Accurate determination of living standard

Please forgive the length of this post but I want to make sure I understand how to use this tool for my particular need.

I'm expecting an imminent career change, going from years of being employed by a large corporation to likely becoming an independent contractor—and the accompanying uncertainty on future income. I bought ESPLanner to help me determine the income necessary to maintain our current standard of living while still meeting life/retirement goals. My spouse works and her income will stay constant.

My intuition is to use the tool to establish our present living standard (the “status quo” profile) and then copy that to a new profile (the “on my own” profile). I'll use the “on my own” profile to play with savings and other variables to determine what percentage of my existing salary I will need to net in order to maintain the existing living standard AND still have sufficient (but likely less) assets in retirement. Assuming this is the correct approach, accurately defining our present standard of living seems a critical first step.

In recent years, our income has had positive fluctuations outside of base salary (e.g., retention bonuses). That’s made it challenging to estimate how much money we're actually saving in our regular (non retirement) assets. We have two children less than 3 years old, so childcare is a new expense and we’re saving for college as well.

Simply put, it’s been hard to know if we are living within our means because our income and expenses have been concurrently volatile. I think I’m being conservative in the assumptions by ignoring the recent extra income but if we are consuming part of that income then ignoring it skews our actual living standard. We have been using Quicken for a number of years and we have a pretty good sense of how much we are spending but we’re just getting around to developing budgets and spending plans.

Question: for the “status quo” profile, should I just use our Quicken-calculated expenses/budget as our guide for determining our existing living standard? In other words, instead of using salary and saving information to calculate a living standard, I’m using a living standard to back-calculate a current salary. To the extent my back-calculated salary is less than my actual current base salary I’ll just add that amount to my annual savings rate. Are there pratfalls to this approach?

Thanks for your help!

James