Budgeting Freelance Income

Last time I discussed my upcoming volunteer year/freelance year/career transition/whatever this is, I wrote about my no-income budget. But I do in fact hope to have some income! As a matter of fact, even though I wasn’t necessarily intending to start seriously scouting for editing and writing work until July, I’ve already found some. More accurately, I did “find” some by cold-emailing old contacts, but some was referred to me by generous friends–you know who you are! By the end of June I currently project I will have billed, though not necessarily received, around $1700. If this pace keeps up I might end up in better financial shape than I thought I would — whether that’s just depleting my savings more slowly than planned, or even adding a bit to them. (My favorite part is that the three projects I’ve either completed or booked this month use three different skillsets and came from three distinct sources. Diversification!)

Freelancing is where the old YNAB method of living on last month’s income really comes into its own. I’ll know in advance which months I’m going to have to be very strict about the no-income budget, and which months I can maybe loosen up a bit. I’m going to have to feel this out as I go along, but I’m thinking that up to $1500 of income a month will look pretty much the same as the zero-income budget (including health insurance premiums and setting some aside for taxes.)

However, if I make more than $1500/month, I’ll start by allocating any extra money this way:

25%: tax savings

20%: cash savings

10%: retirement savings (Roth IRA)

10%: gifts & donations sinking fund

10%: travel sinking fund

25%: slush spending

I think that’ll be a reasonable balance between saving and spending. What I want to do is to use freelance income both to extend the lifespan of my savings accounts (hence, the cash savings) and to supplement the bare-bones nature of that zero-income budget. 25% of freelance income allocated to slush means that I can go out to eat sometimes, or buy some music, or whatever.

I guess if I unexpectedly do REALLY WELL in the freelance game, and am making thousands of dollars a month, I will end up rethinking this. But since at least at first I’m not going to really hustle, so that I can focus on volunteering, I think this ought to be fine.