Short Term Budgeting

Separate your business expenses from your personal expenses by having a bank account for each. When you spend money on anything related to your work (see a list of business expenses below), use your business bank account. This will both help provide clarity into your inflows and outflows, and make it easier come tax time getting tax deductions. 

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Estimate future expenses

• Base this on what you've been spending in past months

• Adding in any known expenses that might happen that month but are on a schedule of less than one month (ex: if you know you need to take your car in for maintenance this month specifically, add that in)

• Subtract what you'll be setting aside for taxes

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Project your earnings out

• Divide your total earnings from the past year by 12 (or if you've worked less than 12 months, divide your earnings by the number of months you've worked so far)

• Adjust for any anomalies (if you got a huge contract that was much more than usual, pretend that was a regular sized contract for your average)

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Calculate your after-tax take home pay

• Subtract your estimated future expenses from your projected earnings

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Budget types

• Zero based budgeting

• 50/30/20: 50% of your after-tax earnings should go to needs, 30% to Wants, and 20% towards debt payments, your emergency fund, and long term investments

• Cash envelope

• Pay yourself first

 

Setting aside money for taxes

• Regular income taxes

• Employment taxes = 15.3% (goes to Social Security & Medicare)

• Set aside 25-30% of your earnings for taxes, if you have money leftover at the end of the year, put it towards debt payments, emergency fund, or long-term investments

 

List of Expense Types and Expense Examples

Needs

1. Fixed

• Rent

• Insurance payments

• Utility bills

• Cell phone plan + WiFi

 

2. Variable

• Groceries (to a degree)

• Transportation (bus/train ticket, gas, parking, etc)

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Debt payments (check the debt section for more detail here)

• Credit Card

• Auto Loans

• Student Loans

• Mortgage

• Personal Loans

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Business Expenses 

• Advertising, Marketing, and other Internet Expenses (web platform)

• Office supplies and equipment (laptop, printer, books, etc)

• Vehicle Costs (but only the percentage of time you're using it for business)

• Business Insurance

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Wants

• Entertainment (movies, tv, music, streaming subscriptions, video games)

• Eating out & drinks

• Clothes

• Events (concerts, comedy club, museum, sports game, etc)

• Health & Fitness (extra things like gym membership, spa, fitness classes, etc)

 

Emergency Savings

• Purpose = money saved in case something goes wrong – you get paid late or have unexpected expenses like medical bills or maintenance on your home or car (or a mix of both)

• Where to stash you emergency fund: preserving your money and lowering your risk is key here (high yield savings account, money market account, cash)

• Should have emergency savings that can cover your expenses for 6-12 months if you don't have any income 

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How to do it

• Assess how much extra money you can put into it, and how likely you are to do that. If you’re likely to forget, or if you start and are forgetting, it’s best to start with small amounts and build a habit out of it. Or have small amounts of money move into that account automatically until you hit your goal

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Curveball fund (create separate funds for true emergencies, and a fund for smaller not top of mind emergencies)