Friday, April 12, 2013

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.

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