A Very Detailed Look at My Summer Budget
In three months we’ll either look at this and say “good planning!” or look at it and laugh.
So my financial goal, for this week, was to figure out whether I was overspending the summer budget I had created for myself AND to determine when and how I should pay off all of the summer expenses I had front-loaded onto my credit cards.
Here are my starting assumptions:
- I am going to earn, on average, $5,000 per month between May and August, or $20,000 total. Although I might earn more than $20K, I should budget with $20K in mind.
- These earnings will be distributed very unevenly throughout these four months.
- Of these earnings, 25 percent ($5,000) will be set aside for taxes, and 15 percent ($3,000) will be saved.
- That leaves $12,000 to be spent.
- My overhead expenses (rent, bills, food, health insurance, public transportation) come in at a really steady $2,000 per month, give or take a few bucks. So $8,000 of that $12,000 needs to be set aside for basic cost of living.
- That leaves $4,000 for discretionary spending, which will be split pretty equally between business and personal expenses.
- As of today, I have spent $2,711 on business expenses and $2,272 on personal expenses. (In other words, I’ve already overspent.)
- However, a lot of this is pre-spending on stuff like plane tickets and hotels that will take place later this summer. (A huge chunk of this spending will go towards the six-day business and personal trip I’m taking to NYC and DC next week.)
- I have a business credit card balance of $1,836.35 and a personal credit card balance of $705.38.
- I anticipate I will have $250 in business expenses and $638 in personal expenses for the remainder of the summer (that is, through August 31) though things always come up.
- I also need to make sure I pay back the $3,000 in “savings” that I put in my checking account as a buffer to cover low-cash-flow months.
So let’s start doing the math.
I received $5,507.07 in freelance payments in May. $1,376.77 went to taxes, $826.06 went to savings, and $3,304.24 went to my checking account.
Of that $3,304.24, $2,000 went to overhead costs, leaving $1,304.24 for personal and business spending. I knew I would be spending a lot more than $1,304.24—like, $2,711 on business expenses and $2,272 on personal expenses—so I put a lot of those expenses on credit cards. I also spent down some of the $3,000 “savings buffer” I put in my checking account in April, and ended the month with a checking balance of $1,810.02.
Let’s do some math.thebillfold.com
I expect to receive $3,317 in freelance payments this month. $829.25 goes to taxes, $497.55 goes to savings, and $1,990.20 goes to checking, added to my checking account carryforward of $1,810.02.
So $3,800.22 in checking. $2,000 goes to overhead, leaving me with $1,800.22.
$705.38 goes to pay off my personal credit card, and $25 goes to my zero-interest business credit card, which leaves me with $1,069.84.
I’ll have about $200 in additional business expenses this month and $136 in additional personal expenses, though I might as well round that latter up to $200 as well because things come up.
Let’s say I end the month with $669.84 in checking and $1,811.35 on my business credit card.
I expect to receive $7,734.37 in freelance payments and book income (yay!) in July. $1933.59 goes to taxes, $1,160.16 goes to savings, and $4,640.62 goes to checking.
Add my $669.84 carryforward from last month and that gives me $5,310.46 to spend.
Subtract $2,000 in overhead costs and I’m down to $3,310.46.
Now I get to pay off the $1,811.35 still on my business credit card, leaving me with $1,499.11.
I should have no business expenses in July—none planned or expected, anyway—and $201 in personal expenses. We’ll just round that up to $300 because things happen, and I might end the month with $1,199.11 in checking.
I expect to receive $7,755.40 in freelance payments and book income in August. (I get my book royalties 60 days after the end of the month.) $1,938.85 goes to taxes, $1,163.31 goes to savings, and $4,653.24 stays in checking.
Add the $1,199.11 carryforward from last month, and that gets me $5,852.35.
Subtract $2,000 in overhead costs and I’m down to $3,852.35.
$3,000 of that $3,852.35 needs to stay in my checking account, because that represents the $3,000 I put in as a buffer. That $3,000 isn’t meant to be permanently spent forever; it’s meant to be occasionally spent if I have low cash flow and then paid back.
So I have $852.35 in discretionary spending money for the month. I anticipate $50 in business expenses and $301 in personal expenses, which means that I might have around $500 of wiggle room for the entire summer.
But it should work.
To answer a few questions:
How are you spending so little on personal expenses? I’m not? I just spent a lot of it already. I went to a wedding last month, and I’m going on trips in June and August. I also booked myself a $200 massage.
But yes, I did set some rules for myself at the beginning of the summer. No new clothes. No takeout. As few Lyft rides as possible. I haven’t seen Wonder Woman or Guardians of the Galaxy Vol. 2 or any of the other movies. I have so many expenses already that I’m trying really hard not to have any more.
What about business expenses? Now that I’ve published my novel, my business expenses are going to drop considerably. Since I know I have a little bit of wiggle room, I might try to plan a Bolt Bus trip to Portland to do a reading at a bookstore somewhere. That kind of thing will cost less than $100 and might even cost less than $50 if I get a really good Bolt Bus ticket.
You built your budget around the assumption that you would receive $20,000 in income, but you’re going to get more than $20,000 in freelance paychecks between May and August, aren’t you? Probably. I anticipate receiving around $24,313.84 total.
What if something happens and you don’t earn what you expect? Then… it happens? Keep in mind that I get paid after I do the work, so much of this income is stuff I am already owed. The rest is based on expectations I already have with my editors and clients; that I’ll complete a certain amount of work every month, etc. Those expectations could change, but EVERYTHING COULD CHANGE AT ANY TIME.
How much do you expect to have in savings, including your $3,000 checking account buffer, by the end of the summer? $11,423.22.