I know the guest posting has been out of control, but so too has my corner of the world. Bear with me a little longer, and you’ll have me back full force soon. You can still vote for me as your favorite frugal blogger, but just remember the frugal blogging months! I need a new backpack filled with stuff!
Take it away, Sean!
Creative Budgeting for Creative Types: Planning Tips for Variable Incomes
For a long time, I lived without a budget. I tried, but it proved to be too difficult—both my expenses and my income varied greatly from month to month, and I had little desire to trade in my passions for traveling and freelance writing for a more predictable life. Nevertheless, while my money situation continued to provide a steady source of surprise, my story took a predictable turn into massive credit card debt.
What those who write about budgeting for freelancers don’t realize is that it’s very difficult to create steady expenses to balance out a variable income when you don’t know what to expect from month to month. While I’m bound to reiterate much of my accumulated knowledge from countless articles and conversations on this topic, I know that when my wife—who is an artist—got pregnant, we had to make a plan, and we did it largely from scratch. This is what I discovered.
Look for Consistencies
I have friends without permanent addresses who manage their finances better than people whose grocery bills match down to the penny every month. They have never relied on budgeting “percentage” rules, and have probably never spent a third of their income on housing. What they have done is spent some time looking at their patterns and comparing that to what their plans were. Then they create a new plan with the information they gather from their previous comparison.
How do they create their initial plans, then? By looking at what can be consistent over the period of an entire year (not a month, a year.) If you know you’re going to receive a birthday check from your parents, include that in your budget. You can predict how much money that will be, and when it will arrive. Additionally, if you spend every July painting at a family friend’s cabin for free as long as you maintain the property, you can include that—and the travel expenses— on your budget. Even those of us with permanent addresses can take this into account—you know you will have your monthly rent or mortgage payment, or approximately how much your cellphone costs a month. Record these things first.
Keep a Record
Once you know what cash you can be certain will be entering and exiting your life in the next year, choose a sample month and make a painstaking record of everything that actually comes in and out. Every dieter knows that he or she will eat healthier if she or he is made aware of everything he or she eats, and it’s the same for cash flow. Websites like Mint.com will track this for you, but I recommend keeping a handwritten record in a notebook, as that will let you better track cash transactions and “in kind” trades (we’ll get to those later).
Also, unlike any online program I’ve encountered, a notebook will allow you to keep your money in and money out completely separate. This is helpful if you’re a seasonal worker who makes almost all of your money in summer and winter and takes months off in the fall. Additionally, a notebook will allow you to customize all of your categories, and won’t judge you if you spend more on books of poetry a month than you do on groceries. After you’ve tracked what you’ve spent, make up categories that make sense to you. Is this the least amount that you can spend in that category per month? What other categories do you need that were not reflected by your sample month? This is what other budgeting articles will call your baseline, and like other budgeters, I will tell you that your next step is to figure out from where you will get the money and/or resources you need.
Choose Your Own Timeline
So often budgets are monthly, and I do recommend breaking whatever budget you land on into monthly chunks. However, seasonal workers make their money seasonally. Some people maintain lives so unpredictable that it’s better for them to plan in bigger or smaller chunks—down to the week and up to the year. The important thing is to choose a timeline that reflects your own spending and earning patterns, which will be revealed when you keep a record.
For instance, if you discover you will need housing for a week in December in between a residency and a ski camp gig, you can make a cash housing budget for that week, or rely on in kind methods of housing, like couchsurfing. Either way, your weekly budget would show a money amount or read “in kind” for housing, and this will be noted in your yearly budget as either a dollar amount or as a zero. You will need to figure out how to make the money—or the connection—for housing before that week occurs. Having a plan will allow you to do this.
Trade and In-Kind Arrangements
I’ll admit it: I’m frugal, but I can’t live without massages, so I trade two hours of writing/editing for one hour of bodywork. Creative types need to keep a record of these kinds of arrangements, and I would even recommend pursuing these where you can. When I was crawling out of debt, I definitely mowed the lawn for a doctor’s visit. Your categories will reveal how much money you need for the week/month/year, but what if you can get something as part of trade? It’s important not to over budget your time, and some would recommend giving a monetary value to in-kind agreements. This is one way to handle it, but it’s not how I’ve done it. As a creative type, I’m more comfortable with a budget that isn’t entirely numerical.
What It Looks Like
In the end, you end up with a budget that will look something like this (likely with more details!):
Yours will, in time, will hopefully account for emergencies instead of a giant credit card payment, but the point is that just because your budget doesn’t fit the advice given about budgets—even budgets for freelancers—doesn’t mean that you shouldn’t have a plan. Account for all of the realities of your life. When you know what’s coming— and what’s going—you’re far more likely to be able to do it all for less.
About the Author
Sean Lords spent three insightful years teaching English in Seoul, South Korea. Since returning to the US, he’s offered insight to others looking for tefl certification in Portland. He’s currently working toward his Master of Education and raising an amazing family.