Defining your translation rates as a freelance translator

As the Bible states the workman is worthy of his meat (Matthew 10:10). How should a translator define the prices for his (her) services?
Recently I heard about someone who was considering to start as a translator. The native Dutch teacher was very convinced about his linguistic qualities in German and believed he could offer his service to Dutch companies. And hey, why not? He was not entirely sure about the right price to ask but considered to charge € 0,35 per source word.
That his proposed word rate was about four times the word rate of native German professional translators was justified. He as a native Dutch had a PhD in some subject and I – stupid – did not have it.