Nothing says “creativity” like sitting down in front of a spreadsheet. Okay, we’re sorry; we know 1) that’s facetious and 2) Excel might be a triggering word, but keeping track of your finances and maintaining a budget are extremely important parts of growing your business as a creator.
Though budgeting might not be what has you hopping out of bed in the morning, it’s a foundational practice that will allow you to continue realizing success as you conquer new creative formats and platforms. Like taxes, keeping your backoffice in order with a budget will allow you to focus on your craft with a little bit of upfront work. Here are our 8 tips for building and maintaining a budget.
Lock in your expenses
The first step of managing a budget is having a good one to begin with. To start building, determine your fixed expenses (ones you have every month, for example – like your coworking membership and internet) and variable expenses (ones that can change month to month, or even week to week – like props for videos and client meeting expenses). By doing this, you’ll start to piece together the things you need every month to keep your business running. From there, you can determine what fixed expenses you can afford and also which ones you can justify. This will allow you to determine if you have any money “leftover” to either save for long-term goals, or put towards things you need to buy in the short term for your work.
Once you know your expenses, you’ll be able to not only build a monthly budget, but also start an annual or quarterly forecast. Undertaking this process can help you determine what you need to make each month to make things work. Plug in your fixed expenses to get an overall look of your operating costs to start, they layer on from there based on what you already have planned or projected. You’ll want to check back on this forecast regularly to ensure things are on track and refine this process over time, like if you book a partnership with a recurring partner. It’s not uncommon to have booms and busts – so make sure to always have a backup plan and some savings set aside. A forecast will help you identify these trends overtime which will make money management less nerve wracking and more empowering.
Have a back up plan
Even with a perfectly-crafted and -managed budget, unexpected things can happen (*ahem* pandemic). Part of your budget should include some savings or contingency. This can help you out when the proverbial well of business dries up or if you find yourself in a situation where you need to take time off work – whether for your mental health or for a vacation. A contingency fund can be slow to build, but trust us – it’s essential to have a safety net just in case. It’s hard to pinpoint an exact figure for how much this should be, but a general rule is to have about three months of expenses set aside.
You can’t have an accurate sense of your finances without keeping track of your actual expenses – building your budget is important, but knowing what you’re actually spending is paramount. Find a system that works for you that allows you to document every little thing. This could be a simple Excel spreadsheet or a specific tracking tool – like one for receipts. A tip we love is to pick a day of the week to reconcile everything from the days prior so you never fall behind. By making it a weekly habit, you’ll avoid feeling overwhelmed (digging through piles of old receipts and statements is not our favorite task!) by doing it in smaller, more manageable increments instead.
Keep work and play separate
An easy way to streamline your budgeting process is to keep business and personal expenses separate. The simplest way to do this is to set up separate bank accounts so you’re not having to go line by line through your account statements to ensure everything is accurate.
Refresh your rates
If you’re creating work for clients or working on brand partnerships, the rates you’re charging will (obviously) have a big impact on your budget and can create some variability. Though you want to forecast your revenue, it’s a good idea to have regular intervals set to review, and maybe adjust, your rates. When you’re looking at what you’re charging, we recommend asking people outside your immediate network to get a sense of the value of your services – you don’t want to be pricing yourself too low! Though you want to make sure your rates acknowledge both your worth and market conditions, there might be situations where you can offer discounts that can actually help with budgeting. For example, it might be worth offering a bit of a discount for long-term, recurring partners. Locking something in longer term is good for budget building and can also save you time on the song and dance that is business development.
Be firm with your payment terms
It’s hard to have a budget if you aren’t seeing the income you forecasted land in your account. Be sure to be clear about your invoicing terms with all clients and have them detailed in your contracts. Clear payment terms will allow you to understand when you can expect revenue to come in and sharpen your forecasting skills. For example, if your payment terms are 90 days, you want to make sure you’re not planning to use that revenue before it hits your books.
Ask for help
If you’re struggling to start or stay on top of your budget, reach out to fellow creators and ask them for their tips. The adage “a rising tide floats all boats” definitely applies here – we think your creative colleagues will be happy to help. You can also look to online courses, or even podcasts, that share budgeting tips to get you started.
It’s never too late to sort out your budget. Though you may not become enamored with Excel (or some other amazing budgeting and finance tools), knowing you have a solid budget that works for your business will certainly have you feeling some big time self-love for setting future you up for success.