Budgeting is very hard for some people...and has been impossible for me. But now I am working for myself, have credit card debt, hiring services, have car payments and credit car payments.
I can no longer stick my head in the sand when it comes to budgeting. In fact, part of the reason I wanted to go into freelancing was so I could learn to budget and manage my money. So here is my first sincere attempt at budgeting.
As you can see above, I have both my personal and business expenses side by side. That is because they are very closely related. For example, when tax time comes, the office space in the house I am renting is write-off-able. So even though the rent is under personal, it's really more like half personal and half business.
An important thing that many freelancers and self-employed individuals forget is to save money for taxes. Being self employed means that you have to pay both halves of your social security tax-instead of your employer paying half. I estimate that I will have a tax rate of about 30%. So once I figure out how much money I need each month to live, I take that number and multiply it by 100/70 or 100/60 if I were expecting a 40% tax rate.
So since I need about 2740 for my personal expenses each month, I need to earn about 3,914 dollars in revenue. But if I need $1,364 each month to run my business, then I only need to earn $1,364 because most business expenses are write-off-able.
This sort of calculation gives me a little cushion in case I run into problems. For example, for every business mile I drive, I get to write off $0.55! So if I drive to LA, which is about 150 miles I will get to write off about $83!! So this calculation allows me to have some extra money in the bank come tax time.
w00t extra $$$$$$$$
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