It’s the 4th quarter of the year…
…now that you’ve followed the steps, in last week’s article, and created an annual operating budget for your creative business, it’s time to create your personal budget. Creating a personal budget is less complicated because your spending behavior doesn’t tend to vary extraordinarily unless there is a lifestyle change. So, track your spending over the past few months, categorize the expenses into buckets (similar to the ones below). Total the expense categories for one month and decide how much in income you need to at least cover that month of expenses. And vuala! you have a budget. If Revenue (-) Expenses > $0, that means you made more than you spent. If Revenue (-) Expenses <$0, that means you spent more than you brought home.
While it may be tempting to take that 1 month budget and multiply by 12 to create a personal budget for the year. Consider how your income or expenses change seasonally and account for that. For example, if you spend more on Utilities in the Summer and Entertainment & Dining during the Christmas Holidays, increase the budget for Utilities for June to August and, the budget for Entertainment & Dining in December.
|Sample Personal Budget Expenses||Sample Operating Budget Expenses|
|Fixed Expenses – regular expenses that rarely fluctuate||Personnel|
|Mortgage/Renter’s Insurance||Consultant (Technical)|
|Medical Insurance||Consultant (Professional) Fees|
|Credit Card (can be fixed or variable)|
|Student Loans||Non-Personnel Expenses|
|Car Note||Operating (Internet, Phone, etc)|
|Cable/Internet||Advertising & Publicity|
|Utilities||Costumes, Makeup, Props|
|Telephone (landline/mobile)||Dues & Subscriptions|
|Food & Entertainment (business-related)|
|Variable Expenses – regular expenses that fluctuate||Messengers, Mailbox & Postage|
|House Maintenance||Office Supplies|
|Car Maintenance and Fees||Photocopying & Printing|
|Personal Care (Products & Services)||Professional Development|
|Groceries & Regular Meals||Research & Development|
|Entertainment & Dining Out||Space Rental (Home office)|
|Medical/Health (Products & Services)||Space Rental (non-Home office)|
|Child Care||Taxes (corporate & sales)|
|Pet Care||Technology Expenses – Services|
|Transportation (local)||Technology Expenses – Rental & Purchases|
|Banking Fees||Transportation (local)|
|Taxes (if self employed)||Travel (long distance)|
|Extraordinary Expenses – irregular expenses||Other|
|Donations||Gas (note mileage used)|
|Contribution to Your Business|
|Other Extraordinary Expenses|
|Savings – $ Invested In Yourself|
|Savings – Variable Income Fund|
|Savings – In Case of Emergency Fund|
|Savings – Retirement|
A budget is a guide. Sometimes life changes or you get new information and you have to update that guide. So every 3-6 months do a review. Check your personal and operating budgets against the actual income you’ve earned and expenses incurred during the year. See if it’s reasonable. If not, adjust the budget only for the remaining months in the year.
There are online and mobile applications that can help you track income and expenses but you have to set up the budget categories first. In the top 3 list of my August 10th post, I shared the names of a few of these applications. I personally use Mint.com and Home Budget. Budgeting and planning for the future can be exciting and daunting at the same time. Do it with a partner or a team so you hold each other accountable for getting it done. You will be glad that you did! It will help you make smarter decisions with your personal and business finances. And the best part is….if you ever have to submit a budget for a grant or small business loan, that work is done!
Have a great week!
Your fellow creative and business owner.