How to Build a Basic Budget (When You’re a Freelancer)

Whether you’re a freelancer because you love the flexibility or because it’s the best way to work in your chosen profession, budgeting is the key to a successful financial future as a creative professional.

Learn how to build (and stick to) a basic budget, and check back for tips on how to level up your budget in the future.

What is a budget?

A budget is an overview of how much money you have, how much you spend, and how much you can save or put toward any debt you may need to pay off. Budgets are usually calculated on a monthly basis, which likely aligns with the cycle for many of your bills.

When you’re ready to start building your budget, you might prefer a tech savvy approach with an app that connects to your accounts, a slightly lower tech spreadsheet, or you might like way an old school pen and paper connect you to the numbers.

There’s no right way to manage your budget—as long as you actually are managing it.

Why do I need a budget?

A budget is the key to financial freedom and the security that comes along with it. Armed with a budget, you can live each day knowing you’re making smart money moves rather than worrying you’re backing yourself into a financial corner.

When you build, review, and stick to your budget, you can remove the constant fear or worry that you don’t know if you’re making enough, spending too much, or that your financial future isn’t secure.

How do I start to build a budget?

It starts with researching your current financial situation. The information you need to build your budget includes:

• All of your bills, like housing (mortgage or rent), your utilities (including phone and internet), food, transportation, and subscriptions or streaming services
• All of your inflows, including regular paychecks, one-time job payments, and any interest you may be making on savings
• All of your debts, such as a mortgage, card payment, credit card balance, or any medical or personal loan debts you may have

It’s also important to take stock of any spending you might do for “fun” things, like shopping, social activities, hobbies, or going out to eat. Budgeting doesn’t automatically mean you’ll have to give any of these things up, it’s just a chance to review how much you’re spending and where so you can make smart decisions with your money.

Once you know how much money you’ve got coming in and going out, it’s time to start building your budget.

What is the best method for building a freelancer budget?

Now it’s time to take the research you did and apply it to your budget. You know how much money you need to maintain your current lifestyle, and you can say whether or not that matches with your income. If the answer is, “Yes” then plug it all into your budget so you can keep going. If the answer is, “No” then your budget will help you find the best areas to trim.

There are several effective ways to bucket your money for your budget. Popular budgeting methods include:

• 50/30/20 budget: With this budget, you allocate 50% of your income to needs like housing, your car, food, and utilities, 30% for wants like dining out and entertainment, and 20% for savings and debt repayment.

  Note: If you live in a high-cost area, you may need to tweak these numbers a bit to—for example a 60/20/20 split.

• Envelope method: To utilize this type of budgeting strategy, you divide your income into envelopes (real or virtual) and fill them, starting with the ones that cover your basic living expenses. Once an envelope is empty, you stop spending out of that envelope until you refill it again the next month.
• Zero-based: This budget is just what it sounds like. Each dollar you earn is assigned to a category until you reach zero. This type of budget allows you to keep a close eye on how much you’re spending in each category.

Many people find that a combination of these budgeting methods works best, e.g., using the 50/30/20 method for determining how much money should go in each of your envelopes.

If you’re a freelancer or business owner, you’ll also want to set up a separate budget for your business so you can track how well your business is performing, what your expenditures are, and save for things like training, marketing, and taxes.

Finding a financial partner who understands the challenges creative professionals encounter can help you build, maintain, and level up your budget.

Frequently Asked Questions

How does being a freelancer impact my budget?

When you’re a freelancer, you might have irregular income. Your budget should account for this, and during the months your earnings are higher you’ll set aside funds to help balance out the months you earn less.

How often do I need to review or revise my budget?

To an extent, you’ll be reviewing your budget each time you input your current income and expenditure (weekly or monthly). Additionally, you should do a full review on a quarterly basis to account for any changes in your income, expenses, or living situation and make adjustments as needed.

What’s the best budgeting method?

The best budget method is the one you’ll stick to. When you’re first getting started, it can be helpful to try out a few different methods to see what resonates. The 50/30/20 method provides a simple, easy to manage framework. The envelope method helps clearly define spending limits and works well for people who struggle with overspending. The zero-based budgeting method is great for people who want to track where every dollar is going.