How To Set A Freelance Income Goal
Have you ever asked yourself, “how much money should I be making?”
Or, have you ever compared your income to another designer?
After you did, you may have...
- Gasped with shock because the designer you compared yourself to was making x3 what you make.
- Poured yourself a glass of wine because your business suddenly didn’t seem as successful as you thought it was.
We shouldn’t compare our income to others but we do because it can make us feel good about ourselves - IF the other person seems to be ‘less successful’ than we are.
When they’re not?
It’s a recipe for disappointment (and a really sucky inferiority complex).
Stop comparing your start to someone else’s middle. And stop comparing YOUR middle to someone else’s start just because it makes you feel good.
You do not need to compare your freelance income to anyone else’s to feel successful.
That said, you DO need to have a clear idea of how much money you should be making. Knowing the answer to that question will help ensure you can pay your bills, afford your vacations and get that new car you’ve been eyeing up.
Related post: 5 Reasons Why You Need An Income Plan
There’s no better time to set an income goal than right before the start of a new year, so let’s get crackin’!
In today’s blog post, I’m going to teach you how to set a freelance income goal and work out EXACTLY how much money you need.
Before I show you how to set the perfect income goal for your business, sign up below to download my FREE Income Goal Worksheet. Then, fill out the worksheet as we go through the rest of this article!
To calculate your perfect income goal, you need to answer a few questions...
What are your monthly personal expenses?
This includes expenses like…
- Food shopping
- Clothing
- Rent/mortgage
- Gas/water/electricity bill
- Car fuel
- Insurance
- Netflix
- Magazine subscriptions
- Medical expenses
What are your monthly business expenses?
This includes expenses like…
- Phone bill
- Internet bill
- Business insurance
- Spotify
- Adobe Creative Cloud subscription
- Other subscriptions (Squarespace / Wordpress / Dropbox etc)
- Subcontracted services
- Employees
How much money do you like to save per month?
Saving is a MUST, no matter how much or little you earn. I won’t tell you how much you should be saving, just save whatever you can afford to save.
When you add it all up, that’s your baseline income. This income would cover your bills and put food on the table but you won’t be able to do much else.
Let’s change that...
How much money do you spend on vacations each year?
This would include things like:
- Flights
- Hotels
- Travel insurance
- Spending money
How much money do you like to spend per month on non-necessities?
This would include things like:
- Coffee
- Dates
- Home decor
- Day trips
- Hair/nail salon
- Sports games
- Concerts
Psst! Don't just create an income goal. Create an income plan to help you reach your goal! My Income Plan Spreadsheet will help.
Is there anything particular that you want to start saving for?
Maybe you’d like to buy your own house.
Maybe you want to travel the world.
Maybe you’re getting married.
All of these things require more money than you’d usually put aside so remember to give serious thought to your goals and think about how much money you’d need to achieve them.
Now add it all up!
Got your total? Good!
Now here’s the important bit: That sum is the income you need to make AFTER taxes are deducted.
Yep, that’s right. You actually need to make more than that sum because you’ll be paying taxes on it. *Womp womp*
Use a tax calculator to work out how much money you need to earn so that even when you deduct taxes, you go home with the sum you calculated above.
Here's an example.
Let’s say you answered all the questions above and realized you need to make £50,000 after taxes are deducted.
Here’s how to work out how much tax you need to add to that:
Open an online tax calculator. (Use this tax calculator if you’re based in the US and this tax calculator if you’re based in the UK).
Enter an income that’s a bit higher than your income goal. You may need to keep altering that number until the results show that you’d take home £50k.
In this example, the tax calculator shows that we would need to earn £74k to take £50k home. (That’s £24k to the tax man.)
So, £74k would be our yearly income goal if we wanted to go home with £50k!
If you’re feeling a little confused, watch the video at the start of this post to see a step-by-step walkthrough of this.
Free Income Goal planner
With 2018 right around the corner, it’s super important that you figure out how much money you need to make! Especially if you didn’t make the money you thought you would this year.
It’s time to have your most profitable year yet. Sign up below and you’ll immediately receive my FREE Income Goal Worksheet in your inbox!
