The Day I Realized I Needed to Raise My Rates as a Coder

Hourly billing is nuts.

I learned that from Jonathan Starks. Charging by the hour doesn’t encourage productivity. To make more money, you have to work slowly or pad your time sheet. In either case, you’re not being honest.

Even knowing that, I agreed to work as a contractor for a small software agency charging by the hour.

After every task, I couldn’t resist the temptation of looking at my tracking software to see how much I had made in that working session. “I’ve made only $75, I need to pay my bills. Arrrggg!”

But that story started months earlier, after being “let go.”

After the initial moments of relief from a layoff, the anxiety of not having a paycheck made me go into panic mode. I sent my CV to as many places looking for coding skills as possible. Even to a FAANG, and my overconfidence and lack of preparation made failed.

Out of dozens of applications, only one got me a reply: “Thanks, but we’re not looking. Maybe later.” A polite no.

Months later, they wanted to chat with me.

I wasn’t used to charging by the hour. As a full-time employee, you receive your monthly paycheck and don’t run those calculations. Maybe HR does, not you. I picked a rate out of thin air based on my last salary.

One ex-coworker suggested that I should go with a lower rate since hiring in 2024 has been slow. AI, high interest rates, or who knows what made the demand for software engineers decrease. I followed that advice and lowered my rate.

The day of the interview came.

The usual questions: “what do you do?” and “tell me about yourself.” And of course, my hourly rate.

When I asked about my future project, I was told it was an app migration from an ancient tech stack to a newer one and they were looking for someone “cheap” like me to handle the repetitive part.

Ouch! That hurt. Directly in my ego. “Thanks for being honest.”

I knew I needed to set an aspirational rate (lesson from Naval Ravikant) and escape from the Matrix. That moment reinforced that decision. But my emergency fund was about to run out in a couple of months, so I had to swallow my pride and be the “cheap” one.

The next time you’re asked about your rates, go with the advice from “The Secrets of Consulting” by Gerald Weinberg and give a rate that makes you comfortable either if it’s accepted or not. Avoid the “oh no, I should have charged more” and the “damn, I charged too high.”

Or use a more practical approach: slap the other person in the face and say your rate. If he gets offended by the slap, you’re charging too low.

You need to raise your rates.