Creating a budget

- You probably wouldn't work for someone who couldn't pay you. Well as a freelancer, you work for yourself, so you better be able to pay yourself. I know that talking or thinking about money can be scary, but the reality is, if you're going to freelance, you need to develop a plan for managing your finances. That means you need a budget. You can do this with a simple spreadsheet. I've included a template for you in the Exercise Files. There's not enough time for me to cover every aspect of this template, but I've included comments that you can follow on your own. Start by identifying all of your current expected monthly expenses. This includes rent, utilities, cell phone bills, monthly subscriptions, things like that. Then fill out the amount you spend on each of these expenses. And then get even more specific with variable expenses. Add rows for things like, going out to eat, groceries, Uber rides, haircuts or gas. If you need to, look at your bank account for the past few months and make some assumptions. Use the spreadsheet to set goals for your monthly expenses in each category. Look at your total monthly spend and think about what you want to cut out or decrease. Maybe it's discontinuing a subscription service or deciding to spend more time cooking for yourself rather than going to restaurants. Then at the end of each month, check your bank statements to see how you did. Applications like Mint or Personal Capital are great for helping you quickly categorize your expenses. Now don't forget about one of your biggest expenses, taxes. Not only do you need to be able to pay your regular expenses, but you'll need to pay your federal, state and local taxes as well. In the Exercise File, I provided an area for you to find how much of your net income you want to reserve for taxes. Net income means the money you earn minus the expenses necessary to run your business. I plan for 30% of my net income, but I recommend talking with an accountant to determine the right plan for you. Last thing, I recommend budgeting to save some of your income every month. You can start small, but putting a little bit of money aside will protect you from times when work is hard to come by or your eventual retirement. Once you've defined your expense, tax and savings goals, you can calculate your gross revenue goal, that's income before expenses. All you need to do is take your after-tax income and divide it by your tax percentage. With this budget in hand, you know exactly what you need to earn to meet all of your financial obligations while also planning for your future.