Common advice is to double your effective hourly rate when going from salary to contracting (which "divide annual salary by 1000" is equivalent to). That's not just because you'll have fewer hours or have to search for clients; some clients will pay you for all the hours you can give them. But also, you'll have to bring your own health insurance, pay the additional self-employment tax, maintain a business, do business taxes, and quite a bit of other overhead. The additional cost helps offset all of that.