I’ll be honest: I think a lot of budgets are dumb. Whether it’s done with envelopes, spreadsheets, or an online dashboard, I don’t need a screen full of numbers telling me what I can and cannot do. I’m plenty smart and I’ll be damned if I can’t buy a 12-pack of tea towels so that my kitchen looks like the set of Barefoot Contessa. #priorities
A conventional budget works well for folks who have a regular paycheck and monthly bills. If you have trouble paying off a credit card, or routinely find yourself in some type of consumer or personal debt, a conventional budget can help you recognize when your spending has gone overboard. You can do this with a spreadsheet or an online service like Mint or Mvelopes. You can even put actual dollars and cash into envelopes labeled “rent”, “groceries”, and so on to ensure that your dollars go where they’re supposed to.
But what about the freelancer who hasn’t gotten paid from the concert gig 3 weeks ago, is still living off of December’s caroling income, and has 3 coachings in the next 2 weeks for a gig next month? A lot of the singers I’ve met are already pretty frugal and spend carefully, but a conventional budget in between gigs doesn’t work. If you’re getting your hustle on, now’s the time to think about what style of budgeting will work best for you.
My budget works more like a battle plan armed with a concept called “zero-sum budgeting”. Basically, I’ve got this many dollars arriving in a given month as reinforcements and it’s my job to deploy them as I see fit. When all is said and done, every dollar has its assignment. I break my budget into 2 broad categories:
Cash Inflow = Everything with a positive value in the table below. Money that comes to me, though it must be “new money”, or money that wasn’t in my name before. Transferring funds from a savings account to Paypal doesn’t count. Getting paid does.
Cash Outflow = Everything with a negative value in the table below. This is either:
Savings: money that I’m putting away for a specific purpose, such as a gift, car, educational opportunity (pay-to-sing, anyone?) or debt repayment.
Expenses: money that leaves me or is no longer in my name. Note that this doesn’t include paying off a credit card - I spent that money when I ordered the tea towels, not when the bill for said towels shows up.
This type of analysis is common amongst businesses using a “Profit/Loss Statement” or “P&L” for short (cash in = profit, cash out = loss). Also, note that “save” is above “spend”. In the personal finance community, there’s a popular saying: “pay yourself first”. Put money towards your savings plan before determining what you have left to spend. This is akin to keeping some of your dollars at base camp, just in case the ones you send out on patrol get ambushed.
Breaking down these categories is a matter of personal preference and how much you like to analyze your financial situation. If you’re a numbers person or like spreadsheets (#conditionalformulasftw), you’ll end up with more categories. I would recommend splitting up your income however you mentally categorize your work life: jobs I hate/jobs I like; chorus/solo/opera; W-2/1099, etc. For each income category, I would also add an expense category too so that your business-related expenses are categorized the same way as your income (pro tip: these categories can make your taxes a lot simpler too).
Does this overly complex or time-consuming to you? Do you wish there was an app for that? Turns out there is - YNAB (You Need a Budget) - and it only costs $7/month. If you’re intrigued but prefer the DIY approach, check out the budget below:
This represents what I could have spent as a 26-year-old single person trying to make a living as a working singer. It looks like I was expecting to bring in over $1,200 that month but something went wrong - maybe a gig fell through or I had not been paid for some Christmas work. I had been thrifty to make up for the missing income, but I needed some extra lessons voice lessons this month. In the end, I was short $158.08, which is drawn from my savings. The good news is that I’ve got $75 saved up to see my friend sing in NYC, and I can afford a night out at the bar or a nice bottle of Scotch (scotchy scotch scotch…)
For freelancers with irregular income and expenses, I prefer the zero-sum approach. If you’d like to try it out for yourself, here’s a copy:
In the future, I’ll cover how to expand this method to include long-term savings, childcare, debt repayment, and/or a side hustle. More to come!
SM
Tenor Siddhartha Misra shifted from a career as a full-time performer to life as an opera admin/regional performer. He currently works full-time at the Opera Philadelphia as their Lead Guest Services Associate and still sings throughout the region. He is deeply familiar with the YAP merry-go-round, as a participant and as a former staff for the Janiec Opera Company at Brevard Music Center. As a side hustle, he invests in real estate properties with his wife, a full-time voice teacher.