How I...Budget as a Freelancer/1099 Worker

Here is a brief look into my personal techniques for staying on budget and organizing my expenses. For context, I live in NYC and have a pretty average amount of financial responsibilities.

0:08 Episode Introduction

1:19 What Do I Use?

2:02 How the Spreadsheet Works

3:44 Budgeting

4:22 The 50/30/20 division

5:09 How I use credit cards

6:35 What happens when I get paid?

8:12 Recap

9:03 Tax University

9:29 Do your parents help you?

9:58 Student loans

11:25 Ask others for advice!

12:00 Wrapping Up

Resources You Need...

Keeper Tax
Get organized for tax season and keep track of all your deductions

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Chapters

• 0:08 Episode Introduction
• 1:19 What Do I Use?
• 2:02 How the Spreadsheet Works
• 3:44 Budgeting
• 4:22 The 50/30/20 division
• 5:09 How I use credit cards
• 6:35 What happens when I get paid?
• 8:12 Recap
• 9:03 Tax University
• 9:29 Do your parents help you?
• 9:58 Student loans
• 11:25 Ask others for advice!
• 12:00 Wrapping Up

Transcript

Catherine 00:08
Hello there. My name is Catherine and I am 23 year old working as a full time freelancer in the media and entertainment industry and welcome to The House Diaries podcast. This podcast is a diary of how I am currently going about my life and career, and I thought it would be cool to post these and have them as a resource for any other people wanting to get into freelance or just as entertainment for this alternate way of living and working.


Catherine 00:32
So this episode is a little bit about my budgeting strategy. So this is my first year really dealing with 1099 taxes and all that. So I'm definitely again I am going to constantly be reiterating, so nobody comes from my neck that I am definitely just always still learning and I'm not claiming to know everything and all of the things.


Catherine 00:57
I'm just out here trying to start the conversation and maybe build a community sort of thing anyway. And then with taxes specifically, I will take all the advice I can get because if you are a 1099 worker or anything under that same umbrella, it's a lot and I'm only 23 and I barely know about regular taxes. So right now my main resources for my organization are Google Sheets and the zero based budgeting techniques this technique is basically when you will allocate all of your income to something specific compared to giving a monetary amount to each category for every month.


Catherine 01:33
And you know, I'm not sure I follow zero based budgeting exactly, but either way, this is what I found that works for me. It's kind of like a combination dealio. So since my income comes from multiple streams and most of those aren't conventionally consistent example, I always don't I don't always get paid weekly, biweekly, the same amounts, etc., etc. It's super, super vital to keep track of all of your deposits.


Catherine 2:02
So I personally use my own spreadsheet that is a log for like any of my income. I know a lot of invoice services do something a lot more efficient, but I don't feel like paying for it when it's not that hard to replicate on my own. As of currently, it's, you know, manageable. And I have all my own invoice templates and, you know, systems, but I kind of do plan if it does get a little bit too much for me to do my own bookkeeping, you know, I'll outsource that so I don't have to do it.


Catherine 02:30
So this log includes a checklist for each month of the year across the x axis, and then each invoice check or payment, you know, has the name, the amount of the payment and if taxes were deducted from it and that's on the Y axis, I know that's kind of hard to visualize, but I kind of thought about I know some people do make their sort of templates or, you know, Google sheets or any resources that they use available to other people.


Catherine 03:01
I could do that. I would have to kind of figure out how to, but I don't think it's too hard. But also the concept isn't that hard. It's just like the x axis you have, you know, the months and then the other axis is what the money is basically. And I kind of have a color coded system as if it's white.


Catherine 03:21
I mean, it's on standby. I just have it logged so I don't forget about it just in case it is late. I know that it's late. And then when it's completed, I check the month that it was deposited in and then I turn it green yellow is if it's partially been paid out because some people will do that and then red is if it's not paid and it's late essentially.


Catherine 03:41
So that's just kind of like a literal just log of income. So now to the actual budgeting part, I have basically I have three main bank accounts and two credit cards. I have one checking account. And then for each credit card account, I also have like a savings account. You know, it's like under the same bank sort of situation.


Catherine 04:01
So two savings accounts, one checking account and then two credit cards. I also have a retirement account, a Roth IRA, but I'm still in the process of figuring out how I want to budget my contributions to that. Yeah, right now it's kind of pretty random, but I would like to use it to its full potential. Just haven't made enough money yet.


Catherine 04:22
So and the zero based budgeting that I do is the common 50, 30, 20 division. And those are my three main pools that I divide all of my expenses into. So it's I group one as rent utilities and like car and therapy. And then the second grouping is my credit card payments. Third grouping is savings. So all of my money gets deposited into a checking account and then from there I transferred out.


Catherine 04:53
And then if I can, if I have like electronic payments from, you know, my rent account or whatever, I can wire it to a specific pool because I know my bank has transfer fees. So just that's just in preparation to avoid those transfer fees. And before I came up with these numbers in three pools, I took a look at all of my monthly expenses and based things on, okay, what can't be put on a credit card and what can I put on my credit cards that won't put me in debt?


Catherine 05:22
So obviously, things like rent, utilities, car therapy need to be paid right away. Then between my two credit cards, one is use for my month to month expenses, gas, groceries, toiletries, etcetera, and then my other credit card, I put longer term items on, you know, birthday presents, hobby items or other big purchases. I can do a whole other episode on how I thought out which cards should be used for which just because there was a separate thought process in that and how I kind of maintain credit cards and keep my credit score and also share some of the information I've learned over the years about why credit cards are good because they are good, and you


Catherine 06:02
just have to be aware of certain things. And it's everybody. Everybody should have a credit card and everybody should be taking advantage of what credit cards offer. So things like gas and groceries, I keep myself to a limit each month just because those things can add up if you don't set a value to them. Doing things like this helps me not have to watch everything I spend on and, you know, stress.


Catherine 06:22
And so far it's been pretty good, even though the gas thing is kind of, you know, because my original budget was for about three fourths of a tank and now it's, you know, all different because of the gas prices and stuff. But I haven't changed it honestly because I don't want to change my budget. So what happens when I actually get paid easy I use the is over of equation to convert the 50, 30, 20 percentages to numbers, which is quite literally the only thing I remember from math in high school.


Catherine 06:52
Then I transfer them respectively to whatever each account is. So for instance, say I get paid $100 at first, gets deposited into my checking and then from there I use a percentage calculator off the internet to make sure my math is correct. The formula to get the answer of what you're looking for is what is insert the percentage either 50, 30, 20 of whatever the deposited amount is going to be.


Catherine 07:18
So for this instance, what is 50% of 100 comes out to $50. What is 30% of $130? What is 20% of $100? $20? So the 50% pool, like I said, is for rent utilities and car and etc. So I go back to my checking account, I set up a transfer of 50 to the savings account that pools those expenses and then the 30% is for credit card payments too, credit cards.


Catherine 07:42
So sometimes I'll split the 30 into two 15 and 15 for both credit card accounts, but not always because like I said, I set up the other one, I set up the other card to be paid off on a longer term. So most of the times I'm, I'm paying it to one account and then usually I make the minimum card payment on the long term credit card.


Catherine 08:01
And then the other transfer is I will set up the $20, the 20% goes to my other savings account which I use to store money to be put aside for taxes and overall savings. So a recap, I have two savings accounts, a checking account and two credit cards everything gets deposited into a checking account. And then I designated one savings account to pool money for rent, car utilities, yada, yada, The other savings account pools, money to be used for taxes and just general savings.


Catherine 08:34
And then the credit card I use for, you know, that's my, my everyday spending. Hopefully that makes sense. And you know, with freelancing, you have to put tax money aside. And the reason why you have to put money away for taxes, unlike other jobs, if you notice in your at a regular job, your taxes get taken out automatically with freelancing and gig work.


Catherine 08:57
They don't always come out automatically. So you have to be prepared. You have to take it out manually. And a big resource that I've been learning from with taxes and ten, 99 and freelance self-employed taxes is tax university on YouTube and their website. I will link them down in the show notes. They also have an app that I use.


Catherine 09:18
It's similar to like TurboTax, the thing that they do with it where they'll itemize all of your deductions and stuff. I definitely recommend so I forget how much I pay for it, but I'll link everything. I would also like to just note that my parents help out in nontraditional ways, so I don't want to undermine the things they do do to help me.


Catherine 09:37
But I also would like to make it clear that I am about 90% independent from them financially to give any other young people hope just because, you know, I feel like it might be a stereotype that people who have their college paid for and like all of that sort of thing, your parents bought you a car sort of thing.


Catherine 09:56
That's not my situation. And I am actually I. Student loans are another thing I have to eventually make into my budget, but don't have to worry about that until August. So yeah, we'll come back to that in a later date, but I'll just use the other techniques, similar techniques anyway. Yeah, I have been very lucky. I have supportive parents who first of all, let me go into this career field and have helped me out, like I said, in nontraditional ways.


Catherine 10:20
And again, I live out of state from them and I'm about 90% independent from them financially. The biggest thing that they're helping with is insurance, which I am allowed to stay on for another three years until I'm 26. But I am also in the process of trying to prepare and educate myself on what I have to do to freelancers and stuff.


Catherine 10:39
You have to again budget for insurance because traditional jobs, they are they offer you plans and everything's right in front of your face and freelance. It's not and I'm not a part of any unions or anything. So yeah, that's basically it in a nutshell. And I do that for anything that I deposit, which varies every month. But for someone who is new and fresh to adulthood and all of the things surrounding money and budgeting and then add to that all the information about 1099 taxes and living in New York City.


Catherine 11:08
This is work pretty okay for me so far and kept me from overspending. Truly having a grasp on what my income and expenses ratio is and it's been not completely Stress-Free but manageable stressful is what I will say and another thing I do since I am first to this profession is when I can and it's appropriate. I try and get some tips and tricks from people I work with or for and how they go about things since usually they are people who have been doing it for years, etc. So I typically learn something new almost every month.


Catherine 11:40
And yeah, taxes are a whole other subject that I am still navigating, so I don't feel knowledgeable enough yet to be sharing my experience with all of that yet. But like I mentioned, tax university is where I started and what I use still too. So but YouTube is also just a general great overall resource for all that sort of information.


Catherine 12:00
If anyone has any recommendations to a specific channel or people feel free to let me know. And yeah, that's going to be it for this episode. Feel free to take a listen to my other episodes and topics. And if this reaches you and you have any other burning questions or stories, I'd be happy to use this and learn from one another.

12:17
Catherine
So thank you for listening. See you next time