Look at it this way. How much does someone have to pay you per hour to NOT spend time with your kids?
For me I have an amount set that will allow me to do something with the family later, plus enough to put back into my business and continue to grow it. I am not giving my time away. If they want me for free then they can get a cake somewhere else and i'll spend it with my family, or even spending my money doing something I want to do, but at least I will get something out of it.
"Some people can't afford me .... and that's perfectly ok."
How do i love theeeeeee.....................sooo much.
chiming in here...everyone has given great advice, so i won't beat a dead horse 
i won't make a cake for less than $60 (and that's for a 6 inch round). because let's face it, even a 6 inch round, by the time you make the batter, bake, cool, crumb, final coat, and decorate, has taken you around 2-3 hrs at minimum. that's only $20/hour (not including cost of ingredients, utilities, etc., etc.), so don't hesitate to have an aggressive pricing list (know your costs)!!!
but as far as what to do with a family member, SIL, MIL, whoever! of all people that can and will order a cake from you, your family member should know how much time, effort, and money you put into your cakes. they more than anyone should compensate you fairly because they love you and know you deserve it! no one, and i mean no one, gets a discount from me, unless i decide so!!!!!!
i did free cakes for 2 years for family, so i could build a portfolio, test out recipes, learn, make mistakes, etc. i said "ENOUGH!"... i want to make some money and so i started my business, got legal, marketed and voila...i'm loving it!
Just be careful suggesting cupcakes in the place of cake - cupcakes can be more time-consuming individually than one fully-decorated cake ... time is money !
Once you sell your cakes, you are a business selling a product. You are no longer a hobbyist, but a professional !
You teach people how they should treat you.
KarmaStew - So true across so many levels. So true.
Finally I decided enough of this! If I asked any of them for anything what did I hear? "Well I'd love to help you but I just can't." Really?? Well the next time one of them asked for an unreasonable cake order, I very calmly and politely explained "I'm sorry, I'm booked for that weekend and I can't do your cake."
When pressed on it, I told them "Look, I appreciate you wanting me to do your cake, but if I said yes to everyone, the quality of my work would suffer and surely you don't want an inferior cake?" (Said VERY nicely!) Guess what -- now I'm treated with respect and those who didn't aren't in my life anyway.
Bob - Clap, Clap, Clap!! They you go!
Quote by @%username% on %date%
%body%