Creating a Budget as a Freelancer: Simplified

One of the most common issues freelancer’s face is how to create a budget. How do you create a budget on income that always varies?

Fixed Income vs. Variable Income

Do you have a steady gig or a part-time job? If your answer is “yes” then you have what is known as fixed income. This income is guaranteed to be a certain amount each month that won’t change, or if it does, it will increase. Fixed income is also known as “reliable income”.

So if my fixed monthly income is:

f=$1,500. (This is an example, not really my income.)

Variable income is income that varies. Most seasoned freelancers can guess the range of their variable income. You’ll have regular clients and set routines that will allow you to estimate the range of variable income.

For instance, if you have three steady clients who come to you at least once every three months with projects worth one hundred dollars and you pick up at least one new project a week for between $50-$200 then your variable income is:

v= $600(worst case or w.c.)-$1,400 (best case or b.c.)

If you’re a freelancer, you’ve learned to prepare for the worst. The same goes for your budget.

So based on these figures, your budget should be no more than:

f(1,500) +  v(w.c. 600) =  $2,200

Sample Monthly Budget

Absolute Needs:

• Rent = $700
• Electric = $110
• Cable/Phone/Internet = $120
• Cell Phone = $60
• Food = $300
• Vehicle/Transportation = $300
• Misc (because things come up)= $100
• Savings (because you need an emergency fund) = $100

Wants:

• Clothing (because most people do not buy clothing each month)= $100
• Movies/Video Games/Entertainment = $75
• Restaurants= $100
• Other = $75

Grand Total

Total = $2,140

For most people this type of a budget would be pretty comfortable. So even in a bad month, you’d have some left over cash. In a good month, well you’d be pretty happy with all the extra available dough.