Guide
Can I afford to quit my job to freelance?
The short answer: you can afford it when your day rate covers your old salary plus what your employer was quietly paying on top of it, across the number of days you can actually bill. For most people that rate is close to double their first guess, and the reason is not the rate. It is the days.
By Mick, founder of Pathway Discovery ·
The sum almost everyone starts with
Take a salary of $95,000. There are about 260 weekdays in a year, so the obvious move is to divide one by the other and call it $365 a day.
It looks reasonable. It is the number that gets people into trouble, because both halves of it are wrong. You will not work 260 days, and your salary was not what you cost your employer.
You will not bill 260 days
Start with time off. 6 weeks covers annual leave, public holidays and the days you are too ill to be useful. That is 30 days gone, leaving 230 working days.
Then take out the work you do not invoice for. Finding the next client. Writing the proposal. The call that does not convert. Invoicing, and chasing the invoice. Bookkeeping, tax, and the software that keeps breaking. Learning the thing the next job needs. At 25 per cent of your time, which is a mild assumption rather than a pessimistic one, you are left with 173 billable days.
This is the part an employee never has to think about, because a salary pays out across all 260 days regardless of how many of them were billable. Nobody deducts your Tuesday afternoon spent on expenses.
Your salary was not your whole package
Two things your employer paid that you now pay yourself.
Your pension. At 11.5 per cent of $95,000 that is $10,925 a year, and it was never in your salary figure. Stop paying it and you have not saved money, you have taken a pay cut with a delay on it.
Running costs. The laptop, the software subscriptions, the phone, the internet, insurance, and somewhere to sit. Call it $4,000 a year, which is modest if your work needs a decent machine.
So the figure to cover is not $95,000. It is $109,925.
The real number
$109,925 across 173 billable days is $637 a day, against the $365 the first sum gave you. About 1.74 times as much.
The currency does not matter and neither does the exact salary. The transferable part is the ratio: the honest figure sits close to double the naive one, and almost all of that gap is the days rather than the costs.
Where income tax fits, and where most calculators go wrong
This is worth being careful about, because it is the single most common error in freelance rate advice and it inflates the answer badly.
Your salary was already a gross figure. Income tax came out of it before you ever saw the money. As a freelancer you pay income tax out of your profit. Same tax, same income, different route. So adding a separate "tax to set aside" line on top of a gross salary charges you for it twice, and can push a rate up by a third for no reason at all.
The same logic applies to unpaid time off, which some calculators add as its own line. Weeks off have already shrunk the billable-day count. Charging for them again double counts them.
What genuinely does change is timing. Nobody withholds tax for you any more. You are paid gross and you set it aside yourself, which on $637 a day means holding back roughly $32,978 of what you bill across the year. That is a cashflow discipline, not a higher rate. It is also the thing that catches out people in their first good year.
Three questions the day rate does not answer
The rate tells you what to charge. Whether you can afford to go is three further questions, and the second one is what actually ends freelance careers.
1. Can you charge it? Find out what comparable independents in your market actually bill before you resign, not after. If the honest number lands well above what your market pays, that is not a reason to abandon the plan, but it does mean the work is in positioning rather than in spreadsheets.
2. Can you fill the days? Every figure above assumes 25 per cent non-billable time. Push that to 40 per cent, which is ordinary in a first year while you are still building a pipeline, and the same salary needs $797 a day instead of $637. Utilisation moves the answer more than your rate does, and it is the number people track least.
3. Can you survive the gap? Your first invoice goes out at the end of month one on 30 day terms, so the money arrives some time in month two, assuming they pay on time. Plan for three months of living expenses before anything lands, and do not assume month one bills in full.
Run it on your own salary
Every number above moves. Your time off, your utilisation, your pension rate and your running costs are all different from the defaults used here, and the answer is sensitive to all four.
Free, no email, and the result is a link you can keep.
The number is the easy half
Working out what you need to charge is arithmetic. It has one right answer and you can get it in a minute.
The harder question is what you would actually do independently, and that one has no formula. Most people who stall on going freelance are not stuck on the rate. They are stuck on which direction to take, and no calculator will settle it.