Wednesday, August 27, 2014

How to live on a budget for WAHM & Freelance Writers


Forbes did a recent article on how freelancers should budget their money! Some great tips that I wanted to share since so many WAHM doing freelance writing and small gigs.

1. Know what you’re spending.

 The most important money principle for everyone — freelancer and full-timer — is to spend less than you earn . So knowing where your money goes is key to proper budgeting. If you don’t already, track your spending. You can do this in whatever way you are most likely to stick with — a spreadsheet, a notebook, an automated program like Mint, or one of the numerous other financial apps that aim to help you manage your money.

2. Create a baseline budget using a conservative number.

 Track your income for a few months and see what you’re averaging. Or, if you have records from the last several months or year, determine your average from that. Let’s say in the last three months, you earned $2,000, then $4,000 and then $3,000. Create a budget using $2,500 as your limit, remembering that 30% of that money will go to taxes. If this figure won’t cover what you’re spending monthly, we’ll go over how to fix that in a moment. “Some people have a situation where they have enough cons

3. Come up with your dream budget.

 The methods outlined above are good for helping you live within your means. But if you’re not making enough money or are new to freelancing or just lost a client, then you may be looking at that math and feeling like things are a little too close for comfort, or even realizing that you’re in the red. 

 4. If your dream budget number is vastly higher than your first, cut costs. 

You may be in danger of getting into debt because your income may not cover your costs. If so, go back and see how you can cut your costs, starting with recurring ones.

 5. Try the 50/20/30 method of budgeting.

 You may be wondering how much you should spend on different expenses. Some people like the 50/20/30 guideline Take your income and subtract whatever you are paying to taxes. From there, divide your expenses into three categories — 1. Necessities like housing, transportation, groceries and utilities, 2. “Paying yourself” in savings, retirement contributions and paying down debt, and 3. Discretionary spending on items like going out, shopping, travel, entertainment, fitness, etc. — and allocate no more than 50% of your income to necessities, no less than 20% to paying yourself and no more than 30% on discretionary spending. Notice that the emphasis is on saving more or putting more toward debt when you can.

 6. Give yourself a weekly allowance.

 Once you’ve determined your monthly discretionary spending limit (the “30” if you’re following 50/20/30), break it down into a weekly allowance. “This works really well for a lot of my clients, because they say, ‘I know my bills are paid, I know I’m putting aside money for taxes and savings each month, and I just need to keep track of this number,’” says Bera.

 7. Give yourself a paycheck. After you’ve gotten into a predictable rhythm with income, bills and your weekly spending, you can try creating a paycheck for yourself. Let’s say you decide you need $4,000 to live on every month and that $4,000 is your monthly average income after taxes.

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