Gross salary is a fundamental financial term. For freelancers, it represents your total contract or project earnings before any costs are subtracted.
What is Gross salary?
Gross salary is your total income from work before any deductions. This includes your full contract value, hourly rate totals, or project fees. It does not account for taxes, business expenses, or platform fees. It's the raw number you agree to be paid.
Why is this important?
Knowing your gross salary is vital for financial planning. It helps you set realistic rates to cover your costs and desired net income. It's also the starting point for calculating your tax liability and understanding your true business revenue.
How does it work?
As a freelancer, you invoice clients for your gross salary. For example, if you charge $5,000 for a project, that is your gross income. From this amount, you must then pay taxes, software subscriptions, and other business operating costs. What remains is your net profit.
Pros and cons
The main pro is clarity: gross salary shows your total earning power. A key con is that it can be misleading, as your take-home pay is significantly lower. Focusing only on gross figures without budgeting for deductions can lead to cash flow problems.
Conclusion
Gross salary is your headline earning figure. Always remember it's just the starting point for your finances. Effective freelancers track both gross and net income to build a sustainable business.
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