A common mistake when leaving a salaried job for freelance work is anchoring the target income to the old salary number — "I made $60,000 as an employee, so I need to make $60,000 freelancing." That comparison looks reasonable but is quietly wrong, because a salary number and a freelance revenue number aren't measuring the same thing.
What your old salary actually included
An employee salary typically comes bundled with things a freelancer has to fund separately: employer-paid portions of certain taxes, health insurance contributions, retirement matching, paid time off, sick leave, and often equipment or software provided by the company. None of that disappears when you go freelance — it just becomes a cost you're now responsible for covering yourself, on top of matching your old take-home pay.
Matching your old salary as freelance revenue usually leaves you worse off than you were as an employee, not equal to it.
Building the real number, piece by piece
1. Start with your desired take-home pay
This is the number you actually want landing in your personal account each month — your old salary is a reasonable starting reference point here.
2. Add self-employment tax costs
In many countries, self-employed workers cover both the employee and employer portions of certain payroll or social security taxes, where an employer would have covered part of that automatically. This is frequently the single biggest gap between "what I used to take home" and "what I need to bill" that new freelancers underestimate.
3. Add the benefits you're now funding yourself
Health coverage, retirement contributions, and paid time off (see our other articles on these) all need to be line items in your target income, not left as vague future goals. If your old job paid a meaningful health insurance premium on your behalf, that cost hasn't disappeared — it's just moved onto your plate.
4. Add business operating costs
Software, equipment, insurance, a portion of home office costs, professional development — these come out of freelance revenue in a way they never came out of a paycheck.
5. Add a buffer for unpaid time
Vacation, sick days, and slow periods between projects are all unpaid unless you've built the income to cover them. If you want three weeks off a year, roughly speaking that means your working weeks need to generate what 52 weeks used to, not 49.
A rough way to see the gap
Adding these categories up, many freelancers find their real target revenue needs to be somewhere around 25-40% higher than their old gross salary just to land in a genuinely comparable financial position — not because freelancing pays less for the same work, but because a salary number was never the full picture of what a job was actually providing.
Why this matters for pricing and workload
Once you have a realistic target number, it becomes the actual input for calculating your rates (see our article on setting rates) and for deciding how much work you need to take on. Underestimating this number is one of the more common reasons freelancers end up working unsustainable hours for less real compensation than they had as an employee, without ever quite understanding why the math doesn't add up.