There are plenty of ways to manage a monthly budget for your blog, and I'm not going to say that I have the best method. In fact, this method is different from what I taught in a previous post about managing your blog's budget - if you like that way better, then do what works for you! However, the method used in this post is what I currently use and find to be most effective for me. It's easy to do, easy to manage, and it is proactive, which I'll explain a little later. If you're constantly being blindsided by your expenses, you'll want to try out this system!
Why budget for a blog?
Seems a little unnecessary, doesn't it? Not to me!
Michael and I budget our personal expenses - it's a practice we've done since our early dating days, even though our finances were separate back then. Managing our money is incredibly important to us, because we've learned the hard way that money not managed has a way of disappearing on you.
So because I'm used to assigning my personal income to certain expenses, it only seemed natural to do the same for my blog. Especially as my expenses grew and it got a little more challenging finding the funds when income sources had dried up.
The problem is, I was used to budgeting a relatively consistent pay. Not only is self-employment income incredibly variable, but it's virtually unpredictable when you're still in the start-up stages. One month you can easily make a few hundred dollars, but that can just as easily be followed up with 3-months of nothing.
So how can you prepare for extremely volatile income in an industry that is almost exclusively based on consistent monthly subscriptions?
The first answer is to be careful about how much you're signing up for when you're still in the early stages. Only invest in what matters up front.
The second answer is the budget. You plan, you prepare, and you organize. And it just so happens that my system allows me to prepare for my expenses ahead of time, regardless of how much money I make.
I'll still need to earn money, obviously, but my budget doesn't rely on the unknown. Curious yet?
Step 1: Get it Together
Okay, step one is the same step one as just about every step one I have on this website: Open a separate checking account for your blog.
This step is always the precursor to any financial management activity regarding your business. This method relies heavily on having a checking account designated solely to your business activity, so get that done today. Most banks will allow you to apply for a new checking account through your regular online banking.
It doesn't even have to be a business account as long as you're just a sole proprietor who is not using a D/B/A. If you don't know what either of those things are, you're probably a sole proprietor not using a D/B/A.
Open your checking account, and move all of your subscriptions over to it. You can use the rest of this budgeting system to determine the amount of money you should transfer over as a starting balance.
RELATED POST: The Best Time to Open a Blog Bank Account
Step 2: Know Your Regular Expenses
Here's the boring step. You've got to compile a list of all those subscriptions. If you've kept a proper bookkeeping system in place, this shouldn't take long. Otherwise, you'll have to go hunting.
(This step can directly coincide with you moving your subscriptions over to your new bank account, if you had to do Step 1. As you change your billing details, keep track of them all.)
This doesn't need to be a complicated process. Just create a list of every monthly, quarterly, or annual expenses you have that you know will come out of your bank account consistently. This means web hosting, domain name renewals, PO boxes, email marketing providers, social media schedulers, course payment plans, membership site fees, software subscriptions, etc.
Make sure your list includes the name/description of the expense, the amount, the payment frequency (i.e. monthly, annually, etc.), and approximate payment dates.
Step 3: Your Available Funds
This is the key to this system! Step 3 is how we can budget completely independently of the unknown variables of how much money we're going to make this month.
Budget your bank balance, not your income. Mic drop.
Depending on your budgeting background, that may or may not be as profound as I just made it out to be. For Michael and I, we're used to budgeting for the current month based on that month's income. My day job pays monthly (it's as bad as it sounds), so we always know how much we have to work with there, and we know that it's already in the bank. Then we can project Michael's bi-weekly, variable income with a conservative estimate and plan the remaining expenses.
But the pure unpredictability of a start-up blogging income made this system nearly impossible. I couldn't guarantee the income, but I definitely had the expenses.
So instead of playing with the unknown, I work with the known. Regardless of how much money I'm going to make, I know exactly how much cash I currently have in my account.
So, once you get all of your bank arrangements made and funds moved around, write down your starting bank balance as of the first day of the month.
Then decide how much of a cash cushion you need to keep that balance at - you don't want to plan to spend to 0! Especially with volatile income, we need a cushion so there will always be some funds in the account when the expenses come around. A safe goal would be to always have enough to cover your regular monthly expenses, just in case you don't make any money in one month.
For example: Let's say you currently have $300 in your account. You know that you have $75 in regular expenses (thanks to your list you made in Step 2!). You might set your cushion to be $80. Now you have $220 to budget for the rest of the month.
Ideally, that $80 will never be spent. It is an emergency safety net. Personally, I view my cash cushion as my minimum balance. If I cross that threshold, I've overdrafted in my mind, but my bank won't view it that way!
Step 4: Subtract the Non-Negotiables
Using your list of regular expenses, subtract out what you know is going to come out of your account this month.
Theoretically, you don't need most of these items, but they're currently what you're using to operate your business, so they're necessary. Though, this exercise might help you see any subscriptions you have that you can cancel.
Regardless of your decision, we need to show ourselves just how much money we actually have to work with. When you sign up for a subscription or payment plan, you've already signed over your funds to those purposes. This process is assigning your current funds to the jobs you already have waiting for them.
I recommend keeping a running balance alongside each line item so you can see your remaining balance as you go.
Step 5: Decide on the Negotiables
Now, whatever is left needs to be given a job!
If you don't have anything left at this point, you can either start canceling subscriptions and memberships or move on to Step 6.
If there are some remaining funds, it's decision time! Is there a course or product you've really wanted to invest in? A coach you've wanted to hire?
If there isn't something urgent you were hoping to purchase, I'd recommend reading through to Step 7 before finding ways to spend your money - you may need to consider saving it.
Step 6: Supplement the Funds (If Necessary)
This is the less fun step; trust me, I've done it often. If you found in Step 5 that you either A) didn't have enough money left over to purchase something on your wishlist or B) didn't have any money left over, you may need to supplement your business' funds with your personal funds.
Your ability to do this is very much dependent on your personal financial situation. Michael and I usually build in a portion of our personal budget to cover any supplemental needs for TLS, so I'm usually able to do this without losing sleep (which is why I'd highly recommend a personal budget!).
Obviously, in a perfect world, the business would be able to support itself. However, in those start-up days, this simply isn't always possible. Don't be too hard on yourself for it. This is why we plan and prepare.
Usually, I'll do Step 4 and then Step 5 to the extent of what is important to my business at the time. I'll keep the running balance going, even if it starts going into the negatives. Then, I'll create a line item that adds the difference to bring the running balance up to 0, which is the amount that I will transfer from our personal account to my business account.
(And of course, bringing the balance to 0 actually means bringing the balance back to my cash cushion figure.)
Step 7: Set Goals
So, with all of these in place for planning the regular expenses, there are a couple goals that should be set to make this a more effective plan...
- Step 7a: Set savings goals
This is the one that could affect some of the previous steps. The entire time you're working with Steps 4-6, you have to consider any major upcoming financial events. A good example would be an annual subscription you forgot about.
A year is a long time, and it's easy to forget about those annual renewals if you're not organized about it. How do I know? Because I literally just did this to myself. As in, while I'm writing this post, I'm currently scrambling to find the funds to renew my hosting and Tailwind subscription next month. Yeah, that's right. The accountant/bookkeeper/budget-planner screwed up. So don't ignore me on this!
It's easy to hope that you'll just magically have the money next year. But if you don't plan for it, chances are, you won't. So go get your renewal dates, and write them down somewhere really obvious. Set calendar reminders, put sticky notes on the wall above your desk, write it in a noticeable spot on your planner, whatever it takes.
(And don't forget about self-employment taxes in the U.S. You'll want to set aside approximately 30% of all of your business income! But don't take that as professional advice - consult an actual pro before making any major tax or business decisions.)
Your best plan of action is to work on a business savings plan for those renewals, future investments, tax planning, and emergencies. You can build this into your checking account like your cash cushion, or you can even open a second business-related account to keep these items separate. I have an upcoming post on saving for those larger business costs, so keep an eye out!
- Step 7b: Set income goals
This is the part that doesn't come easily for most bloggers. Setting realistic income goals is hard in the beginning. So, when you're just starting out, don't focus so much on what you should be making. Instead, focus on what you need to make. Then make it happen!
By the end of this exercise, you have an idea of what your regular monthly expenditures are, so that's a great place to start. Additionally, if you're trying to replace your day job income, you can start building stepping stones (take baby steps!) for building a consistent monthly income that can do just that.
As you set the goals, make sure you establish how you're going to reach those goals. So are you going to send out some pitches to get new clients? Guest post to build your email list for your new sales funnel? Invest in a Facebook Ads campaign? Whatever works for your business, make sure you plan for it!
With this system, you've accounted for all the money currently in your possession. Then, as you earn more money throughout the month, you're contributing to next month's available funds!
So, perfect world situation:
Your beginning balance on the 1st day of the month is budgeted.
You have a built-in cash cushion.
You planned all your regular expenses.
You made a plan for any leftover funds or transferred personal funds to supplement.
You made money throughout the month.
Your ending balance on the last day of the month is your cash cushion + your current month's income.
This ending balance is your beginning balance for next month.
Your ending balance should be #6: Cash Cushion + Income. If it's higher, you spent less than you expected. If it's lower, you spent too much.
With this system, I don't plan to spend any of the money I've earned until the month after I've received it.
So now you know how you can create a variable-free budget for your highly-variable business...but how can you make sure you keep up with these budgets?
For one, pure discipline, because this process does not have to take long. Once you have your list of regular expenses, you simply just have to subtract those from your bank balance, which should take you approximately 4.6 seconds to look up in the 21st Century. Add a couple tweaks and you're looking at a 15-minute process, maybe.
Two, you can schedule official Solopreneur Budget Meetings as I highly recommend you do! These meetings involve not just the budget process, but also a bit of analysis and strategy. You can learn more about how to conduct a budget meeting with yourself here:
RELATED POST: Hosting Your Own Solopreneur Budget Meeting
And finally, in conjunction with those Solopreneur Budget Meetings, you can get some help from me! Assisting and coaching solopreneurs through their finances is exactly what I do. Learn more here!
So tell me in the comments below, do you prefer budgeting on paper, or electronically?
Michael and I budget electronically using Everydollar for our personal budget, but for some reason, I really like a paper system for my blog budget. You?
Until next time!
- Katie Scott