I’m not sure if I’ve mentioned how much I appreciate topic suggestions. I love doing this podcast but there are times when I’m not exactly sure what’s best to discuss. Tara in Colorado recently invited me to be on her podcast “Shop Talk for Content Creation” and suggested an Amanda’s Money Tip series. I love that idea, so this is the first installment. If you have something you’d like me to talk about, please email me at info@aardvarkgirl.com or dm me @aardvarkgirl on social.

Now, when you hear the word budget, do you cringe? Does it make you want to run away? It seems the typical response, especially in the creative world, is a negative one. People associate budget with restriction. Or tedious scrutiny of everything you do wrapped up in a boring spreadsheet. Or rules. And we know how we all feel about rules. We got into business for ourselves so we could create them, not follow them.

But budget doesn’t have to be a bad word.

The real reason for having a budget is so you know where your money is going and can use that information to make a game plan of what you can and should do. It’s exactly like I talked about in the time management episode. If you don’t know where your time is going, it’s hard to manage it. The same can be said about money. If you are not on top of your finances, it’s really tricky to know what you have, what you should save, and what you can use to buy fun things for yourself.

When you work for someone else, it’s much easier. You have a salary, so you know how much you’re going to make each month. You can then divvy up those dollars pretty easily. But when you own your business, you generally don’t know exactly how much you’ll make at any given time. There is a lot of fluctuation. You’ll have good months, great months, okay months, and am I ever going to work again months. Planning with that kind of uncertainty is pretty tricky.

If that’s your situation, you have to do what’s called reverse budgeting. So instead of saying, I have this much and here’s how I’m going to allocate that money, it’s more like okay, here’s how much my bills and everything cost, so this is the minimum I have to make. And then from there, you can create different tiers of things you can get or do if you make more. 

The first step is to figure out what that minimum number is.

Hopefully you already have a bookkeeping system. I talked about that a bit in my “How to Get Started in Business” episode, and I’ll probably do one of these Money Tips specifically about that in the future. The gist is, get your bookkeeping in order. But if you haven’t done that yet, or if you do it for your business but not on the personal side, don’t let that stop you.

There is software out there that’s helpful for tracking your personal finances as well. I use Mint, which is free with ads, and the ads don’t bug me. It’s made by Intuit, who also makes Quickbooks, which a lot of businesses use for accounting. It acts the same as Quickbooks – you link your bank and credit card accounts, and you can even add your utility accounts so those bills are automatically added. You assign categories to each expense and there are some really helpful reports so you can see where your money is going. A new year is coming up, so it’s the perfect time to start a new system to stay on top of this stuff.

But if you don’t want to use that kind of software, you can do all of this manually. The easiest way is usually to go through your bank and credit card statements. Now, if you’re one of those people who still uses cash, that can really complicate things unless you save all of your receipts. I personally don’t use cash for anything. Even with as organized as I am, I find it impossible to keep track of it in a long-term sense. If I’m on a production and there’s petty cash, that’s a different story. But that’s someone else’s money, so I’m more careful with it.

It’s really best to have a full year’s worth of information to form a proper budget.

Not just because of the fluctuation in business, but even things like our utilities will fluctuate from month to month. Living in Las Vegas, I can tell you that my energy bill is significantly higher in the summer months when it’s an oven outside because the A/C is running to make sure it’s not an oven inside. So figure out what your typical needs are throughout the year.

If you’ve been in business for more than a year, you might start to see trends that will help you figure out your cycles. Knowing this can really help you form a better budget. Pre-pandemic, for example, I knew that I’d have CES in January, and then it would be pretty slow until March. In the beginning of the year, people are still figuring out their budgets and might not have everything planned out yet. They’re getting back into the swing of things after the holidays, so it takes some time. Then I’d slow down again around June because of the aforementioned oven where I dwell. There aren’t a lot of people wanting to shoot in Vegas in the middle of the summer, especially if it requires being outdoors at all. But September would pick up again and usually get really busy until Thanksgiving and then it would be slow again. Budgets for the year were spent and people were in holiday mode, so there just wasn’t much work. So those were my typical cycles. Of course, there can always be fluctuation within the fluctuation. I was really busy from September of 2019 through January of 2020. And then we all know what happened.

Start with your regular expenses.

You know how much your mortgage or rent will cost. If you have a car payment or any other debts, you know what those are. You should have a pretty good gauge on your utilities if you look through your bills. Same with cable, Internet, and any other monthly subscriptions you have. You can figure out your average weekly grocery expenses, dining out, coffee trips, entertainment, clothing, household expenses, and all that other fun stuff. Track it all, write it down or type it somewhere where you can organize it into real numbers.

Then, be realistic. What is the minimum you can spend each month for the necessities? Meaning what do you absolutely have to pay every month, and not the things you just really like to do or buy. That is where your baseline is – you have to make at least that much every month to break even. And no one wants to just break even. Be honest with yourself about these things. It’s not about depriving you of everything you enjoy. It’s about being realistic about what you need to be comfortable.

One thing I consider a necessity is saving. I’ll go into more detail about saving another time (hey, Tara, I think you were onto something with this whole Money Tip series) but saving should be priority over things like going out to eat or buying a fancy new purse. You should absolutely treat yourself sometimes, but you can build a treat category into your budget. For budget purposes, we’re talking about 3 types of saving. 1 – Taxes. This is money you will owe and isn’t really saving. But you need to put it aside to make sure it’s there when taxes are due. A safe rule is to save 35% to make sure you’re absolutely covered and hopefully end up with more than you need. 2 – Saving. This is the available money you should have for emergencies, fun, or what my grandpa always called a rainy-day fund. My dad always said you should save 10% of everything you make, so that’s something I keep with me. I always aimed for 20% or more because I’m an overachiever. But putting a percentage aside can really add up fast.

I always recommend saving a percentage of your income versus a flat amount each month.

This helps with that fluctuation, because you’re putting more aside when you’re busy and that will help cover you when you’re slow. Putting away $500 a month is great, but it doesn’t account for those cycles.

3 – Retirement & Investment. Hopefully you have some kind of IRA or other retirement account. You might not have a 401k from an employer, but you still have options to put money away for the future. As a business owner, you can get a SEP IRA or a solo 401k. Talk to your accountant about the best option for you. The amount you can contribute depends on the type of account you have, but it’s always a nice goal to max out those contributions each year. Or however you can invest your money so it’s working for you to make more, that’s great.

Considering those 3 saving types, when you get to that minimum number you need to make each month, ideally you should be adding 40-60% on top of that as your true bare minimum. It sounds scary, I know. But saving needs to be a habit so you are prepared when the unexpected happens.

From there, you can start figuring out your tiers.

So after the necessities are covered, where would you spend your money next? If you have debt, hopefully you’d include a bigger payment in that next step because getting your debt paid off will help so many other things. You want to get rid of that stuff instead of losing money on interest. And this is also where you can start peppering in those other things you want but don’t necessarily need. Figure out little increments so it’s always really clear to you where your money can go as you make it.

When you have that bigger picture, it can help you decide what’s best. I know it’s difficult when you don’t know how much you’re going to make. That’s why I love having some retainer clients, because I at least have a baseline of what to expect. I highly recommend getting some of those if you can. But even if not, if you’re keeping track of what you make you should be able to get a pretty good sense of what you can bring in. And if it’s not enough, you have two options – find ways to make more, or find ways to spend less.

Consider compromises with yourself.

Maybe you eat all of your meals at home vs going out for a month. Or cancel one of your TV streaming services for a few months and then you can catch up on those shows when you get it back. There’s this idea of deferred gratification that I think is important when it comes to budgeting. It means that you’re giving up something now for something much better in the future. Then shift your focus to what you get. Maybe you don’t have that fancy drink at the coffee shop every morning, but with that money you save over the course of a certain amount of time, maybe you can go on a trip to somewhere you’ve always wanted to go, or splurge on some new gadget that will make your life easier.

There are so many possibilities out there. But it starts with knowing what you have, what you need, and why it matters. Budgeting is not a bad word. It’s a starting point to help you understand what you have to do to get the things you want. And when you get the things you want, you’ll wonder why the idea of organizing your money ever seemed so cringeworthy.