Earlier quoted context omitted.
I've only been a consultant for 2 months, and the reason I say every waking hour is because we are only just now getting caught up with bills, but we're still pretty far from being stable, and this weighs heavily on my concentration, so while I may work 12 hours in a day, I only get maybe 6-8 hours out of this work that I can actually justify billing for, because the rest of it was just spent staring at a screen and…
It sounds like you need to manage your time, including making time to take care of your life, especially if you're spending handfuls of hours every day simply stressing. If that time is going to be not-work, then it might as well be time spent managing your life and your future. If you can convert three hours of "sitting and stressing" time to two hours of "self and family-care" and one hour of "productive work", the…
I think Patrick McKenzie recommends contractors bill by the day instead of the hour, partly to get them to consider necessary break time as billable. Of course, if you get to the end of a day and realize you really have been very distracted all day, you don't have to bill it as a full day.
Family distractions can be a big problem, though. You have to have blocks of several hours — I think the ideal might be two 3-hour blocks in a day — where you know you're not going to be interrupted, short of a true screaming emergency. Getting this across even to one's spouse, never mind a young child, can be very difficult. Getting out of the house might be the only way. As Paul Graham once observed [0], even the prospect of an interruption can be enough to keep one from getting into a flow state.