Being your own boss: Budgeting
Budgeting for freelancers doesn’t follow a conventional path. Afterall, how can you plan your future if your income is irregular? In the first part of our series, Being Your Own Boss, I catch up with PGA Pro Emma Brown.
“I’ve never budgeted”, says Emma, “I know I’m supposed do it although I’m not sure why, and I can’t afford to waste time doing something I might not need”.
For many, the word ‘budget’ is a real turn-off: with connotations of paperwork and hassle. However, having a budget can actually save you money and, whether you’re a lover of Excel sheets, or scraps of paper, it doesn’t need to be complicated. A budget is really just knowing how much money you have coming in (income), how much money you have going out (costs/expenses), and working with what’s left.
Budgeting is an essential part of running any business, but the fact that Emma’s income is irregular and unpredictable makes the process even more important.
Making a Budget
Step 1 Do you have a goal?
The first step is to work out where you want to be in 2, 3 or even 5 years. Do you have ambitions to be a Director of Golf, or do hanker after a new house? If you’re financially motivated, for example, work out what you need to save to achieve your goal, and work back from there. Your long-term goals should be the motivators to do the ‘boring’ stuff, like setting a budget.
Step 2 How much do you spend?
Track your expenses for about 3 months to start with. For freelancers like Emma, these might include overheads such as rental at the club, use of facilities, hardware, demo clubs, and her own equipment and clothing.
Once you’ve done this, you can look at your expenses against your average income, and make your budget.
“Budgeting is an essential part of running any business, but the fact that Emma’s income is irregular makes the process even more important”.
Step 3 Keep track of payments
As a freelancer, it’s essential for Emma to stay on top of money she’s earned, and have systems in place to check invoices have been paid.
“I’ll admit when I first started out, I wasn’t that great at looking back at what lessons I’d given, against what payments I’d received”, Emma admitted to me. “So last year, I asked clients to sign up to a 3-month package by direct debit, which most people did, and it worked really well. And, because I’ve linked the system to my bank account, I can look to see if payments have gone through”.
Step 4 Allocate spend
Financial advisors generally suggest we work to the 50/30/20 rule: living on 50% of your income, and dividing the other 50% between spending (30%) and saving (20%).
If you can stick to those proportions, and follow the steps above, you should have enough money to live well and also work towards for the goals you’ve set yourself.
Budget Calculator for Golf Retailers
We've put together a simple budget calculator to help you get your budget off the ground.
All you have to do is input your turnover and gross margin from last year, and it'll do the rest. You want to look to increase your turnover by at least 5% each year and this clever budget planner will show you how. Please note it works best on a desk top PC (as opposed to phone or tablet) due to the live calculations. Good luck! http://bit.ly/ShopBudget
Next edition: Planning and Marketing for Freelancers