Freelance 101: Setting rates

I've been getting a lot of questions on Twitter about making freelance sustainable, so I'll be addressing the basics of freelancing in a few upcoming posts. I'm still relatively new to this but hopefully I can provide some insight! Blog posts (similar to the master studies post) will be treated like tutorials: early access for $5+, and open to suggestions for $10+ Patrons. Thanks!

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"What should I charge?" is one of the biggest questions among artists that are seeking compensation for their work, especially in a freelance setting. I want to break down the lessons that I've learned (and continue to learn) over the years regarding rates.

Some context: I did some low-rate freelancing while in college as a 2D game artist, got a few years of in-house experience, and am now freelancing fulltime. I work in the US entirely for American companies and live about 20 minutes from downtown Chicago. I'm living in a residential neighborhood with my bf so our $1200 rent is split down the middle and I pay out of pocket for insurance, plus I don't have to pay for a car.

The most important piece of information to know is that as a freelancer, you should charge more than what you would be paid in-house. You're paying out of pocket for a ton of things that the company would normally cover, and they know that. A lot of folks are surprised when told that fulltime freelancers should charge what they need to in order to make profit, but it's all much clearer when you do the math. So...what expenses will you be paying for?

• Rent/mortgage: the big obvious one. If you're working from home, you can write off a certain amount of space on your taxes since it's functioning as an office space.
• Loans: student loans, car loans, credit card payments. None of this goes away when you decide to jump into freelance. I pay $700/month in student loans, which takes a fat bite out of what I make each month.
• Health insurance/coverage: when freelancing, there's a good chance you'll be paying out of pocket for health insurance. As a healthy 24 year old, I pay $270/month for what is essentially catastrophic health insurance. That means any time I have to go to an urgent care, have a cavity, get a regular check-up, see my psychiatrist, get new glasses, get my medications refilled, or do other perfectly normal health biz, I pay almost entirely out of pocket for that too. Health insurance is much more expensive as you get older, have a family to care for, or have health conditions. If you have a partner working a fulltime job, find out if their company will provide health insurance for spouses or domestic partnerships. It will still be expensive, but coverage is often much better this way.
• Taxes: once you hit a certain amount of profit from an individual source of income, you pay income taxes. Anytime I get paid, I immediately put away 30-35% of that check for taxes. Got a $800 commission? Nice! Put $250 of that away, that goes to Uncle Sam. I recommend doing research on your local taxes, since a few states have low or no state-level income tax. Also make sure you're paying your self-employment tax, and do research on quarterly taxes.
• Hardware/office furniture/software: paying for Adobe or Maya, upgrading your PC, replacing your shitty old office chair? That would all normally be covered in a studio by the company. That's on you now.
• Retirement funds: a lot of companies match part of your 401K contribution that you make each month. That's on you, too.
• Time off due to injuries/emergencies: sprained your wrist? Bumped by a car? Fell down the stairs? There's no paid sick or injury leave here.
• Time off between contracts: contracts inevitably end as all jobs do, and some months will be more profitable than others. It's SUPER important to save up enough to be able to feed yourself for a while between contracts...while still being able to cover rent, insurance, and loans.
• Plus all the other regular expenses, like feeding yourself, clothes, pet costs, furnishing your home, any sort of commute, etc.

"Wow! That shit sounds expensive and risky!" It very much is, and that's why it's important to set your asking rate at a fair price. I've heard varying pieces of advice on the lowest rate you should set for yourself, but it's usually either $40/hour or 3X what minimum wage is locally. Any company with funding that regularly works with freelancers should expect that. If they're shocked by it, that's a red flag.

Also keep in mind the length of the project when setting rates. If it's a super short 2-week contract, charge more than if it's a gig that will (probably) last for several months. Consistently having income over an extended period of time provides a lot more flexibility than making a burst of cash and being out of work immediately afterwards. And remember that contracts can end any time! Always be prepared to suddenly lose work.

I personally never work for under $60/hour now except as an absolute exception. I started freelancing at $40/hour and found out very quickly that wasn't high enough. 

Taking a quote from my "5 Needed Traits for Successful Freelancers" post: 

I know of a lot of situations in which a client wanted to hire someone, but that artist skirted around the money conversation too long, so nothing could happen.

You have to be willing to talk numbers.

The easiest way to do this is to talk to other artists about what your rate should be, then really stick to it. Have a minimum. Have a "I'm guessing this will be a little too high, but I'm going to quote it anyways" rate. Have an asshole rate. But you MUST have set numbers in mind before you can be confident in quoting rates. If you're not sure how much you can charge, here are some suggestions:

-Read Xavier's Big Thread(tm) on freelancing rates

-Check out freelance rate calculators like this one 

-Read my Patreon Freelance 101 post about rates

-Follow Justin Oaksford on Twitter (just in general. Great dude.)

A good rule of thumb is that your MINIMUM should be 3x minimum wage or more. Personally? I never quote under $60/hour as an absolute. My default is higher than that now, but I had to learn the hard way. My original absolute minimum when I started was $40/hour, but that was actually way too low. (My gut reaction is to be nervous putting that number out there, but I also believe that wage transparency benefits all workers.)

Sometimes I'm okay with a lower rate for either a project I really want to work on or if there is some sort of revenue sharing option... but that's all pretty situational.

TL,DR: when in doubt, make your minimum either $40/hour or 3x your local minimum wage.

If you're struggling to find enough gigs to freelance fulltime, remember that your basic needs are valid and need to be met. If that means working a parttime job and doing freelance on the side until it's sustainable, there is absolutely nothing wrong with that. A slew of artists that I'm close to do this, and although it can be hard to juggle, it lets you put food on the table and keep your creativity flowing.

Do the math. Take your living expenses seriously and be honest with your cost of living. If you're asking too low...for the next opportunity, bite the bullet and ask higher.  

Edit: just added another thread here:  https://twitter.com/beccahallstedt/status/1153678193599090688?s=20