In honor of NaBloPoMo (or National Blog Post Post Month) I took on Blogher’s challenge to write about something I feel I am an “expert” in. To say I am an expert at budgeting is VERY far from the truth, but when it comes to somehow keeping our heads above water while freelancing, I have some experience. So below I have included our tactics for “backwards budgeting!” Woohoo!
Unless your a freelance psychic, this is for you
In a perfect world, freelancers would have consistent income like the full-timers out there. For the majority of my time freelancing, I worked more hours than when I have a 9-5. The hours in between actually creating my art are spent chasing after the next gig or organizing my finances so I can continue to maintain my career. Up until last Spring, my husband and I freelanced at the same time, making our hair stand on end every 1st of the month, because things never seemed to line up. I recently took a full-time job outside my career to catch up for a bit, and it’s given me some insight into why so many non-freelancing friends of mine are able to do things like chip away at their debt- they have a predictable budget.
After discovering the website Learnvest, an incredibly relatable financial site written for women, I started to grab hold of our finances and felt much less alone in our situation. Apparently I am not the only one frustrated that most budgeting instructions begin with “Enter your income.” But here’s the kicker – since freelance jobs often come in last minute, and the timing of paychecks vary from job to job, you often do not know your income on the 1st. (This was one of the hardest things about figuring out the Affordable Care Act forms). But alas, this is a sacrifice that you happily make to do something you truly care about. Still, there had to be a way to catch up. The constant wave between feast and famine was leaving us in a purgatory of credit card debt that slid up and down depending on the week. After many failed months of trial and error, this is what we came up with:
1. What do you need vs. what do you have
The first thing we did when we built our spreadsheet was create a section just for “Essentials.” These were the “if we ignore these, someone will come knocking on our door” payments. Rent, credit card minimums (not ideal, but again, bare minimums), and student loans. I also added groceries to this list, but this was more a psychological trick for me, to remind myself that if all else fails, we will still eat. I have managed, in a very tight month, to get our grocery bill down to $200 a month for the two of us. This is thanks to Trader Joe’s and a lot of pasta nights. The other items on this list are train tickets, gas money, electricity, and internet. If you cannot do your work without them, you should pay for it.
2. Special Essentials: Or what to do when you drive a U-Haul into your neighbor’s gutter The next section is Special Essentials. These are all the oh-so-special bills for that month in particular. Things like union dues, medical payments, and random things like parking tickets or a bill from your neighbor for breaking his gutter. The only reason they are not in the top category is that they can wait if absolutely necessary. The world will not stop spinning if a bill has to be a little late. But it isn’t ideal, and no, it doesn’t feel great. But it is what it is. I also try to put savings into this category when we can. Paying yourself first, especially for an emergency fund is always a priority.
And this is where all the “living your life” stuff comes into play. These are the items people often bring up when they say, “Maybe you can just cut back a bit.” I assure you, freelances are most likely not splurging the way you think they are. For me, this category is often Restaurants/Bars, Coffee, Gifts, Shopping, Education/Gym, Misc., and any special events that month like a wedding. Determining your priorities is very helpful here.
4. Making the numbers add up (to something over $0) And this is where the backwards part comes up. Back at the top of the spreadsheet, have a place for your income. You can break it down by source if that helps, or by person if you combine finances with someone else. I like to use a line for expected income and actual income, so that when money is deposited, I enter the actual one and the formula changes the amount that is still expected that month. Creating a center box for all this is really helpful. If you are interested in seeing how we set up our sheet itself, I would be happy to write a follow up post:)
As your gigs line up for that month (and you know the check will arrive before the 31st) add this to your income. This way you can see how far away you are from breaking even. If at the start of the month, you are not breaking even from what you know, adjust all the lifestyle categories. If that doesn’t fix it, take off the Special Essentials. Most importantly though, add the amount you are putting off to next month so that it is not simply brushed aside. This way, you have a timeline for paying it off. Having a timeline and a plan is better than putting it in a sad growing pile of bills with the post-it “someday” on top. If your expected income suddenly spikes (hooray!) we try to add a small portion to section of lifestyle, a small section to our savings, and the remainder to our credit card and loan payments. This way, the extra is going to getting rid of debt, paying into your future and emergency fund, and also giving you some physiological wiggle room to go out to lunch occasionally. Without this wiggle room, I have found that I begin to resent my art form. No we are not going out for a night of snazzy cocktails when this happens, but we may have a beer and wings night without worry.
5. Diagnosing the sneaky problems The first few months for us were very eye-opening. Every several days, I check in on our account and add the purchases to the appropriate category. At first I realized that we were spending a comical amount on coffee. We used to have a Dunkin Donuts next to our train station and so we stopped almost every time. I think at one point we spent $200 on breakfast sandwiches. So yeah, that stopped. But we didn’t even realize it until it was adding up in front of us. So now instead of wondering where all the money is going, we can see the reality of $3 sandwiches adding up over time.
6. More income over less spending Sometimes there is only so much you can cut. When you have to pay a bill, you have to pay a bill. You need to eat and live somewhere, and getting to work is not always cheap. So this year, I also stopped beating myself up for spending money on essentials and remembered that increasing income is often way more effective. Unfortunately, it’s much more out of your control. I’ve come across similar posts where comments go off track and accuse the writer of “not getting a real job.” If you are confused by artists and why they break away from the typical structure of 9-5s that aren’t related to your interests, message me, I’m happy to chat. But nonetheless, sometimes your budget can alert you that it is time for a change. An extra gig, an attack of a particular credit card to cut down your monthly payments, or perhaps an overhaul of how your approach your career in the long-term. All of this is very helpful to consider. It’s also important to remember that these things take time.
6. Taking a deep breath Though obviously budgeting will not literally create money, I felt a huge weight life off my chest after we set this up. Learnvest also has a fantastic budgeting program that goes into way more detail, but having an excel spreadsheet worked better for us as far as sharing. Seeing your end of the month total pop above $0 always feels like an accomplishment, even if in a perfect world, we wouldn’t have to think about this. But at least this gives you a game plan instead of holding your breath the last week of the month, hoping that it all adds up.
As stressful as it can be, I don’t think we will ever give up the freedom of pursuing our art. And though we may bring in less money than many, I believe we as artists need to be more diligent and organized because of our income’s inconsistencies. The best thing I always remind myself is that we are still plugging away, doing the thing that we love and somehow squeaking by. Perhaps in a few years the phrase “squeaking by” will be a thing of the past, but at least for now we can sleep more soundly because of a meticulous excel spreadsheet.