How Much Do You Actually Need to Earn as a Freelancer to Replace Your $100K Corporate Salary [ Freelancing to Financial Freedom ]

What would your freelance income actually need to be to replace a $100,000 corporate salary?

If you're thinking about leaving corporate life for freelancing, simply matching your old salary may not be enough. Once you account for health insurance, business expenses, taxes, time off, retirement savings, and a cash cushion, your real monthly income target can look very different. This episode helps you reverse-engineer that number so you can approach freelancing with a concrete financial target instead of guessing.

By the end of this episode, you will:

• Calculate the minimum monthly revenue you need to replace a $100,000 corporate salary as a freelancer.

• Understand how health insurance, business expenses, and taxes affect your actual income needs.

• Learn how to structure your client load and monthly pricing to build in paid time off, retirement savings, and a cash cushion.

Play the episode now to calculate your own freelance income target and see exactly how many clients and what monthly rates could get you there.

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TRANSCRIPT

Take a listen to this episode to find out the real freelance income you need to replace your corporate salary, What you should be thinking about in terms of health insurance and business expenses and taxes, as well as all the nice-to-haves that you should put into your monthly income.

Oh, boy, guys, welcome back to the show. I just recorded an entire episode, but I didn't record it. I've never done that before. I don't even know, I don't even know. Like, where is my brain? I was just so interested in getting this recording done, I never hit record. Yeah. It happens! 

Anyway, welcome back to the show. Today, we're going to be talking about how to transfer from corporate and calculate the income you need as a freelancer when you were getting a salary before. Now, what I've done here is assumed someone just starting out in their freelance career, and I'm assuming that they're making $100,000 a year annually. And I did that because it's just a very easy number, which I discovered later on, as I was doing the calculations, it's not as easy when you start breaking it down. But, for now, we're assuming you want to make $100,000 as a freelancer, or you made $100,000 in your corporate life. Whichever. Now, how do we transfer this into freelancing? How do you make the money? We're gonna be talking about monthly revenue, okay? We're gonna be doing this by month. The first step, obviously, is taking $100,000 and dividing that by 12. So, at a minimum, that's $8,333. Let's suppose that you're a single-income earner, and you need health insurance if you're in the United States. Aren't you lucky, right? You don't have to worry about this fact. But most of us in the United States do have to worry about health insurance. And I did a search on the average U.S. health insurance, and I know this is such a range, because the United States is so big, and there's so many different standards of living, but what it came up with was $750 per month, on average, right? But you would have to check that out on your own state website. If we're looking at $8,333 a month, and then $750 on top of that for health insurance, next comes business expenses, and that is something that I put at $275, I think per month? That would be pretty average. I'm assuming you went out and bought, like, a $1500 laptop or something. I divided by that by 12. I thought about if you needed business email, like, website domains. Business email, what else? CRMs, possibly maybe light accounting software. Took all those annuals and just put it into, like, a lump sum for the month, and some of those things you can do without in the beginning, but I put that on average, $275 a month. And then one of the most important things you need to think about because your employer used to do this for you, is taxes. Everything you make, you do owe the government taxes, and that's quarterly, usually, and it's based on your income and expenses. So, you can't really just say, based on income, I'm gonna take 30%. It actually is based on your expenses, because one of the good things, or bad things, is the higher you spend in expenses, the more money you spend in your business, the lower your taxes are gonna be, but then the less you get to pay yourself as well. It's really a give or take, it's a push and pull, right? So when we look at taxes, I always, always, always recommend to put aside 30%. And the reason for this is that taxes and the requirements and how much you actually owe the government changes year to year and administration to administration. Depending on who is in office right now and what they decide that year on taxes, it's ranged sometimes from, like, 22% to, like, 28%, Putting 30% aside is good, and if you have too much money at the end of the year, great. You can then, you know, give yourself a little bonus if you save too much. So, 30% put aside. What we're looking at now, when we add all those line items up, is a baseline of $13,369. Let's just round that at $13,400 a month. That is very bare minimum what you need to be making if you want to hit $100,000 corporate salary, a similar, you know, kind of lifestyle. I like to think about, like, nice-to-haves, okay? Nice-to-haves are, you know, if you want to have, like, a paid time off buffer. Now, this is funny, Paid time off buffer is, like, if you want to just, like, peace out for the day and not work, and just totally disappear, but you still want to get paid, or you take the time off from clients, you can just put this in there. Now, I'm… put this at a really high end of, like, $700 a month, which is ridiculous, but I wanted to kind of do these, like, crazy high-end dream scenarios, right? But side tangent, I kind of want to talk about this for a second. For years, I did package pricing, and I do package pricing. If I took a week vacation, I would devise a weekly rate and just subtract that from my monthly rate. Because I wasn't going to be working, or even, like, a daily rate, if it was, like, 2 days off. I would do a daily rate out of the whole month. And then I had a client come to me, and he's like, why are you taking a discount, or like, why are you providing a discount and taking this money off of my bill? He's like, because I'm not doing your work. And I was like, oh, you're right. And he said, I expect you to do the work when you come back. Like, if I was doing the work for you, I would totally, 100% want that discount. But for now, like, just pay yourself while you go on vacation. Continue with the same rate, because I don't want to do that work, and I want you to do it when you come back. And when you come back, you're gonna have, like, double the work, right? You're gonna have that whole week that you missed, plus this week, and I'm gonna expect you to jump in. You should be paying yourself for all that catch-up time that you're gonna have. And I was like, I didn't even think about that. Now when I approach clients and I talk about time off, I say, are you going to have someone cover for me, or are you going to be doing the work? Because if so, then I will give you a discount. If not, if you expect me to do the work when I come back, then I expect to be paid for this time off. And people are like, hmm. You can't really argue against that, right? But let's say you want to have this, like, paid time off buffer. Built in, right? And you don't do what I do. Then, let's just say $700. On the high end, we're doing dream scenario here. Before we did the baseline, now we're doing, like, a dream scenario. Now you want to contribute to retirement, which I would love everyone to contribute a minimum of $500. That would be awesome. And then we also want to think about a cash cushion. Because cash cushions are so vitally important, right? Because sometimes there's ebbs and flows in your business, feast or famine, and you need to have that cash cushion. Now, 5% cash cushion out of all this is $668. At a baseline, remember, when we're looking at the minimum. You need to make it to $13,400. Now, if you have all these little nice-to-haves in there, we're actually upping it to $15,268 when I did all my calculations. So, $15,200, let's just say $15,300. So it's a big, like, $2,000 difference, pretty much. Don't get scared. I know it sounds like a lot, like, holy crap, how am I gonna find clients who are gonna at least pay me $13,400? So let's try to simplify this. Four clients. You need to make at least $3,350 a month to hit your minimum. Suppose you want to have all the nice-to-haves, you should probably be around $4,000 a month per client, charging them. So, 4 clients. You can do $4,000 per month, anywhere $33.50 to $4,000. That's gonna be able to hit your goals. Now, let's just say, like, you're like, I am not at a place where I can charge people that. Let's do 6 clients. Okay. Now, let's say you can do 6 clients. That means if you want to hit your minimum, the baseline revenue that we were talking about earlier, it's $2,250. If you want all the nice-to-haves, you know, your little PTO, retirement, 5% cash cushion, then you're looking at $2,650 per month. That seems maybe a lot more doable for you, you'll be able to sell that, then you're looking at 6 clients for that.

What I want you to think about here, importantly, this is so important, is to be flexible. You don't have to keep it within… you can do anywhere $2,000 to $5,000 a month. You need to be thinking about, does someone want the bare bones of what you can offer? Does someone want the very minimum, but they love your work, and they want just a fraction of your time? Maybe they're going to be close to $2,000 a month. Suppose you want someone who's very intense, and is very time-intensive, and they're the ones that are, like, weekly calls, they want you on Slack, they want to be able to text you, they're just, like, the insane client that we love and hate at the same time. And we want to love them, because we want them to pay us a lot. So that could be the $4,000, $5,000, $6,000 client, because they're looking at someone who's going to be bringing their A-game every single day, and giving them all their attention, and they're gonna get you their stuff worked on first thing in the morning, and you're gonna be super responsive, and you're gonna be letting them know what you're up to. I don't know. That would be $4,000 to $6,000, I would say. So you're gonna have this range, and every time you jump on a sales call, you're gonna be talking to these people and finding out exactly what they need, and you're gonna be putting them in these tiers, in the sliding scale of this income bracket. So then you… but as long as you know I have a minimum I will not go below. And maybe that minimum is $2,000, maybe it's $3,350, whatever that minimum is. That's something you know you will not go below, because you know you need that in order to hit your baseline salary. So even if you had 6 clients at $2,233, that is actually what you need in order to hit the baseline minimum revenue for everything we talked about, then maybe that's what you are. That's, like, you're like, hey, $2,250, ev- that's if I had even every client at that, I would be able to hit it if I had 6 clients. Alright? 

Hopefully helps you feel more concrete about this, because I know it can be hard when you're coming from corporate, right? So instead of thinking something like, oh man, I have to make $100,000 as a freelancer. Instead, what we just did was reverse engineer it. So, if you could do 4 clients at 4K a month, or 6 clients, that's $2,650 a month, this is much more comfortable, right? So you have to work on those numbers based on you, and I highly suggest using my money mapper in the show notes that will help you with this, okay? To recap. Suppose you had $100,000 in your corporate salary. Now, we divide it by 12 to come up with $8,333. We thought about business expenses and health insurance and taxes to set aside, so we came up with a minimum of $13,400 a month that you would have to make. And then we thought about these nice-to-haves, right? The cash cushion, the retirement, paid time off, buffer, all these things are like little bonuses that you can pay yourself. And then we were looking at something a little bit more than that, right? We are looking at, like, $15,268. And then we looked at what would it be, what would you have to charge for 4 clients versus 6 clients, and the range that you could have between them. 

I really suggest, if you can, listening to this again and taking a piece of paper and kind of working through it on your own. And even better, I would love you guys to join. a workshop that I am hosting with the Finance Girlies. If you remember, they were on the podcast in the summer, and it's on October 1st at 1pm Eastern Time. You really want to sign up for this, because from there, you'll learn so much about how to handle your finances as a freelancer. It's so vitally important, and they're going to go into everything nitty-gritty. So please join us October 1st at 1pm Eastern Time. You can find that information in the show notes as well. You can find that information to sign up for the workshop in the show notes as well. On Thursday, we're going to be talking about what you need to be practicing while you're still getting a steady paycheck from corporate, right? what is one of the most important things you should be practicing? And then next week, we'll be talking to one of my students, who did so well, she doubled her income and got way more freedom and flexibility in her life. So stay tuned for that, and until then, keep flourishing.