviously my email and my account password and all that would be.

I love that this spreadsheet calculates the annual cost because bullshit like Spotify costing me $130 a year is silly. Like I pay $1,000 a year to go to this gym that I go to. That's a lot of money, guys, and I'm okay with that.

It is worth it to me, and I'm happy to pay it because I freaking love rock climbing, but if you see anything in here as you're like putting bills in and you're like, fuck that, I am not paying $200 a year for like Hulu or something, then like pay attention, do something about it. Like change your subscription, get the commercial one, delete it, like whatever you need to do to reduce some of your bills. Some things you're not gonna be able to change, but a lot of things you can.

I also have my business expenses in here. It's negative because this is sort of complicated, but I basically treat all of my coaching income as a separate entity, all of my passive income from courses and things like that. So it pays for the business bills because the account that my Podia income goes into is the account that my business bills come out of.

So it sort of just like negates these things, but I should actually probably change that because I wanna see what it does to my rate in the rates calculator. This is my debt and this is my rates calculator. So this is my minimum hourly rate, which I mostly make, a lot of times it's close to $150 an hour, but that's okay.

I honestly don't usually end up working 20 hours a week and I'm still making on average $160 an hour, so good to go. But it is a little bit, it's really high for me because I have some high goals and some really low hours. This taxes estimation is actually pretty accurate for me.

I did pay $3,300 in taxes this year. So I will say the further into your business you get, the more likely you are to actually use that full 30%. So that is what it looks like inside my financial management dashboard and what yours might look like after you fill it out.

So go ahead and fill in your financial management dashboard now, and I'll see you in the next lesson.

Calculating Your Baseline Rate

Before we get into this, grab a copy of the Rates Calculator spreadsheet if you haven't already:

→ Rates Calculator Spreadsheet

Step 1: Calculate Your Monthly Expenses

Before you can decide what to charge, you need to know what your life actually costs. Your rates need to cover your personal expenses, your business expenses, your taxes, and anything else you're financially responsible for.

Open your spreadsheet and start by listing your monthly personal expenses. This includes:

→ Fixed bills — rent or mortgage, insurance, subscriptions, loan payments → Variable expenses — groceries, gas, utilities, clothing, toiletries, and other necessities → Savings goals — retirement contributions, emergency fund, days off fund, housing fund, car fund, laptop replacement or repair fund

Then add your monthly business expenses:

→ Overhead — your website, software, tools, coworking space → Taxes — more on this in a minute → Investments — courses, coaching, communities, templates, technology

For variable expenses, use your best estimate or average. Go through your credit card statements and bank accounts to find real numbers — don't guess. If there's something you're not currently doing (like saving for retirement) but want to be doing, include it now. This is your chance to build the financial life you actually want.

These numbers will change over time. Plan to revisit this every 6–12 months as your income and expenses evolve.

Step 2: Find Your Baseline Annual Income

Add up all of your monthly expenses to find the absolute minimum you need to bring in each month. Multiply that by 12 to get your baseline annual number.

Now add taxes on top.

As a freelancer in the U.S., you're responsible for self-employment tax (15.3%) on top of your federal and state income taxes. A lot of new freelancers underestimate this. I recommend setting aside at least 25–30% of everything you earn for taxes — and paying quarterly estimated taxes to the IRS to avoid penalties. (If you're not sure how quarterly taxes work, this is a great thing to ask an accountant about before your first big payment comes due.)

So if your baseline is $40,000/year, add 30% for taxes. That's $12,000. Your real baseline is $52,000.

One more important note on savings: a standard emergency fund covers 3–6 months of expenses. As a freelancer, I'd push toward the higher end of that — slow seasons are real, and having a cushion makes a huge difference for your mental health and your ability to make good business decisions without desperation driving them.

Step 3: Calculate Your Baseline Hourly Rate

Now we need to figure out how many hours you can actually bill.

Start with how many hours per week you want to work on average. I strongly recommend capping this at 120 hours per month — that's 30 hours per week. Make sure you're accounting for any other jobs you have and your own basic self-care.

Not all of your working hours will be billable. Some of your time will go toward running your business — emails, pitching, invoicing, admin. So subtract:

→ 2 hours/week if you're working 10 hours or fewer per week → 4 hours/week if you're working more than 10 hours per week

What's left is your billable hours.

To calculate your annual billable hours, multiply your weekly billable hours by 50 (not 52 — this gives you 2 weeks off per year without stressing about it).

Then divide your baseline annual income (including taxes) by your annual billable hours. That's your baseline hourly rate.

Example 1: $2,500/month in expenses → $30,000/year → add 30% for taxes → $39,000 20 hours/week − 4 = 16 billable hours × 50 weeks = 800 hours $39,000 ÷ 800 = $49/hour

Example 2: $4,000/month in expenses → $48,000/year → add 30% for taxes → $62,400 17 hours/week − 4 = 13 billable hours × 50 weeks = 650 hours $62,400 ÷ 650 = $96/hour

The spreadsheet does all of this math for you automatically — but it helps to understand where the number comes from.

What to Do With This Number

This is your floor. It's the minimum you need to charge to keep the lights on and build a sustainable business. It is not the ceiling.

A lot of newer freelancers look at their baseline rate and immediately feel like it's too high to ask for. That feeling is normal — and it's also not a reason to charge less. The math is the math. Charging below your baseline doesn't make you more likely to get clients; it just means you can't afford to stay in business.

That said, I do recommend charging at or close to your baseline for your first 3 months. Not because you're worth less — you're not — but because you're also learning a lot right now. You're figuring out your niche, your services, your process, and how to work with clients. The baseline gets you in the door, gets real work on your plate, and gives you the experience you need to start charging more. After 3 months, revisit your rates. You'll almost certainly have reason to raise them.

Take a breath before you move on. Money stuff is hard. If you're feeling overwhelmed, step away — go for a walk, do some dishes, call a friend. Then come back. You've got this.