Freelancer Income and Expense Planning
Freelancers face unique financial challenges: irregular income, self-employment taxes (15.3% Social Security + Medicare), health insurance costs ($400-$1,200 monthly), retirement planning without employer match, and business expenses (software, equipment, marketing, workspace).
To match a $60,000 employee salary, a freelancer needs $85,000-$95,000 in revenue after accounting for additional taxes ($9,000), health insurance ($6,000), retirement contributions ($9,000), and business expenses ($5,000-$10,000).
Calculate your effective hourly rate by dividing net income (after all expenses and taxes) by billable hours—many freelancers work 2,000 hours annually but bill only 1,200-1,500 hours (60-75% utilization).
Pricing strategies should account for non-billable time (marketing, admin, professional development).
Target rates should be 1.5-2x employee equivalent: if employees earn $50/hour, freelancers should charge $75-$100/hour to achieve similar take-home pay.
Build financial buffers for irregular income: maintain 3-6 months expenses in emergency fund, save 25-30% of each payment for taxes, and track expenses meticulously for tax deductions.
Consider the flexibility premium—many freelancers accept 10-20% less total compensation for autonomy and schedule control.