Budgeting for Success

Freelance writing is one part creative skill and one part business sense. The only problem is that too many writers who get into this business don’t have much of the latter. Unfortunately, this came from what most learned in school—albeit subconsciously.

Writing has always been looked upon as an intellectual endeavor. Therefore, it shouldn’t be tied in any way to business. But when you’re in business to make money, having a bit of business sense is a prime concern. And if you’re going to make money in this business—at least enough to live on—then you have to know what’s coming in and what’s going out. If these aren’t relatively balanced, you’ll be out of business sooner than you think.

To keep tabs on your finances, you’ll need to create a budget based on what you’re spending now and what you predict you’ll spend in the not too distant future. The best way to do this is to create a budget sheet for each month for at least six months. Doing so will let you know if you’re going down the right marketing path and making enough money to cover your expenses. Once you know how much you can afford to spend based on your earnings, you’ll be able to take control of your finances. If you're always coming out in the red, you’ll find it easier to change your work patterns once you're faced with the actual figures.

One of the best ways to start budgeting is to faithfully record the details on your budget sheet. After you've recorded these for a month or two, you'll have a better idea of what sums to enter in your budget for the month. At the end of the year, add them up and divide by 12, putting the resulting figure in the proper slot, even though you may pay some bills quarterly, semiannually, or annually. With an accurate monthly record, you'll be able to more easily adopt counter measures if your receipts aren't tallying with your expenditures.

Lay out your budget sheet like this: Divide it into three columns.

The first lists your sources of income for that month, your uncontrollable expenses, and your net income (the first minus the second). Under that, list your regular expenses—mortgage or rent, gasoline, equipment, office supplies, utilities, travel, etc—and the their totals. At the bottom, create a line for profit or loss.

The second column lists the predicted and the actual amounts in each category in the first column.

The third column lists the predicted and actual totals for the year to date.

A budget sheet faithfully kept will show clearly where your problems lie. Are expenses in one category heavier than you imagined? Is disaster looming around the corner if you continue to work for a specific market? Where and how can you cut down on expenses? Will you have to negotiate for a higher fee from your best client? Should you aim for more sales volume? Do you need to consider getting a part-time job? Are you paying too much rent? Are you billing properly? Has your inventory of stories and ideas been turned over quickly enough?

Obviously, this budget sheet, too, needs to be balanced monthly. Be sure you carry over the figures on the following month's sheet where indicated. To accurately record figures on this sheet, you'll have to tally up those petty-cash slips you've collected. Keeping an account of each expense as it occurs will help you tremendously in following a budget plan.

Count in the current inflation rate when you're setting up your future budget pages, saving yourself from too many unpleasant surprises when new costs arise. For instance, is your phone/Internet plan slated to increase next year? What about your health insurance premium?

By keeping an accurate tally of your income and expenses, you’ll be able to tell when you may possibly be getting into hot water. If you don’t, you may find yourself reaching for that life preserver all too soon.

10 Ways to Keep Your Bank Balance in Check

Thanksgiving Weekend always seems to be the time when people look for bargains, especially on Black Friday. But as a freelance writer you need to look for bargains all year long. The best way to stay ahead of your bank account is to follow these easy steps.

1. Try to keep a cash reserve in your account to cover the slow months. Use it only for this purpose and replenish it as soon as possible. An easy way not to overdraft your account is to make this cash reserve invisible. In other words, set your ending balance without taking it into account. So when you’re at zero, you’ll actually still have money in the bank. This allows you to not only keep some money aside but also to avoid those high overdraft fees.

2. Another way to keep your income safe is to open a special savings account and deposit all your income in it. Then transfer funds to your checking account as you need them to pay bills. This method works especially well with a sporadic income flow.

3. To make bill paying more efficient, create a Bill Pay Sheet. At the top list all the months in two rows. Under them, list your regular monthly bills set up in categories—mortgage or rent, utilities, credit cards, insurance, etc. Next to each bill listing put the date due in parentheses, followed by the amount you need to pay that month. You can then add up all your bills to see how much you’ll need that month. Cross out each bill as you pay it to keep yourself on track.

4. Synchronize your accounts receivable with accounts payable as much as you can by your early planning method. Know when you’re supposed to be paid, and if you don’t receive payment within a day or two of that date, let your editor know.

5. Apply for credit with your suppliers. If you’re on friendly terms, ask to pay on a periodic basis, if need be, especially if you have established a good credit rating. Explain that your income arrives in spurts instead of on a regular weekly, biweekly, or monthly basis if this is the case. Some suppliers may be willing to bill you on a two-,three-, or four-month basis—allowing you a discount if you pay early. Talk this over with them, explaining it saves them billing and postage costs. Another possibility is to open credit accounts that allow you to pay in three-month or six-month installments with no interest if paid within the allotted time. This works well with car and dental care.

6. Slash expenses to the bone. You can only cut corners so far. But a close analysis of your budget may uncover frills that you can do without briefly without hurting your professional stance. You’ll be amazed how much you can cut your budget and still live a healthy and happy life. Doing this will not only make you more efficient, but will make you the envy of your friends.

7. You might be able to apply for a short-term bank loan for your business, but chances are no bank will loan you the money. Banks are in business to make money, so unless you’re borrowing $50,000 or more, the usual minimum for a small business loan, you’re out of luck. You might want to check credit unions you, your spouse, or other family members may belong to. A last ditch effort may be to borrow some money to hold you over from a family member or friend—this normally isn’t a good idea, however.

8. Join forces and share some of your expenses.  Get together with other local writers or even friends to share services.

9. Take a temporary part-time job. If you do work part-time, try to work at a job that is somewhat related to your writing or the subject matter that you write about. This way, you won’t be wasting your creative energies.

10. You might try applying for a grant. This, like a bank loan, is a slim possibility. Remember, while there are loads of grants out there, unless you can meet their requirements, they might as well not exist. And if you do apply for a grant, be sure to follow the instructions to the letter. If you don’t, you’ll surely be rejected.