Budgeting For Creators With Inconsistent Income

If I’ve earned an honorary doctorate in any subject due to my deep and extensive experience, it’s budgeting with inconsistent income.

I’ve owned my own business since 2007, and aside from a two-year stint producing a TV show, I’ve never had a consistent, reliable income that was the same from month to month.

Yet, here I am, 15 years later, still earning a full time living as a creator. Here are the key principles to remember if you’re struggling with how to create a budget that works with your situation.

1. Check in regularly

The most important principle I can share is that you need to regularly check in and analyze your finances. For me that’s twice a month, but there have been times that I’ve monitored it weekly and even daily.

Using a tool like Quickbooks or the app we created called Benchmark can help you establish a regular cadence so that you are always on top of your finances and your cash flow.

2. Use Percentages, Not Hard Numbers

This can be difficult in the early stages when the percentage for your compensation isn’t enough to cover your cost of living, but it’s a habit that will serve you as you grow. You may be tempted now to take 80 or even 90% of your business’ revenue and pay it to yourself, but that doesn’t leave enough room for taxes, operating expenses, and profit.

If you’re starting out, budget with these percentages and then adjust every quarter:

• 5% Profit
• 15% Taxes
• 20% Operating Expenses
• 60% Owner Compensation

The order here also matters. Pay your profit and taxes first, that way you’ve always got money to grow, and your quarterly taxes will prevent you from owing a huge amount come tax season.

3. Master Your Mindset

It may take you months or - more likely - years until your business is generating enough revenue to pay you a healthy salary ($75k+ per year). Until that point, the low-level stress of “not having enough” can do a lot more damage than you would expect. I’ve lost business partners, clients, projects, and have had to go into debt to try and keep the business afloat (not recommended, by the way).

Change the meaning by looking at how much you have. Freedom and control over your time. Autonomy. The ability to choose your clients and the work you do. No limit to your potential and growth.

If you don’t manage your stress and your mindset, you’ll make it that much harder to succeed in the long run. Focus on what you can control, and grow a little bit each day until you reach your ideal financial situation, at which point the habits you’ve built over that time will serve you even more.

(I publish these essays on the creator economy every few days, and you can get them in your email for free here: https://links.craftsmancreative.co/essays-indiehackers)