7 Budgeting Tips for the Self-Employed

Working for yourself? Congrats!

While being your own boss means a flexible schedule and working at home in your pajamas, it also means that YOU control how much you earn–and how much of that income you actually keep.

If you’ve got the self-motivation and drive to run your own business, then chances are good (hopefully!) that you also have what it takes to stick to a healthy budget. Just keep in mind a couple things as you work your budgeting magic: always plan ahead and always overestimate.

We’ve put together 7 budgeting tips for the self-employed, telecommuters, and WAHMs that need a kick in the wallet.

1. Take stock.

It’s time to consider your lifestyle strategies. Basically, it’s important to take an inventory of your life—where does your money go each day? Every day for one month, write down every single expense you have in 2 columns: Personal and Business. Personal expenses would include anything from your rent or mortgage payments to new clothes, groceries, and entertainment. Business expenses would include anything used for your business: printer paper, a Starbucks trip to meet with a client, your web hosting subscription, professional society membership fees, etc.

Now, once you’ve done this, see if there are areas where you can cut back–how many pairs of shoes did you buy last month? Do you really need 5,000 business cards?

Aside from how you live, think about where you live. If you’re living alone in a 2-bedroom apartment, maybe you should consider downsizing. You don’t need to go the way of the tiny house, but think about how much money you could save each month on rent and utilities if you inhabited a little less square footage.

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According to your inventory from the past month, set a realistic but stricter monthly spending budget– one for personal items, one for business items—and try it out for a month to see how feasible it is. If you prefer to keep things digital, you can use online budgeting sites like Mint.com.

2. Should you work from home?

You’re already saving hundreds of dollars a month if you work from home and not at a rented office space. But that also may mean you barely ever leave the house, and you’re getting uninspired and tired of being in the same environment. If you’ve got kids or live with roommates who come and go, this can also interfere with your work and decrease productivity.

There are a couple of solutions, depending on your budget limitations. One is to become a member at a coworking space, where you can rent a work desk or room per hour, day or month. Even though you’d be doling out cash for what you already have at home, this is definitely a worthwhile investment if you find yourself more productive there or your business benefits from networking with other entrepreneurs who also use these coworking spaces.

A second and less costly solution is to work from university or public libraries (free) or in calm cafes, where your only cost is that of your beverage. If you get inspired by working with the cafe’s chill background music, funky furniture and constant buzz of conversation, you can easily make up for that beverage cost by being more productive.

3. Social media = free advertising?

It can be a pain the neck to tackle all the social media devices that keep popping up and to consistently use them to effectively reach your target market. But at least it’s free right? Sort of. You no doubt need to have a solid website, which will cost you a small annual fee to run. But if you want someone else to help you design and maintain and update your website, and to run all your social media outlets, then there’s another cost right there.

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Before you call for help, check your stats and followers—are you reaching who you want to reach? How much time are you spending each day or each week on updating your social media outlets? Does your income reflect that this outreach is actually working or has it just been a time suck so far? If you decide you want someone else to do the dirty social media work, see if you can first hire an intern who can work for college credit. Advise your employee on some goals you have for social media–more sales, more visibility, regular interaction. If the intern brings in strong results, you should be able to offer them some payment.

4. Set money aside each month for taxes.

This is simple enough–skim off at least 10% of each payment you receive from a client and put it into a savings account. Do this so that you aren’t shocked (or as shocked as last year) by how much money the government takes out of your humble earnings each tax season.

5. Pay your bills on time.

Just because your paycheck might not be stable or arrive at the same time each month, doesn’t mean that your bills follow the same unpredictable schedule! Be prepared for your monthly phone/internet/insurance bills, and be sure to pay them on time to avoid late fees and other pesky problems.

6. Stay organized.

To follow up on the previous tip, if you can’t even find a bill that came in the mail a couple weeks ago, then it’s more likely you’ll forget to pay it or make a late payment. However, with most bills, you can track and pay them all in one place with websites like Manilla.

Just the same, you can track all your business expenses with apps like Expensify or ProOnGo, so you can see where your money goes, but also so you can deduct certain business expenses when tax time rolls around. But, if you can afford the services of a CPA, even better. Get organized and keep your work space, as well as your desktop, free from clutter in a simple and accessible way so you don’t waste time (time is money!) searching for old documents. Use whatever system works best for you—but do use some kind of system.

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7. Join a professional organization

Not only will you be able to connect and network with like-minded business owners, but you can also sometimes find resources and assistance in applying for small business grants, invaluable tax tips and even discounts on helpful workshops or conferences.

Whether you are making more than you ever imagined or you’re still off to a slow start, going out on your own as an entrepreneur makes it that much more critical to meticulously detail how and when you spend your hard-earned cash. Put in the time to plan a solid, feasible budget—it could be the answer to a more stable and successful business.

This article was written by staff writer Suchi Rudra. Her mission is to help fight your evil debt blob and get your personal finances in tip top shape.
Copyright © 2013 Suchi Rudra
Photo: Newton Free Library