Where does the money go?
What do you do when you get paid for something as a part of your business?
Do you rush out and buy a new toy? Do you pay bills? Do you dump the money into your personal checking or savings account? Do you have a business account it goes into? Do you buy something you've needed for your business?
All of the above are actually good answers, but the trick is in balancing those answers out.
I have done a lot of looking into things to do with what to do when I make some money, and for me the following formula seems to work out all right.
Lets assume for simplicity that I have been paid $100.00 - this is how I would treat that money.
$10.00 - put away for taxes. Yes, I know that is a lot, but if I have extra in that account at tax time then I can spend it on something I want - right?
$15.00 - goes into business. This is the general fund for stuff I need for keeping my business going - things like paper, printer ink, website fees, magazine subscriptions, etc... and includes emergency stash to buy a new computer if I have to.
$5.00 - my savings. No, it's not a lot, but it will slowly add up. If I make $1,000 in a month that means $50 into my savings. In two months it's $100, in a year I have $600 in savings. After 10 years I would have $6,000 just from $5.00 per $100. You can see how that would be much bigger if I was making $50,000 a year. Then we'd have a ten year savings account of ...
(rough calculations)
$50,000 per year = $4,167.00 per month
$4,167 divided by 100 = 41.5
41.5 x $5 = $207.50 saved every month
$207.50 x 12 = $2,490 into savings in one year.
$24,900.00 in savings for 10 years at just saving $5 out of every $100 I make.
$50.00 toward house rent etc. This is the biggest chunk from my money, but it covers rent/utilities/food/etc. So from $1,000 I would be putting $500 into rent and such.
$20.00 sent wherever it is most needed. The remaining $20 out of every $100 is sent to wherever I need it to be sent. This gives me a good percent of leeway for things I may have forgotten.
It is by no means an exact science, and I know sitting here I am forgetting a lot of stuff, but that is the basic breakdown to get you started on thinking about what you might look at in dividing your own money. Build a list of what you have as expenses, assume what you would make in an average month (you can get this by averaging out what you made in the past three to six months) and break it down based on how much you need to pay each expense. Break that down to your average per project earnings and that is where you want to look on allocating money.
For example: say that instead of $100 I got $10? My breakdown becomes....
$1.00 - taxes
$1.50 - business
$0.50 - savings
$5.00 - house etc.
$2.00 - misc
Do you rush out and buy a new toy? Do you pay bills? Do you dump the money into your personal checking or savings account? Do you have a business account it goes into? Do you buy something you've needed for your business?
All of the above are actually good answers, but the trick is in balancing those answers out.
I have done a lot of looking into things to do with what to do when I make some money, and for me the following formula seems to work out all right.
Lets assume for simplicity that I have been paid $100.00 - this is how I would treat that money.
$10.00 - put away for taxes. Yes, I know that is a lot, but if I have extra in that account at tax time then I can spend it on something I want - right?
$15.00 - goes into business. This is the general fund for stuff I need for keeping my business going - things like paper, printer ink, website fees, magazine subscriptions, etc... and includes emergency stash to buy a new computer if I have to.
$5.00 - my savings. No, it's not a lot, but it will slowly add up. If I make $1,000 in a month that means $50 into my savings. In two months it's $100, in a year I have $600 in savings. After 10 years I would have $6,000 just from $5.00 per $100. You can see how that would be much bigger if I was making $50,000 a year. Then we'd have a ten year savings account of ...
(rough calculations)
$50,000 per year = $4,167.00 per month
$4,167 divided by 100 = 41.5
41.5 x $5 = $207.50 saved every month
$207.50 x 12 = $2,490 into savings in one year.
$24,900.00 in savings for 10 years at just saving $5 out of every $100 I make.
$50.00 toward house rent etc. This is the biggest chunk from my money, but it covers rent/utilities/food/etc. So from $1,000 I would be putting $500 into rent and such.
$20.00 sent wherever it is most needed. The remaining $20 out of every $100 is sent to wherever I need it to be sent. This gives me a good percent of leeway for things I may have forgotten.
It is by no means an exact science, and I know sitting here I am forgetting a lot of stuff, but that is the basic breakdown to get you started on thinking about what you might look at in dividing your own money. Build a list of what you have as expenses, assume what you would make in an average month (you can get this by averaging out what you made in the past three to six months) and break it down based on how much you need to pay each expense. Break that down to your average per project earnings and that is where you want to look on allocating money.
For example: say that instead of $100 I got $10? My breakdown becomes....
$1.00 - taxes
$1.50 - business
$0.50 - savings
$5.00 - house etc.
$2.00 - misc
posted by Sandra at 10:05 AM
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