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Get clear on your expenses

As a freelancer, you and your business are one and the same – so you need to look at your life holistically to create a pricing structure that reflects your needs, goals, and industry. Your first step is to calculate your expenses and determine how much it costs to live your life. This will also help you calculate your break-even number, or the amount of money you need to earn to afford your lifestyle. Your break-even number is used to determine your baseline hourly rate. 

We’re not telling you to make any cuts or adjustments to your budget — you’ll just want a rough estimate of how much you’re spending so you can accurately forecast your future expenses. ‍

Calculate your annual expenses 

To understand your potential annual expenses, look at your spending from the past few months. You want to get a monthly average for all of your budget categories, from living expenses like rent all the way to business expenses like office supplies. ‍

First, determine your living expenses. These are essential expenses you can’t live without and that you need in order to maintain your lifestyle. These expenses represent the absolute minimum you need to earn as a full-time freelancer. Here’s a breakdown of what to include:

  • Rent or mortgage payments 

  • Utilities, including gas, water, and electric

  • Phone and internet 

  • Groceries 

  • Health insurance 

  • Transportation (including car payments and public transportation) 

  • Travel expenses (including hotel, airfare, and transportation) 

Some of your expenses you may pay annually, some monthly, and others daily or weekly. It’s important to multiply your expenses to find your annual average for each one. For example, let’s say you pay your $200 homeowners insurance bill each month. To get the average annual expense for your budget, simply multiply that bill by 12 ($2,400). The same goes for weekly or daily expenses — you can multiply these by 52 or 365 to get a working estimate. 

Some expenses (like groceries) fluctuate and can be hard to predict. Make your best estimation —it helps to go back and look at your spending patterns to find an average. Use your workbook to fill out your annual fixed expenses. 

Next, use your workbook to calculate your business expenses. If you’re transitioning to a full-time freelance role, these may be new expenses that weren’t previously in your budget, including:

  • Office supplies

  • Software 

  • Hardware (additional monitors, ergonomic tools) 

  • Subscriptions (like project management tools)

  • Business insurance 

  • Legal and accounting fees 

  • Advertising 

  • Professional development 

  • Office space 

  • Contractors or hired help 

Consider any other new expenses that may have not previously shown up on your bank statements. Maybe you’re considering a life change, like buying a house, or a business investment, such as professional development. It’s important to do proper research to determine the average annual cost of your new expense. Take some time to research the potential estimated costs of any new expenses you are planning in your personal life or for your business, and make sure to include them in your workbook exercise. 

Keep in mind your expenses aren’t your income goal. These are just the costs you need to take into account when determining what you need to financially survive as a freelancer. Your expenses are just a baseline—not your main income goal. We’ll get to that in the next step.


  • You calculated your annual expenses and business expenses. 

  • You learned about your break-even number and what factors into it.

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