Effective budgeting and boat trapping for freelancers in difficult phases

The activity as a freelancer brings with it both advantages and disadvantages. A central topic in the life of a freelancer or self -employed is budgeting .

This magazine contribution serves as a guide for budgeting and for cost savings in difficult fairway for freelancers. Important information is given that should take into account freelancers, as well as a summary conclusion.

The irregular income from freelance activities makes budgeting difficult, and at the same time indispensable. Take a look at our guidelines for budgeting for freelancers to create a budget tailored to you. Budgeting as a freelancer can be challenging, especially if you are used to being paid regularly every month.

Due to unstable financial situations, clever budgeting is of great importance. Are there proven practices that you should consider? In any case! In our short instructions you will find important tips for budgeting for freelancers.

Let's start with some basic information about budget planning and boat trapping . The term comes from English and is mainly used there for startups and solo preneurs who have to keep the costs as low as possible due to the lack of or irregular income. In Germany we would say in an entrepreneurial context:

Stand on the narrowest possible foot. "

Why a good budgeting for freelancers is indispensable

Independent projects often like waiting for the famous London tourism buses: you wait patiently but in vain and suddenly there are several. The payment of the customers, from immediate payment to payments in the course of the year - also varies - with a little luck. ”

The creation of a detailed budget is of crucial importance to ensure effective management of income and finance. Structured budgeting is essential to ensure the financial stability of freelancers and companies.

It serves as a guide for the planning and execution of financial decisions and goals and enables you to avoid financial bottlenecks. In addition, a budget offers clear guidelines for resource allocation and contributes to optimizing financial performance .

The budgeting of freelancers thus represents a fundamental building block for professional success and long -term financial security.

I can very well remember my early years 2004-2008 as a small business owner. Without disciplined planning, I would have failed in no time.

Which sub -areas must be taken into account:

Variable income

The self -employed does not have a regular income like employees. It is therefore of great importance to keep an eye on finances in order to be able to survive in difficult times and financial bottlenecks of your own company.

The creation of a budget especially for the self -employed enables you to manage your inconsistent income through precise financial planning and thus successfully master the challenges.

Expenditure management

Regardless of whether it is about business or private expenses, both areas play an essential role in the life of an independent. Budgeting is of great importance for self -employed people in order to effectively manage both private and business expenses.

Therefore, experienced freelancers choose to invest in accounting software that helps you to easily record, follow and control private and business expenses.

Tax planning and management

A decisive element of budgeting for the self -employed is the planning and management of taxes. In contrast to employees, to whom the tax planning is removed by your employer, it is self -employed to take over your entire tax planning and administration.

Effective budget planning supports your company in precisely compliance with the tax regulations.

From my own experience, I can say that it usually proves harmlessly with a few and a simple income surplus calculation (Eür) begins. However, the step towards the full entrepreneur subject to VAT was very hard for me and put my planning to the test. The changeover of sole proprietors to a GmbH will probably take place shortly, which will make the planning even more complex.

In order not to get into the bredouille, forward -looking planning is essential here. Many freelancers and solo residents have experienced their blue miracle for sales tax payments after the first year.

Reserves and reserves

This is also a point that I myself treated for far too long and pushed it onto the long bench. In retrospect, this is a clear mistake for me. I was used to increasing sales and income until the corona apandemia. I was dependent on reserves with the lockdowns and finally the Ukraine war and the inflation shock.

Solid financial planning is essential for the self -employed like us to build a security net or manage emergency reserves in order to be prepared even in difficult business hours. Due to the fluctuating income from the self-employed, the establishment of an emergency or security fund is essential for unforeseen events.

Effective financial planning helps self -employed people to manage their emergency reserves and thus prepare them for the future as best as possible.

Retirement planning / private retirement provision

Self -employed people do not receive company pensions from employers. We are also not obliged to insurance in statutory pension insurance. Therefore, you are responsible for securing your own financial future.

Careful budget planning helps to focus on emergency sizes and investments and thus ensure solid pension. Don't start with it too late! I know from my own experience how tempting it can be to postpone these expenses to the future in order to devote itself supposedly "more urgent things".

Now that we know what the scope of our plans, we are now focusing on the specific budgeting for freelancers and important savings potential for expenses.

This is how you budget as a freelancer - guidelines, guides, tips

Budgeting is easier for employees with a fixed monthly content because they know their monthly income. In the case of freelancers, on the other hand, the prediction of expenses is more difficult because the income (sometimes strongly) can vary.

Nevertheless, they should not be prevented from monitoring your output behavior and keeping your finances under control!

Here are some effective budgeting tips from which freelancers benefit. Budgeting is an indispensable necessity for freelancers. In order to be able to assert itself effectively in a highly competitive market, a freelancer must carry out a tailor -made budget planning and output control.

Essentially, the budgeting for freelancers takes place by calculating the monthly income and deductions for expenses, future savings, reserves, retirement provision and tax planning. We offer a detailed guide to budgeting as a freelancer.

So let's start!

01 Calculate average monthly income

Your income as a freelancer depends on your projects and customers, which can result in monthly fluctuations. It is therefore important to calculate your average monthly income in order to be able to carry out precise budget planning.

In contrast to employees with a fixed salary, budgeting as a freelancer requires a precise analysis of their income.

As I said, it may be that you will take 7,000 euros in a month to get just 1,000 euros gross in the next.

In order to manage my finances regularly, I calculate an average amount over a period of 12 months. If I add all the numbers, I get to 54,000 euros per year, for example. The division through 12 results in an average monthly income of 4,500 euros.

I prefer to be careful when budgeting because life is often unpredictable. Based on these numbers, I would probably plan an average monthly income of 3,750 euros for next year. Of course, we all strive to increase our income, but we should be aware that certain things are outside of our control.

So I feel more comfortable when I budget with a slightly lower amount. However, my salary check will not be 3,750 euros, since the employer is kept automatically for employees and half of the social security contributions are borne by the employer, this is not the case for self -employed people.

As a freelancer, you usually pay taxes later (unless you choose high advance payments in the current year), but since we want to convert them into an employee, we have to compensate for things. The amount of the amount to be pulled depends on your income, your place of residence and a large number of variables, including your business expenses. There are online computers that can help you.

Since round numbers can be expected better, we will cover 1,000 euros per month for taxes and 500 euros for health and long-term care insurance, which means that we will have a monthly pay of 2,250 euros in the end for the coming year. Ideally, an old -age provision of approx. 20% should also be deducted and created here.

Then we would remain 1,800 euros per month for ongoing expenses and our livelihood.

02 Separate accounts and a system for salary payments

There are different methods of how to pay for yourself, especially in connection with freelance income.

One way is separate bank accounts to manage income and make expenses. Alternatively, you can follow everything in one account. Some prefer cash to keep an eye on their budget and keep the expenses under control.

An effective and firm payment system helps to achieve regular income and to compensate for fluctuating months financially.

It is also recommended to put money aside for taxes. Nevertheless, it can happen that the self -paid salary is not sufficient to cover all costs. We will take care of the possibilities of a solution in the next step.

03 Calculate expenses and monthly costs

We have already analyzed the income side and now it is time to get the expenses under control. Although this step may seem simple at first glance, it is actually a little tricky than expected.

It requires the list of all your costs - both regular ( fixed costs ) and one -off nature ( variable costs ). Due to supposed slingers, many people tend to skip this step or not to carry out thoroughly. Nevertheless, it is of great importance to have a precise overview of all your monthly expenses. Even smaller amounts can add up, so you should take everything into account.

As soon as your expenses are listed, it is time to determine which mandatory . In the worst case, the rest of the expenses can be avoided or paid out of the reserves if necessary.

Fixed costs describe inevitable expenses such as rent, mortgage, insurance premiums, car loans and loan rates. On the other hand, variable costs can be reduced or avoided by effective budget planning, such as expenses for food, electricity, travel, repairs, marketing and more.

It is advisable to determine an average value for monthly expenses to determine the amount that can be used after deducting the expenditure from income for tax planning, emergency funds or savings.

In order to keep your financial situation under control, it is essential to carefully monitor your actual expenses. Leaving on vague estimates can lead to unpleasant surprises. By precisely tracking your expenses, keep control of your budget and avoid potential financial challenges.

Caution: Most people tend to appreciate too optimistically. Therefore, remain stubbornly realistic and be careful to always keep an overview of your financial reality in order to ensure long -term stability.

It is also essential not to only pay for ongoing expenses, but also to repay debt, to operate loan rates and to provide for upcoming needs. This includes strategic preparation for retirement, unforeseen events as well as significant occasions such as vacation and weddings.

04 boat trapping options

Set a monthly issue of expenditure

It happens that the monthly income is significantly higher in certain months than in others. In such moments, the temptation is great to immediately squeeze the additional money or make costly purchases.

But it is advisable to set a limit for monthly expenses to ensure financial security even in phases with lower income.

Plan your trips carefully

Since you currently have no additional money for leisure activities, it is crucial to plan your trips according to your income.

Have you just concluded a 6-month contract? Then it would be the right time to plan a break or a short vacation because your income is secured.

Are you facing a few months without income? Maybe you should wait by booking the next vacation until the situation has improved.

Choose financial priorities

The budgeting method 50/30/20 is an effective tool for the self -employed to manage your finances. With this strategy, 50 % of the income for regular expenses, 30 % for flexible needs such as fitness studio memberships, cinema visits and clothing, and the remaining 20 % for long-term savings goals, old-age provision or debt repayments.

Use practical online computers to find out how you can best divide your budget.

Rent instead of buying

As a freelance entrepreneur, you can usually deduct part of the costs that are incurred for business activities.

Typical expenses for freelancers include broadband and internet access, dedicated landline connections, smartphones, mobile phone rents and calls, as well as computer hardware such as PCs , monitors and accessories. The tax deduction height depends on how intensively you use these resources professionally. These expenses should be documented carefully in order to optimally use tax advantages.

Depending on which area they work, costly purchases for equipment and equipment may come into play. This affects professional photographers and video production above all.

But in general, a basic equipment from PC, laptop, monitor (s), tablet and Co. must first be purchased.

Especially at the beginning, such expenses can quickly increase to the five -digit range. With a short budget, however, you can easily and easily use rental devices. Or in the case of photographers on used equipment or older models.

With providers such as Liverental , IT products such as desktop PCs, iMacs, laptops, iPads and tablets can be rented . In addition, smartphones, printers and other accessories are also available for freelancers and companies.

With providers like Liverental, the devices are up to date with the latest art to provide the latest hardware and software for you. Various flexible rental models adapt well to the needs of solo residents - regardless of whether they are short -term projects or long -term programs.

Technical support from experts is also available to offer technical help, furnishing aid and maintenance services. Very practical if you want to focus on your core competencies instead of struggling with the procurement, installation and maintenance of hardware.

The high acquisition costs can be distributed over many months via rent or hardware leasing, which significantly reduces the financial burden.

Start with a new budget every month

As soon as you have learned to manage your order pipeline as a freelancer, you are able to precisely predict your monthly income.

Start the month with a well thought -out plan and budget to cover all costs, to build up your savings and to keep a clear overview of your personal expenses.

Design customer meetings in a budget -friendly

It is recommended to forego costly dinner or cocktails when extracting potential new customers and instead suggest coffee meetings or more informal meetings.

In this way you can make new contacts more efficiently and cheaper.

Negotiate about the work from home

Some customers may prefer that they will be present in their office during the contract period.

Nevertheless, it is advisable to use the option of the home office to minimize the expenses for travel and meals.

Find out which expenses can be tax deductible

This is a fundamental rule for the self -employed. By knowing the tax -deductible purchases and expenses, you can plan your finances better and budget accordingly. However, be careful not to make purchases under the pretext of "business costs" if the money is scarce.

Ultimately, you still pay out of your own pocket!

Here is a (not complete) list of the most common operating expenses that tax deductible :

• Office rent / room rent / work space at home
• Costs for internet/broadband
• Mobile phone tariff (e)
• Website hosting
• Technical equipment such as a new laptop, a laptop mouse, stationery, printer cartridges, etc.
• Travel expenses as far as they are related to business trips
• All professional training or online courses
• Economic books
• All professional subscriptions (e.g. software-as-a-service, online tools, software , ...)
• Advertising costs
• Industry -specific equipment, such as a camera for a photographer or a playstation for a game developer

Make the best of budgeting apps

Which online budget tool you also choose, your savings goals will surely receive a thrust as soon as you automate this financial task. If you see exactly how much money you spend on different activities every month and keep an eye on several savings goals, it can do a lot!

It is of great importance to use an effective online budget tool to successfully achieve your financial goals. The automation of your finances will undoubtedly help to strengthen your savings plan. Due to the detailed breakdown of your monthly expenses for various activities and the monitoring of several savings goals, you will surely determine positive changes in your financial habits.

From the clear monitoring of your expenses to the targeted planning of your savings, the use of such a tool can have a significant impact on your financial future.

05 Separate short and long -term financial reserves

Through careful and clever budget planning, you can build a financial buffer to be prepared for unforeseen expenses such as repairs to the heating or visits to the dentist.

At the same time, you can long -term savings goals , be it for the training of your children or acquire a home. Especially for self -employed people, the creation of a financial cushion is just as important as taking out a corresponding insurance.

Life as a freelancer already has enough stress - additional financial worries should not be a burden.

06 Keep private and business accounts separately

Imagine it is similar to two different customer groups - just as you would keep project results for different customers in separate folders, business and private finances should also remain separated.

Mixing quickly creates uncertainty and confusion, which makes it difficult to pursue your clever budgeting strategies. With many online banking providers for business accounts and personalized bank accounts, you can easily manage your money.

The separation of business and private finances is not only more uncomplicated, but also enables you to receive free payments in every currency and to withdraw money free of charge from the ATM.

07 How much tax do you have to plan?

Careful planning of taxes as a freelancer requires a certain discipline, because non -observance of common advice can quickly lead to high costs - not only in the form of enormous stress, but also in the risk of a fine.

It is advisable to learn from the experiences of others and therefore to put at least 25 to 30 % of your income aside. In this way, you can make sure that you are well prepared for your tax debts at the end of the year.

08 prepared for the worst: Create worst-case scenarios

So far we have dealt intensively with our income and expenses in the past. But a budget is much more than just a look back at past numbers - it is a future -oriented document that helps you to plan your financial future.

By creating forecasts and estimates for your income in the coming months and years, you can be better prepared to achieve your financial goals.

In the next step, we will use the data and information that we have collected so far to extrapolate it into the future. This enables us to make realistic assumptions about how our financial situation could develop in the next few weeks or months.

There are various apps and software solutions on the market that can help you plan your future finances. Here is only a small selection of possible options (of course there are many more):

• Quickbooks
• Freshbooks
• Pulse
• Xero
• Mint

09 Diversification: Do not put all eggs in a basket

Finally, I would like to deal with the importance of diversifying the income for freelancers. In this context, I would like to point out that the dependence on a single client is a great risk, since freelance projects are unstable and that companies often do without freelancers in times of cost savings.

In addition, you should note in this point of view that you do not get into a "bogus self -employment" and that the BFA subsequently demands social security contributions. That can be very uncomfortable.

You can find a detailed guide on this topic here: Avoid bogus self -employment - the current legal situation 2024 .

It is recommended to distribute the income to several regular customers to ensure financial security. Such diversification can avoid sudden loss of income and to replace the contractual work.

It corresponds to the work reality of a freelancer that there is no job security. It is therefore particularly important to be prepared.

Joachim Rodriguez y Romero

Owner and managing director of Kunstplaza. Publicist, editor and passionate blogger in the field of art, design and creativity since 2011. Successful conclusion in web design as part of a university degree (2008). Further development of creativity techniques through courses in free drawing, expression painting and theatre/acting. Profound knowledge of the art market through many years of journalistic research and numerous collaborations with actors/institutions from art and culture.

www.kunstplaza.de/