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5 Reasons You Need to Keep a Business Budget

Keeping a freelance writing budgetAs a freelance blogger, you need to be keeping a business budget.

Budgets as a whole get a bad rap. People equate them with being poor, living paycheck-to-paycheck or needing to be on one due to not being able to manage one’s own money.

But the former financial advisor in me begs to differ.

Knowing your income and expenses (in essence, all that a budget really is) is essential in being a successful business owner. Here are five reasons why you need to be keeping a budget for your freelance writing business.

1. To Avoid Overspending

How do you know if you can really afford that computer upgrade, hot new course or the like, if you don’t keep track of your income and expenses. Just wing it?

Not a good idea.

Instead, forecast what your monthly income should look like based on your current clients. Then do the same thing for the expenses you’ve committed to (membership sites, hosting fees, etc).

Are you in the red or the black? If you’re barely eking out a profit, then you need to be reducing your expenses and/or increasing your income.

After all, you’re in business to make money, right? If not, then writing might be just a hobby for you.

2. To Fund Your Goals

You can have a full-time freelance gig like me or write on the side to bring in extra money for your household. Either way, your goal is to make money doing something you love.

You might be trying to pay the regular bills, pay down debt or build up enough cash to quit your day job. Each of our goals are different and that’s okay. But knowing your business budget will put you in a better position to actually achieve them. Otherwise, what are you working so hard for?

3. It’ll Make Tax Time Easier

And who doesn’t want that? Keeping track of your freelance income and expenses is super helpful in systematically preparing for income tax time all year long.

As I get physical or virtual receipts, I just log them into my profit and loss tracker. I do the same thing when I get paid. You can do this in real time like I do, or set up an “accounting” email folder and batch the task on a weekly basis instead.

It doesn’t matter so much when you do it, just that you do it on a consistent basis. It’s also fun to see your business grow over time.

4. You Can Assess Your Progress

Want to know how to make more money as a freelancer? Start tracking it. I’m serious, I even wrote a whole post about it awhile back.

Using a profit and loss tracker is a great way to assess your progress and keep track of your business budget. Mine has an annual view on the front page, an expense forecasting tab (things I’m committed to investing in monthly), one for projected income (to look at the current and next month’s billables) and a tab for each month individually to track current income and expenses.

Now that I’ve been in business for over a year, I can see my progress not only month-over-month, but also year-over-year. Last month was the first month that my gross income wasn’t higher than the previous month, but I didn’t sweat it as my net income was the highest it’s ever been.

And I know stuff like this at any given time, because I track it. Knowing your business numbers is the easiest way of assessing your progress (or lack thereof).

5. To Challenge Yourself

Knowing my numbers also motivates me to challenge myself. I’m a competitor at heart – more against myself than anyone else though. After all,

Comparison kills contentment.”

My goal isn’t to make more and more money. Instead, it’s to make a certain amount of money in a certain amount of time. I.e. ideally I’d be earning $10,000 per month on average in ~30 hours per week.

I’m not at that point yet (I did cross the $7k mark for the second time last month), but it’s a bar I can measure myself against. Knowing where I’m at (and where I’ve been) is what enables me to make goals like that (which I’d like to achieve by year-end).

In Conclusion

As a freelancer blogger or writer, you really do need to know your business finances and keep a business budget. How else are you going to know what you can afford to invest in or be able to achieve your personal financial goals.

Keeping track of both income and expenses is bound to make tax time a whole lot easier. It’s also a great way to assess your progress and keep challenging yourself.

For me, it’s not about doing more and making more, but rather being as efficient as possible with my work and my money. This is the only way that I can truly achieve what’s most important – spending as much time with my young family that’s growing older every day.

If you’re not keeping a business budget currently, did I convince you? Feel free to ask any questions about how in the comments section.

Gina Horkey

Gina Horkey is a writer for hire, with a background in personal finance. She also offers coaching services and really enjoys helping other freelancers gear up to quit their day jobs and take their side hustles full-time. Please stop by Horkey HandBook and download your free copy of 8 Tips to Start Your Freelance Career off on the Right Foot!

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