Earlier this week, I wrote about the frustrations of setting a personal budget. Here is a step by step process for budgeting as an artist.
Rules of Engagement:
- Knowledge is power — Understanding where you spend your money from month to month is the only way you will be able to find financial stability in the long run. Tip: Look your spending habits in the eye and come up with a strategy for your financial future.
- Develop a habit — Like remembering to brush your teeth every day, good budgeting comes when you set time aside to take stock of your spending. My wife and I usually talk about our family budget over a glass of wine once a week for thirty minutes and I keep an eye on our finances every day for about 10 minutes. That’s all it takes.
- Budget even when finances are in good shape — One of the biggest mistakes artists make is that when they get an extra gig or project, they spend the extra income that month, which is often beyond the amount that was budgeted. Tip: In pursuit of sticking to a budget, make sure you save some of that extra income when times are good so months that are lean don’t feel so bad.
- Invest in yourself and your art — Make sure you budget some money each month to invest in yourself as you continue to pursue your art. Tip: Create a personal investment category so that you can comfortably pay for opportunities that pop up.
- Don’t forget to have fun — I often see people zero out their budget for eating out and entertainment. Tip: Reward yourself a little each month so you don’t go way off your budget.
Setting Your Monthly Budget
Here is a simple, step by step process for setting your budget:
- Gather — Printout of all of your monthly bills, including utilities, loans, and bank statements so you can see what you’ve spent on things like dining out, gas, and entertainment.
- Chart — Click here to get a simple monthly budgeting spreadsheet in order to capture your last month of expenses. This is simply a starting point for you to see what you spend each month. You just need to be in the ballpark. The categories I’ve included are very broad on purpose. I think it’s best to create a few large buckets for your spending instead of many smaller buckets. When it comes to budgeting, simplicity is the key. Otherwise, you’re less likely to stick with your plan.
- Evaluate — Now that you have filled in a month of expenses, take a look at your monthly spending and ask yourself the following questions:
- Are you missing anything?
- Are you surprised by any of the results? (FYI, I was shocked by how much we ate out the first time I went through this process.)
- Are there opportunities to save?
- Are there areas in which you would like to spend more?
- Amend — One of the biggest challenges with budgets is that we set them and then don’t stick to them. The spreadsheet I have provided allows you to make a few adjustments that may, ultimately allow you to balance your budget each month.
- Chart your expenses — Once you have set your budget, it’s important that you chart your expenses. There are a number of online resources to help you with this, including mint, hellowallet, budgetsimple, and YNAB. I like YNAB the best.
- Don’t give up — Budgets are often broken. It happens. Stay persistent and work to identify why you went over in spending. Often times for me, the problem is that I didn’t budget enough for something to begin with.
- Get out of debt as quickly as possible — Debt is one of the barriers to financial stability. Develop a plan to get out of debt as quickly as possible.
- Save for a rainy day — Ideally, you want at least six months of your current salary in savings so you can weather any financial storm that comes your way. Make an effort to save a bit extra each month in order to achieve this goal.
- Invest for retirement — Don’t forget to put a little aside for retirement. Every bit you invest today will help you have long term stability.
I hope this helps and please let me know if you have any questions.
(Image Source: GotCredit.com)