How to set a day rate you can live on

Ask most freelancers how they arrived at their day rate and the answer is usually some version of a guess: a figure that felt roughly fair, or whatever the first client offered, adjusted a little over time. That's a reasonable way to start out, but it's a bad way to keep going, because it has nothing to do with what you actually need to earn. A rate built on guesswork tends to drift along quietly below what would actually cover your costs, and you only find out when the bank balance tells you.

Start with what you need, not what you think you can charge

Work backwards from your own costs rather than forwards from what feels like a big number. That means totting up everything your work depends on: rent or mortgage and household bills, food, transport, tax and any National Insurance or equivalent contributions, software subscriptions, equipment, professional memberships, and insurance if you carry it. Add a realistic amount for time off, because unlike salaried work, a freelance holiday has to be paid for out of the days you did work.

• Fixed living costs: rent, bills, food, transport
• Business costs: software, equipment, insurance, memberships
• Tax and any pension contributions you're setting aside
• Paid time off: holidays, illness, slow months

Work out billable days, not calendar days

A year has roughly 260 weekdays, but very little freelance work turns all of them into billable time. Pitching, invoicing, admin, finding new clients, unpaid rewrites and the ordinary gaps between projects all eat into the total. Most freelancers find that somewhere between half and two-thirds of their working days end up billable, and it's worth tracking your own figure for a month or two rather than assuming. Whatever the number is, use it honestly rather than the optimistic version.

Turn that into a day rate

Once you have a target annual income (covering both living costs and business costs) and a realistic count of billable days, the day rate falls out of dividing one by the other: target income, including costs, divided by billable days in the year. It's a blunt calculation, but it gives you a number anchored in something real, which you can then sense-check against what people in your field and region typically charge.

Build in room to say no

A rate calculated to the exact minimum leaves no room for the normal unevenness of freelance work: a client who pays late, a quiet month, a project that runs over. It also leaves you no room to turn down work that's a bad fit, because you can't afford to say no to anything. A rate with a little headroom built in isn't greedy; it's what keeps the business standing through an ordinary bad month.

Revisit it regularly

Rates tend to get reviewed only when a client pushes back on one, which means they often stay flat for years while your costs, experience and demand for your work all move on. Put a date in the diary, every six or twelve months, to redo the sum with current costs and a current view of your billable days. It's a quick check, and it's the only way the rate stays connected to reality rather than to the year you first set it.