Freelancers Can Budget, Too!

A Better Way To BudgetFreelancers have, be definition, a fluid income source. Projects come and go, clients don’t always have steady work, and new opportunities are just around the bend. There is also the somewhat unsteady foundation for many websites, magazines and experimental publishers, which make it hard to know when what payment will be coming when, and for how long.

In the past, I have spoken to dozens of other freelancers who seem to agree that this makes budgeting a near impossibility. As a consequence, they end up living from month to month trying to put their money wherever they can, and making up differences here and there when they come up short. Which happens often, because there is no consistent planning involved in the month’s finances.

But it doesn’t have to be this way. With a little forethought and planning, it is possible to come up with a valid budget that will work for the ever changing income of the freelancer.

This is a modified version of an old classic, which was once referred to as the Envelope System. You would pull everything in cash and out it into an envelope for each bill and then for extra or savings. You would only spend the cash you had available, keeping you accountable for each dollar.

However, times have changed and plastic is the way it tends to go. So use this adapted version to get the same benefits in a new age.

Step One – Getting Started

To begin, you want to put together a basic list of all of your monthly expenses. This should include costs that are not bills, but are still regularly deducted from your overall income. This might include childcare, eating out, prescriptions, medical co-pays or events.

In the end, you should have something that vaguely looks like this:

  • Rent – $870
  • Utilities – $150
  • Groceries – $300
  • Cable/Net/Phone – $120
  • Gas – $60
  • Childcare – $300
  • Savings – 20% Gross Monthly
  • Entertainment – $100

When you add your expenses up, you are given a monthly baseline for what it is you need to make. In this case, it would be $1900, plus the 20% of the monthly income for savings. This gives us financial context, and makes it much more manageable an amount to reach.

Step Two – Look At Average Gross Income

Next, you should look at what you realistically make per month. While this amount will be rather fluid, there should be a basic number that can be estimated by looking back at the last six to twelve months of earnings. You want to find the minimum that you absolutely know you can make, and put that up against what you have to make.

This amount is going to tell you what projects you have to conduct monthly in order to create a proper cushion. For example, if you are a freelance graphic designer, you will need to calculate the number of websites you have to make and see if it adds up to what is possible to gain in work per month. If you are a freelance writer, you would calculate it in regular projects and your ability to bring in extra work as needed.

Step Three – Organizing This Data

Now that you know what you need, it is time to find a way to keep track of it all. I am an old school kind of person, and so I prefer using little digital sticky notes on my desktop. But this can become difficult when it comes to keeping extensive records, which is why I have switched to a free version of Budget. Or, you can get the full version for $1.99.

With this program you can create envelope tabs, just like the old system. It gives you specific rules you can generate to match each one, such as percentages based on the whole. It will track your changing income and adapt the amounts accordingly. Or, you can select it to be a fixed amount to stay the same, no matter what you make.


See? Three easy steps to monitoring your finances as a freelancer, and all it takes it a little thought and a good software for the job.






2 responses
  1. Joshua Gillem Avatar

    We have a system very similar to that for our eating expenses and what not. Works very well. The way we work it out is when the money is gone, we don’t get to go buy anything else. Of course this is our family budget and not my business budget. Good post. Never thought about applying it to my business before.

  2. MoneyAU Avatar

    Great outline and strategy which is going to be very helpful for those starting a career in writing.

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