The end of the fourth quarter is near. For many of us, it is a time to reflect upon the previous year’s accomplishments and failures. As we celebrate the ups and learn from the downs, we cannot get too comfortable because 2019 is a month away.
The question is: Are you ready?
One of the ways that you can prepare for the new year is sitting down (or standing up) and mapping out your budget for 2019. If you prefer to chunk the year out in quarters instead of plotting the entire year, go for it! Regardless of the methodology, be sure to plan ahead.
Planning ahead involves projecting, or anticipating, your expenses and your revenue.
It also involves guess work, analytics, and maybe, some optimism, yet it is doable and I highly recommend forecasting your budget, especially for new freelancers.
Focus on what you do know
The first time I projected a budget, I was overly optimistic, to the point of being unrealistic. I included revenue that was based upon wishful thinking and not facts. Instead of honing in on what I did know about my job patterns, I focused on what I wanted them to be. The prior year, I had 12 clients and I was projecting that I would uptick to 200 clients for the next fiscal year.
Was this possible? Sure, but it was highly improbable. The budget I forecasted was futile, which defeated the purpose of creating a budget in the first place.
Thankfully, I had a mentor who reviewed it and simply asked: “Where are all of these extra clients coming from?” I did not have a satisfactory answer.
I wanted the extra clients, but I did not have a plan. So, I revamped my budget and focused on the variables that I could most accurately predict. I made it more realistic based upon my market, my previous year’s earnings, my marketing strategy, and the number of leads and potential clients that I had in the pipeline.
And it worked! The forecasted budget was just slightly off from my actual budget for that year.
The takeaway: Your prior knowledge and experience are invaluable tools for creating a budget.
Take advantage of budgeting tools
The good news is that you don’t have to figure everything out by yourself. There are numerous resources, tools, and apps that can serve as templates to help you manage your finances and plan your budget for 2019.
Trust the professionals
Now, DIY and apps are not for everyone. Honestly, numbers are not my thing; I even regret not paying more attention during my high school and collegiate math courses.
Thankfully, there are trained professionals who are well-versed and experienced with working with budgets, especially the more complicated ones. As your business expands, I highly recommend that you seek out a CPA or a bookkeeper who can either walk you through the process or even do it for you.
The advantage of using a hired professional is that he/she will have a deeper understanding of state and federal tax laws, how to earmark expenses, how to plan your payroll, how to identify tax deductions, and what constitutes charitable giving—all of which can factor into your 2019 budget.
Additionally, if you are able to contract with a freelance CPA, there is a greater likelihood that he/she will truly understand what you do and some of the nuances that go into a freelancer’s budget.
How does all of this lead to saving money? By focusing on what you do know, you will be able to create a 2019 budget that actually works. Every year thereafter, use a strategy that helps you stay within your allocated budget and not overspend.
Impulsive spending, purchasing unnecessary supplies, and even over-hiring are often antithetical to profitability and growth. In this sense, projecting your budget can help you save money now and in years to come. It can also help you anticipate reasonable growth.
More than anything, creating a budget forces you to be realistic about what you can spend, when you can spend it and how you spend it.
The more that you are able to project and operate within your specified parameters, the more likely you are to save. In other words, the more you budget, the more you eventually profit.
Here is to 2019 being one of your best years to date!