Even though this is the advice of a freelance designer, not a writer, some of the tips from this posting on supporting yourself are sound. The following especially can be helpful if you're wondering how to handle a project where you have to set your own price, like freelance editing or proofreading:

Bidding a project. There are two options, a fixed project price or a fixed hourly rate. I prefer the first and have found that a fixed project price alleviates the stress of an ongoing project. I like for my clients to know what they are getting and how much they are paying before I do anything, including drafting the contract. Here's how I bid a project, I estimate about how long it will take, in hours, multiply the number hours by how much I think I realistically deserve per hour, and then add about 25% to cover unknowns, problems, materials, etc. The client never sees this cost breakdown, but it helps me in being fair and not feeling like a project isn't worth it. Don't be afraid to overbid. Clients will pay good money for good work, and on several occasions I have been the highest bidder but landed the project because the client wanted the best work. Your project price defines your quality of work in a client's eyes.

Collecting. I collect 50% of the total project price up front, before I begin work, and the other 50% upon project completion. I have never had a client argue about an initial payment, and to be honest, if they did, I wouldn't want to work with them anyways. Paying in halves or thirds is standard, steer clear of a client who tries to persuade you otherwise. Keep copies of all invoices sent and checks recieved for tax purposes.