Below is the first post in a new series of blog posts called “Side Hustle Budgeting 101”. They will run throughout July and will feature special guest contributors who specialise in budgeting and finances. If you struggle with finances, then you need to get in on this series. Make sure you bookmark this to read later.
I used to be a brat about budgeting because I didn’t understand how freeing it can be.
But learning to budget–first for my personal finances and then for my business–has been life changing for me and my multi-million dollar business.
And I know it can help you too, so let’s get started.
Setting up a Budget for Your Side Hustle
First things first.
In order to create a budget, you will need to figure out how much you’re spending. In the case of your side hustle, how much you will need to spend in addition to what you are already spending personally.
So how do you determine your expenses?
Well some of them, you probably already know.
Rent, utilities, insurance, inventory, website fees, etc are all things you will need to add to your budget.
If you aren’t sure, start saving your receipts, looking at your bank statements, and estimating where necessary.
Create a simple spreadsheet to track your income and expenses and start noting the information you gather from these areas into the appropriate column, or use a program like Freshbooks to keep track of everything.
The Envelope System
One of the tricks that I used at home, when I had almost no income, was I budgeted with physical cash. You don’t need to do this, but it worked quite well for me.
Here’s how this process works:
Whether I needed hundreds or fives or twenties—it sounds silly but it worked.
I used the envelope system and put cash in the envelopes, which were labelled for each area of my budget.
If you decide to do this, it’s important to hide them and hide them well.
So maybe inside an old purse hanging beside clothes in the back of the closet — avoid hiding under your mattress, too obvious.
Note: If you have people in your life that aren’t trustworthy, such as drug addicts, you’re going to have to be a lot wiser and maybe this particular part of the system isn’t right for you.
The budgeting system in action:
For example, let’s say that my rent is $2,400 a month. We know there’s an average of 4-4 ½ weeks in a month so that means if I were paid every week, I need to put aside $600 for rent. So I write $600 and “rent” on one envelope.
Weekly expenses, like groceries, will need an envelope for each week labeled week one, week two, etc.
And this is the only cash I take with me to the grocery store. I’m not going to spend more because I don’t have more with me.
You would do the same with the rest of your expenses, allotting them their own envelope and noting whether they are weekly or monthly.
You could even take it a step further and have a folder that was labeled Business and one for Personal and separate your envelopes into these folders… again making sure to hide them appropriately.
It works the same way for long-term budgeting.
When you have a bill that’s due once a year, like your web hosting fees, you just take the total amount that you are going to need to pay and divide it between the number of months you have to ‘pay’ it.
Put that amount in the envelope every single week or every single month, depending on your pay cycle.
Implementing a Budget into Your Side Hustle
This simple envelope system has taught me to budget in my million-dollar business for product purchases and other business expenses.
To this day I still save out the cost of each business expense plus $100.
We have a $100,000+ stock order and I don’t have to worry whether I’m going to have the money or not to pay for things. It’s no problem because I’ve planned ahead and the money is right there in the bank.
Even if you don’t carry inventory, budgeting is important in your business as you don’t want to get any nasty surprises.
For example, most new business owners don’t realize that they have to pay quarterly taxes to the government for their payroll, sales tax, and other types of taxes that may affect you, depending on where you live.
Putting money away from each month of earnings takes the pain out of the month that the taxes become due.
Creating buckets for your expenses:
I use the Quickbooks accounting system for my business, which is wonderful. My accountant laughs at my bucket system of budgeting, but even though she laughs, she can’t deny it works.
Even though I have one business checking account, I have all these little holding accounts (my buckets) — which has replaced the envelope system.
I apply the same methodology of the envelope system, only now it’s part of my bank account setup, and I don’t need to have cash lying around the house.
The money is sitting right there in the main account but I have it separated out as though it’s not.
I call it “buckets” now, but it’s the same envelope system, and again keeps me knowing exactly how much I have for each expense.
Depending on your banking system, you might need to have separate bank accounts. Label these as you would your envelopes and keep track of what you need to pay and when.
Budgeting is safe and equals freedom once you get used to it. I really encourage you to give it a try.
Nedalee Thomas, Princess Power
Nedalee Thomas is an author, educator, and researcher, with a passion for healthy living. Nedalee coaches her luxurious budget lifestyle through her latest launch of www.PrincessPower.com and believes you can be, do, and have anything you desire.