There is a somewhat subtle reason as to why some can charge more than others and it is not that they offer a better quality of service. It is obvious that I look for quality when I shop at Zara but why would a person buy clothes from Marks and Spencer's when you are charged more for quality not worth every penny? It's because they ask for it and other shops don't.
Freelancing is much the same. I have advised many freelancers who are overly undervalued due to a lack of confidence in testing new waters. I can sympathize with you and I know how daunting it can be to charge more for your freelance projects.
The underlying fear stems from the thought that people will not hire you because of your prices being higher. This is actually an upside-down thought. Clients may actually hire you for a higher price, unless you charge stupid prices.
I took my family to an expensive restaurant recently and the food was as nice as another restaurant in the same area, but by charging more they gave value to their food and the skill of the chef. Personally, I never mind paying extra for quality, which is why I become disheartened when I see a freelancer who has exceptional skill and undervalues himself (or herself).
The Advantage of Charging More
If you pay peanuts, you get monkeys
The majority of your potential clients will approach you with this mindset. If you are cheap, they will expect a cheap job, and if you do an outstanding job it is a bonus for the client. Apart from being a good Samaritan, I can hardly see any advantage in charging less for good work.
On the other hand, by charging more, the client is expecting good work and when you deliver good work they will have expected it. The client is happy with the work, you have put in the same effort as before, but made more money.
If you were selling a product for $5 and made 5 sales an hour and sold for 8 hours a day you would be making $200 a day. Now if you change your price to $12.50 and made 2 sales an hour you would make the exact same. If this is not a service and we are talking about hourly rates then you can do less work.
Again, an example. If you charge $10 an hour and get lots of work and are doing 10 hours of work a day, you are making $100 a day. If you change your pricing plan to $50 an hour and lose 80% of your clients, you will do 2 hours of work every day and make the exact same. If you didn't lose so many clients then you could even work 5 hours and therefore get $250 a day. A clear advantage being less work.
The trick however is that by rising the price, I have found that if you give yourself a respectable value, the client will value your work the same. I believe you will get more work if you hike your prices a little higher.
Research the Market
You ought to have a nose around at what your competition are charging. You may find that they are charging more than twice as much as you are per hour. If this is the case, I would suggest that you revisit your calculator and work out how much you should be charging an hour.
If another freelancer is getting better business for offering a similar service then you can do the same. There is usually not much difference except that the other freelancer asked for more.
Re-calculate
Go back to the drawing board and figure out how much you want to actually make. If you work out you want $xx,xxx.xx a year then divide that by 52. Now you know how much you need to make a week and therefore can work out an hourly or fixed rate for incoming projects.
Conclusion - Test the Waters
When you have made amendments to your pricing plan, try it out. See if you are earning what you wanted. If you lose too many clients, then you have gone up too much and vice versa.
Keep your fire alive and test and check yourself. Never think 'this is it'. If you learn new skills and progress in your expertise, you will definitely find the right balance eventually and make extra cash.
