“You make HOW much an hour?!!”

If I had a dime every time I received that response after telling someone my freelance writing rate… well, I wouldn’t need an hourly rate, because I’d be too busy sorting my diamonds.

For obvious reasons (privacy, competitive pricing, vague sense of discomfort), I won’t specify how much I personally charge per hour. Let me say that it is comfortably in the middle of the pack, but high enough that it sounds impressive to the non-freelancing layperson.

First, the layperson expresses friendly shock: is writing (or programming, or editing, or illustrating, or whatever) really that valuable? Then, they make a couple of casual calculations. “Wow,” said a friend with a full-time high-powered job, “If I made that much money an hour, I’d be rich!”

It’s easy to think that, Lovely Layperson Friend. But the truth is that a high hourly rate often translates into a modest-to-middle-class yearly earning, despite the sticker shock.

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Here’s what is NOT covered by my hourly rate:

“Wasted” time

People aren’t machines. Show me a worker who claims to be 100% productive every waking hour, and I’ll show you a liar.

Work – especially creative or freeform work – isn’t entirely linear. When I worked in a (soul-sucking) office, I was being paid from the moment I walked in the door, whether I was chatting to my co-worker, drinking my coffee, or checking my email.

While well-planned freelance rates do include some wiggle-room for creative brainstorming and client interaction, freelancers still spend a lot of unpaid time thinking about/ vaguely working on projects, and none of that “extra” time is covered.

Business expenses

Most often, I’m working from home, on my own equipment. If the computer breaks, that’s my expense. Programs that build my skills and help land the job are on me, too. Utilities are paid by me. Any of the little incidentals that crop up are my expense – and that’s not including any of the marketing or extra work I do to land even more gigs, so that I’m not reliant on any one employer.

Risk

This is the primary “extra” cost. Freelance work can be inconsistent, even with a strong stable of clients. Every freelancer has a horror story about clients who pay late – or not at all. Contracts can be onerous to enforce. Every project involves a certain amount of risk that I’m taking on – a chance that fair compensation will not be forthcoming. That’s just not covered by the hourly charge.

But that’s only half the issue – here are the deductions that chip away at my hourly rate’s final tally.

Expenses that DO come out of my hourly rate:

Taxes!

Ah, the ultimate hourly rate hiccup. Even the fattest-sounding hourly rate starts to seem rather lean when you take out Uncle Sam’s share.

Health care

Health insurance is a big expense. Benefits are one of the few things I “miss” about a more conventional job. They weren’t worth the agita of an occupation in which I was miserable, but the automatic deduction was verrrry convenient.

Any % that goes to savings / emergency fund

The safety net isn’t quite as firm when you work for yourself; savings are essential for extended lean times (or even delayed checks). I try to save a % of every paycheck. Day-to-day living unfortunately thwarts some of those plans, but I try.

Any % that goes to “retirement” fund

Hahaha. What is this “retirement” you speak of? Someday, theoretically, I will be able to save towards it. (And by the way, Freelancers Union offers a 401k).

As I explained to my Lovely Layperson Friend, comparing my hourly rate to hers (at a full-time, long-term job) isn’t apples-to-apples. It’s more like comparing apples-to-strange-exotic-delicious-fruits-that-are-rarely-in-season.

I love freelancing and have no desire to change to a “standard” job, but even the best hourly rate isn’t equivalent to a regular paycheck. The good news is that it’s sometimes better – the mixed news is that it’s sometimes worse. But it’s nothing to drop jaws over, however impressive the initial figure may sound.

Kate Hamill lives and works in New York City, where she consumes an inordinate amount of Sriracha daily. You can catch up with her on Twitter at @katerone.