Should I Go Freelance?
Compare a salaried position to freelance work to see the financial difference.
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Going Freelance? A Financial Comparison
Our 'Should I Go Freelance?' calculator provides a detailed financial comparison between a traditional salaried job and a freelance career, helping you make an informed decision.
What is a 'Should I Go Freelance?' Calculator?
This calculator is designed to provide a financial reality check for anyone considering leaving a salaried job to become a freelancer. It moves beyond a simple salary vs. hourly rate comparison by accounting for the 'hidden' costs of self-employment, such as the full burden of taxes, health insurance, and retirement savings, against the full value of a salaried position, including employer benefits. This provides a true apples-to-apples comparison of your potential net income in both scenarios.
How It Works: Comparing Total Compensation
The calculator compares two different financial pictures:
Salaried Value = Gross Salary + Employer 401k Match + Value of Benefits
Net Freelance Income = (Hourly Rate × Billable Hours) - Business Expenses - Self-Employment Taxes - Health Insurance Costs
Interpreting the Results
The most important result is the **Difference** between the total salaried compensation and your net freelance income. A positive number suggests freelancing could be more lucrative, while a negative number indicates you might take a pay cut. The chart provides a clear visual of this comparison. Remember, this is purely a financial analysis and doesn't account for non-financial benefits like flexibility and autonomy.
Frequently Asked Questions
How do you calculate if freelancing is worth it?
To determine if freelancing is financially worth it, you must compare the total compensation of your salaried job (salary + value of benefits like 401k match and health insurance) against your potential net freelance income (gross freelance revenue - business expenses - self-employment taxes - benefits costs). Our calculator automates this comparison.
How much more should a freelancer make than an employee?
A common rule of thumb is that a freelancer's gross income needs to be at least 25-50% higher than an equivalent employee's salary to cover self-employment taxes, health insurance, retirement savings, and other business costs.
What are the biggest hidden costs of freelancing?
The biggest hidden costs of freelancing are self-employment taxes (which are double what an employee pays for Social Security and Medicare), the full cost of health insurance premiums, and the lack of employer-sponsored retirement matching contributions.
Tips Before Going Freelance
- Build an Emergency Fund: Aim to have at least 6-12 months of living expenses saved before you quit your job, as freelance income can be inconsistent at first.
- Line Up Your First Client: Try to secure your first freelance client before you leave your full-time position to ensure a smoother transition.
- Consult a Professional: Speak with an accountant or financial advisor to understand the tax implications and set up your business structure correctly.
- Don't Forget Non-Financials: Consider the value of flexibility, autonomy, and work-life balance, which are major motivators for many freelancers.
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