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Maintain a Monthly Budget When You’re Self-Employed

By U.S. News & World Report

Do you find it hard to budget while self-employed? Don’t worry, you’re not alone.

Many new and seasoned entrepreneurs have trouble managing their personal finances while running a business.

Now that the days of the steady paycheck are gone, you have to revise your budgeting strategy to accommodate income that varies from month to month.

[See: 10 Money Leaks to Shut Down Now.]

The good news is that after some trial and error, you can find a budgeting method that you can count on. Here’s how it works.

1. Write down where your money goes each month. First, calculate your financial baseline, which is all of your needs without the frills. Write down your essential expenses, excluding anything extra, such as your unused magazine subscription or premium cable TV plan.

[See: 12 Ways to Be a More Mindful Spender.]

Cutting out all excess spending while self-employed is the key to squirreling away enough cash to keep a roof over your head and food in the fridge during slow business months.

2. Calculate the categories of your budget as a percentage. Here’s where this budget is a little different from the traditional method. It’s easy to allocate a specific amount of money to each line item of a budget when you have a steady source of income. After all, you know exactly how much money you’ll earn each month.

That’s not the case with an irregular income. You can get a huge check one day and not receive another one for several weeks. To manage your budget, think in percentages. Take a look at where your money goes each month and assign a percentage to each one of your budget line item categories.

For example, something like this might work as a sample budget, broken out by percentages:

— Taxes: 20 percent

— Expenses: (bills, groceries, etc.): 45 percent

— Retirement: 20 percent

— Donations: 10 percent

— Travel: 5 percent

This is strictly an example, so the money you set aside for taxes and other expenses will be different. If you’re just starting out, you may not have enough in savings to allocate money to different areas, such as donations and travel. If you don’t have about three to six months of expenses in savings, building up an emergency fund should take top priority.

3. Get organized. The third step is one of the most important steps. Depositing all of your income from clients and other business activities into your personal checking account is a big mistake.

When it’s time to report your business income and expenses at the end of the year, the paper trail will be much harder to follow. Keep a separate business account and pay yourself from it.

[See: 8 Personal Finance Myths Money Experts Want to See Disappear.]

It’s also helpful to keep more than one personal account. For example, keep a personal deposit account, bills account and multiple savings accounts for various goals.

4. Allocate each payment you receive. Now, this is where the magic happens. Each time you get paid, allocate money according to the percentages of your budget. Say you’re a freelance photographer and you receive a $2,000 check for a wedding shoot. The money should first go to your business account. After that, you can allocate money to each category of your budget.

Using the budget example from above, you would keep $400, or 20 percent, for taxes in your business account. Next, you would allocate $900 for bills, $400 for retirement, $200 for donations, and $100 for travel.

Why does this work? Whenever you receive a payment, this strategy helps you distribute the right amount of cash to all areas of your budget. Using this method, you can also avoid spending too much money in one place when large checks come in.

It’s common to go through financial growing pains while self-employed, but it’s also possible to take control of your budget. If you’re still in the planning stages before taking the leap into self-employment, it’s smart to save several months’ worth of expenses as a security net to fall back on to avoid money stress while growing your business.

For an extra savings push, tools, such as Qapital and Digit, can help you save automatically without significantly changing your money habits.

More from U.S. News

11 Expenses Destroying Your Budget

8 Big Budgeting Blunders — and How to Fix Them

10 Ideas for Dating on a Budget

Maintain a Monthly Budget When You’re Self-Employed originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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