How To Calculate What You Need

I posted this to SPJ's Freelance blog yesterday (www.spjfreelancers.blogspot.com)
On the surface, it may seem discouraging to most independent writers that the top rate at $1 per word hasn’t changed in the least since the 1980s.
Don’t be like me and get hung up on what you’re making per word, it will only lead you to frustration.
Calculate what you’re making per hour. I started working smarter this year, calculating my per hour rate and employing more basic business principles and as a result, my writing business is flourishing.
When I finally wrote up a business plan this year, I knew I wasn’t making what I wanted to make and barely making what I needed to cover the monthly bills and business expenses. I was discouraged that I wasn’t making the $1 per word I had heard other professionals talking about on writer’s forums. That’s when I changed my business model and started calculating my projects by the hour. It not only made me work smarter, but it allowed me to weed out and turn down lower paying projects.
Here’s the formula I use: Income Goal (this could be what you made on your last job or a rate you need to make you comfortable – I took last year’s gross income and added 25% to come up with my income goal – I do want my business to grow) + Expenses (include all of your bills and projected business expenses). For example, let’s say your income goal is $30,000 and you have $20,000 in bills and projected business expenses. $30,000 + 20,000 = $50,000. This is the number you have to make to reach your income goals.
This doesn’t mean this is all you will make. It just gives you a number to shoot for. Let’s say you work on average, about 50 hours per week. But how many hours do you want to be working to make what you need, leaving the rest of the week to pursue projects such as writing books, essays or maybe working for lesser paying markets because you enjoy that type of work?
I decided I only wanted to be working 20 hours per week making what I needed to survive. The rest should be gravy.
So, taking 20 hours x 48 (the number of weeks I’m working per year less vacation and holidays) = 960 billable hours.
$50,000/960 = $53 per hour. This is the hourly rate you need to make for at least 20 hours per week.
Now, let’s say you have a really steady gig with a publication that pays $300 per 600 word article. That’s only 50 cents a word. Discouraging? Not necessarily. You’ve calculated that interviewing all your needed sources for a usual article takes you at worst, 2 hours. Writing and going through edits, another 1-½ hours. That’s a total of 3 ½ hours on a $300 piece. Your hourly rate = $85.71 an hour, more than enough for the needed calculated hourly rate above.
You’re ahead of the game if you can secure enough assignments like this to make up 20 hours of your workweek. The faster and smarter you work, the more time you have to pursue other interests.
If you have a gig that pays “top” at $1 a word, but it requires multiple interviews, research and possibly even observation and the editor is a PIA with regards to edits and multiple rewrites, you may not make your per hour rate.
This formula worked for me this year. What are formulas others use?