Earning and spending plans are sort of like budgets, but they have much more flexibility.
They are not a balance sheet or Profit & Loss statement or anything formal like that. They don’t have to balance. And they are anything but complicated. The goal is to let you see clearly, month to month, what’s coming in and what’s going out.
Creating an earning & spending plan
I now keep a running spreadsheet which includes my earning and spending plan.
Mine looks like the one below, but you can set it up anyway that makes sense to you. As you can see, it has 3 columns. Across the top it’s Income, Projected, and Actual.
At the beginning of the month I enter what I expect to earn from each source – that’s what the AWS, Adsense, Panama etc. are. Most of them identify a client. Some pay regular amounts and some don’t. If I’d filled in the numbers, you’d see that I earn $400 a month from one, a varying amount from another. Sources or clients tend to come and go and the amounts change often.
The key to making the best use of an earning and spending plan is to come back every week and input the Actual – if I expected to earn say $500 from one client and instead actually earned $750 that shows up. So does the income I overestimated.
The same thing is true for expenses. Obviously some of those are fixed, others change up and down a bit, while something like utilities can go sky high in winter, etc. A category like gifts will probably be higher in December. You get the idea.
I actually create an earning plan for the year, and then with bang and copy, one for every month of the year.
One unexpected result of the earning plan is I can use it to help me decide if I’ve got time to take on another project – even though time isn’t part of this spreadsheet. I guess it could be, but I haven’t used it to estimate time… hmmm, now there’s a thought.
It also gives me a clue about when I need to push harder on the marketing and when I can probably raise my rates, because I can see what I’m doing in one place. That’s not why I started earning plans, but it’s just one more reason they work for me.
The real joy of this is the freedom it creates. Because I know how much money I have and how much I’m spending I find I have a great deal of choice.
There’s something almost magic about being totally familiar with my income and expenses. I have a sense of being in control that I didn’t have before I learned this system.
And it isn’t as time consuming as you might think. I probably spend a good hour or two at the beginning of every year, adding categories and simplifying them. During the year, I spend maybe half an hour getting the new month set up, and probably 10 minutes bringing over the information from my bookkeeping program. (I use You Need a Budget and I’m looking closely at FreshBooks.
The result is sanity around money.
You may also want to read 5 Ways Freelance Writers Can Manage Money.
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How do you create an overview of your money?
Write well and often,
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