One of the first things you have to do as a new freelancer is determine what you want to charge for your services, no matter your industry. If you’ve never freelanced before, this can be pretty intimidating and easy to completely screw up — given the range of advice coming from gurus.

Set your hourly rates too low and you won’t be able to pay your bills.

Set it too high and you might not be able to find work.

For the first-timers, here’s an easy way to calculate an hourly rate.

Step 1: Determine your annual salary

What do you want to make per year? Don’t pick a random number. What do you need in order to pay all your bills, save, invest, and put away money for retirement? What do you think you should make per year, based on your industry and experience? What are other freelancers making? Ask yourself.

Let’s assume you are a young professional with only a few years of experience under your belt; you have few overall costs and little debt, so you determine you need an annual salary of $50,000. That number should be your starting point, and in later steps, you’ll know why you need more than that.

Step 2: Add on extra for the taxman!

Depending on where you live and what deductions you have, your total for taxes will vary, but it’ll likely be somewhere between 30% to 40% of your income (that’s a rant for a later day). So, if you want a $50,000 annual salary, go ahead and bump that up by, minimum, 30%, to cover your taxes.

Your new total that you need to make is $65,000 per year.

Step 3: How much PTO do you want?

Okay, so freelancers don’t technically get paid time off, BUT it is possible to take worry-free time off each year if you account for that time off when calculating your hourly fee. Since we’re approaching it from an unassuming yearly perspective, we can bite the number of weeks you’ll be working a year.

Let’s say that you want, altogether — sick days, holidays, vacation, etc. — four weeks of PTO, or 20 days. That’s pretty generous compared to a lot of office jobs these days, especially for a young professional. Talking about exploitation? This means you will be working 48 weeks out of the year.

Step 4: Decide how many hours a day

For some freelancers, they fully intend to work 8 hours per day, 40 hours per week. Others want to work less, so they can dedicate more time to family, leisurely activities, unpaid work in their field, or whatever. But it doesn’t mean your scheduling shouldn’t be flexible for pursuits that may crop up.

So let’s say you want to work 6 hours a day, 48 weeks a year.

Step 5: Now calculate your hourly rate

Now, let’s fire up the calculator, shall we?

You want to work 6 hours per day.

30 hours per week. 48 weeks per year.

That’s a total of 1,440 working hours per year. If you need to make $65,000 to cover your entire cost of living/savings/investments, plus taxes, that means your hourly fee needs to be $45.13. Because there’s no point in charging a portion of a dollar per hour, let’s round that figure up to $45/hour.

That sounds like a lot to some, but keep in mind: you’re giving 30% of that to the government and “reserving” a portion so that you can take off four weeks a year without feeling guilty or worrying about money. If you feel that’s too much and set it less, the math will simply not work out for you.

I chatted with full-time freelancers who are incredibly skilled in their forte but when I got to know their hourly rates, I started questioning how they are even surviving. Because, yes, if you track your steps backward, ~$50/hour is what you need to make up for at least a normal job — if not more.

Bonus Step: Do not marry your rates!

You do not want to be rigidly married to your hourly fee, but you do want to keep a good eye on it. For example, during any given week, you may have a job that pays $80/hour, allowing you to take another at $30/hour (though if that less-paying job is something really fulfilling, that you love).

Things are further complicated when you accept jobs at a flat fee, versus an hourly fee.

In those cases, you’d do well to charge slightly more than the amount of time you expect to spend on a job, just in case. So, for example, if you think a job will require 2.5 hours of your time, go ahead and charge a flat fee for 3 hours, just in case, and to keep your bases covered and a little slack.

You never know when an interruption will arise, and you don’t want to spend every day terrified that you’re losing money. Beyond this, tracking your individual hours and fees can get really annoying once you’re to the point that you’re working with 20+ regular clients, all with varying fees and needs.

For this reason, I like to set a weekly required amount earned for myself. I know how much I need to make each week, based on how much I work each week, give or take a few hours, and so I aim to make that total amount, allowing for more or less work (albeit, flexible) at varying hourly or flat fees.

This viewpoint ONLY works if you’re extremely strict with rates.

Apart from not accepting any work at a rate below your hourly fee, making enough as a freelancer is easy — but so is not making enough. With a little thought up-front, though, you can ensure that you always have enough cash to pay the bills, plus some more, without running yourself into the ground.