Budget Hourly Rate Calculator

How This Tool Works

This calculator helps freelancers determine the hourly rate needed to achieve their desired annual salary after accounting for business expenses. The formula is straightforward: (Desired Annual Salary + Annual Business Expenses) ÷ Annual Billable Hours = Required Hourly Rate. This ensures you price your services correctly to cover all costs including taxes, insurance, equipment, software, and other business expenses, while still meeting your income goals.

The calculator accounts for the reality that freelancers need to charge more than employees because they don't receive benefits, must pay self-employment taxes (typically 25-30% more than employees), have unpaid time off, and face income variability. It's important to use realistic billable hours - full-time is typically 2080 hours, but after accounting for vacation, sick days, marketing, and administrative tasks, most freelancers bill 1500-1800 hours per year. This tool helps you avoid the common mistake of undercharging for your services.

Common Business Expenses to Include

• Self-employment taxes (typically 25-30% of income)
• Health insurance and benefits
• Equipment and software subscriptions
• Office space or co-working membership
• Internet, phone, and utilities
• Professional development and training
• Marketing and advertising
• Legal and accounting fees

FAQ

• How do I calculate my freelance hourly rate?
  Calculate: (Desired Annual Salary + Annual Business Expenses) ÷ Annual Work Hours. For example, if you want $60,000 salary, have $10,000 expenses, and work 2080 hours: ($60,000 + $10,000) ÷ 2080 = $33.65/hour.
• What expenses should I include in my hourly rate calculation?
  Include all business expenses: taxes (estimate 25-30% for self-employment), health insurance, equipment, software subscriptions, office space, internet, professional development, and any other business-related costs.
• How many hours should I use for annual work hours?
  Full-time is typically 2080 hours (40 hours/week × 52 weeks). However, account for vacation, sick days, and non-billable time (marketing, admin). Many freelancers use 1500-1800 billable hours per year after accounting for these factors.
• Should my hourly rate be higher than an employee salary?
  Yes, freelancers should charge 1.5-2x the equivalent employee hourly rate to account for: no benefits, self-employment taxes, unpaid time off, business expenses, and income variability. An employee making $50/hour should charge $75-100/hour as a freelancer.
• How do I know if my hourly rate is competitive?
  Research market rates for your skills, experience level, and location. Check job boards, freelance platforms, and industry surveys. Consider your unique value proposition, but don't undervalue yourself. It's easier to lower rates than raise them.