How to Set Salary Goals

As a freelancer, you don’t get a “salary” like most other full-time workers. In exchange for the stress, though, you do have the freedom of making your own schedule, and there’s more potential for an increase in the amount of money you make annually than in a regular 9 to 5. That’s not possible without salary goals.

Image: sxc.hu

But how do you get such goals? There’s always debates raging online as to how much a writer should make per work or per hour, and I’ve seen ranges from as low as $8 per hour to $100 per hour. So people make even more than that, and unfortunately, some make less. So, right now, step away from any debate on how much you should make and look at your own life. How much do you need to make and how much do you want to make.

Step One: Determining need.

First, look at your monthly bills. I’m actually going to use my own life as an example, but keep in mind that I’m a single 24-year-old, so my bills will look much different than that of a 40-year-old father of four. Where you live also makes a different. On average, here are the bills I need to pay every month, including some “extras” to maintain my current lifestyle (but not put anything into savings or make any extravagant purchase).

• Rent and related utilities (electric, cabel, water, etc): $900/month
• Transportation (gas, car loan, bus, etc): $200/month
• Student loans: $200/month
• Other monthly bills (cell phone, health insurance, memberships, etc): $370/month
• Food/restaurants/bar: $200/month
• Entertainment/misc.: $100/month

So, as you can see, I NEED to make at least just shy of $2000 a month or $24,000 a year to maintain my lifestyle. Here’s something to keep in mind, though – you have to figure in your taxes. I’m going to estimate about another 25% to my total, so $500 a month or $6,000 a year, bringing my grand total to $30,000 a year. That’s how much I need to make unless I want to change my lifestle (find a cheaper place to live, cut back on entertainment, etc.).

Figure out your monthly and annual need. Keep in mind that you may not hit ths mark every month, especially if you’re just starting. That’s OK, as long as you exceed your need other months so it averages out and you can pay all of your bills.

Step Two: Determine average payrange in your area.

Salary.com and a number of other websites have statistics on salaries for different jobs in different areas. This can be a starting point for you. Find a job that’s close to freelance writer (such as “copywriter”), and figure out how much they make in your area. In my area, the average is around $40,000. Yours might be a lot higher or a lot lower. That’s ok. Remember, this is about you.

Depending on your experience, you can set your goals from that average. It’s unrealistic for me to say that I want to be making $500,000 a year at this point. I’ve only been freelancing for 3 years full time, and I still have a lot to learn. I think that $40,000 as a goal is more than reasonable, however. In another year or two, I’ll likely want to boost that a bit, but given my need, the area where I live, and my age, I think $40,000 a year is a good goal.

Step Three: Determine your hourly wage.

This is a down and dirty method, not exact, because of course there will be vacations and holidays. For estimate’s sake, this method is fine though. Divide your goal by 52. In my case, that’s around $770 a week. Now divide that by the number of hours you wish to work every week, probably about 40. For me, the answer is about $20.

That means to meet my $40,000 goal, I have to work 40 hours a week and make at least $20 an hour. I’ll need to make more or work extra hours if I want holidays off or want a vacation.

Step Four: Account for non-paid work.

As a freelancer, those 40 hours you work aren’t going to be filled with writng completely. You’ll spend time answer emails, trolling for jobs, negotiating contracts, and more. All of this work is non-paid. Essentially, you’re only billing yourself for the time, not a client. So think about your average day. What percentage do you spend doing actual writing work that pays and what percentage do you spend doing other work.

For me, I spend about 75% of my time writing and 25% of my time doing other things. So, that $20 pay rate I figured out only covers 75% of my time. To figure out the real amount you need to be making fill in this equation:

(pay rate you figured out)(100)/(percentage of time you spend writing)

So I would take $20 and multiply by 100, then divide by 75 to get 26.67. We’ll just say 27…so I need to make $27 an hour to meet my $40,000 a year goal.

Isn’t math fun?

Step Five: Price your work accordingly.

How fast cane you write a 500-word article that needs average amounts of research? If you can write one per hour, you need to charge $27 for it to make $40,000 a year. If you’re charging less, you’re going to have to end up working more hours or you’ll have to charge more on other projects to make up the difference.

Bonus Step: Stop worrying about what other writers are making. Yes, we need to remain competitive, but at the same time, remember that “fair” is a word with many faces. It might not seem fair to you that someone else makes $50 for an article when you only made $25 and did just as good of a job. Is it “fair,” though, that this other writer has to pay $1000 a month in rent while you only pay $500 because cost of living is lower where you happen to live? Or is it fair that your kid’s day care center only charges $200 a week, while their’s charges $400?

Care about yourself. Set your own goals. Stay competitive, but try to forget about what the other writer is charging an focus on charging an amount that makes sense to your living situation.