When you have a regular job, you set your budget by asking what you can afford based on the money you make each month. You ask the question “What can I do with X number of dollars?”
Many freelancers do the same thing. They count their money at the end of each period and figure out how to pay their bills with what’s in their bank account. This is a mistake.
Entrepreneurs are aware of their real-world bottom line, but they don’t plan based on that. Instead, they make financial plans based on what they need to do. They ask the question “What do I need to do to have X dollars by Y date?” It doesn’t take online
accounting degrees to know that much.
This may seem like a subtle difference, but it’s a huge shift in focus. As a freelancer, your potential income is limited only by your willingness to work and your ability to find assignments. You literally decide how much you want to make. If you make as much as is easy, then tailor your budget to that number, you’ll do okay. But you’ll never expand your writing business to make the money you want.
Try this experiment when you have fifteen minutes to spare:
1. Calculate your hard monthly expenses: the expenses you can’t change. These are things like your mortgage, car payment and insurance premiums. Be sure to include taxes for your self-employed writing business.
2. Estimate your monthly soft expenses, called “variables” in business. These change monthly, and you can impact them through planning and discipline. Groceries and utilities are examples of this.
3. Total those two numbers to figure out your monthly expense base.
4. Add to that total any other payments you’d like to incorporate into your “monthly nut,” for example increased retirement deposits, equity payments on your mortgage or a travel savings account.
5. Add a monthly “fun budget” equal to how much you would like to spend each month on yourself and our family.
6. Multiply the total by 110% to account for emergencies and overruns.
7. Compare that amount to how much you make, on average, from your writing. Add in additional income such as a spouse’s salary, rent payments or retirement income.
8. Determine how you’ll make up the difference. This might mean writing more articles for an existing client, bringing in ad revenue on a blog, landing a book deal, or finding a new client.
9. Make your plan for getting the assignments to make your list from step 8 happen (more on that in another post).
The key here is to change your perspective about the income from a writing business. The best entrepreneurs don’t live with the results that happen. They make the results they want. That process begins with a realistic look at what they accomplish their goals. To run your writing as a business, that’s the first step in creating the life you want.
I dare you to take that step, and to comment based on what you discovered.
Thanks for listening.