I see people making this mistake all the time. Price them selves so low that maintaining a certain lifestyle becomes unsustainable.
You also have to think about paying taxes. Good rule of thumb, for each $1 you make divide it by 3. So 1/3 goes to taxes, 1/3 goes to you and the rest is reinvested in your business (so paying for software, equipment upgrades, etc).
All of this and more needs to be incorporated into your pricing.