Yes yes and yes to what jinny said. Friend or not (and sometimes especially if they are a friend) do a contract.
I charge by the hour also. Sometime clients, many that I have had anyway, don't like the sound of that though. So I will try to figure out how long I think it will take me to perform the task at hand and add in any other factors that may take up time and then give my client an 'estimate' cost for the project.
Good luck! Have fun!
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