Freelancer Finances

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Finances: Calculating Your Individual Living Budget

To calculate your individual living budget you will need to examine all areas of your spending. This is about calculating what you need to live the life YOU WANT TO LEAD, it's not an exercise in how frugal you can be. Input the details of your MONTHLY spending into the boxes below. It's important that all the figures are monthly or you won't have an accurate picture. If you have costs that are annual then divide these by 12 to calculate the monthly cost. If you have figures that are weekly costs then first calculate the annual costs by multiplying by 52 and then divide this number by 12 (as above) to calculate your monthly costs. The more accurate you can be at this stage, the more accurate your overall calculations will be.

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Your Individual Living Budget

Your individual living budget is about calculating what you need to live the life you want to lead, it's not an exercise in how frugal you can be.
Here are the answers you gave.

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Household Costs

Your household costs will likely be your largest monthly outlay. They will likely include your rent or mortgage, followed by local taxes such as council tax and TV licence in the UK, utilities such as water, gas and electricity, and insurance for your property and its contents.
Most of us have home broadband, perhaps with an associated TV subscription and landline costs, as well as a mobile phone contract. If you have any additional household outlays specific to your personal circumstances, add those in also.
If what you are paying is likely to increase soon then make allowances for that. For example, if you are living with family currently and paying little or no rent but plan to move to a new location for work, it’s sensible to factor in that new level of expenditure.

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Mortgage or Rent

Council Tax and Insurance

Gas and Electricity

Water

Mobile Phone

Broadband and Subscriptions

Broadband services and any streaming / subscription services (e.g. Netflix)

Any Other Household

Total Monthly Household

Total Annual Household

Transport Costs

You have to be able to get out and about.
Put in this section all the costs associated with your transportation. Include any finance or leasing costs you pay on your vehicle, road tax, insurance and any parking and servicing costs.
Allow for consumables, such as new tyres. Think about whether your annual mileage will increase or fall are freelancing and adjust accordingly.
If you plan to use your car for work you must make sure that your insurance policy covers 'own-business' use.
If you use public transport regularly, estimate how much this costs you per month.

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Public Transport

Season tickets and other tickets

Car / Motorbike / Bicycle costs

Include rental/lease/HP monthly payments plus insurance.

Car / Motorbike Service and Maintenance

Estimate a monthly amount for all servicing and maintenance costs during the year.

Car / Motorbike Fuel and Parking

Estimate monthy fuel costs and parking costs

Other Transport Costs

E.g. Hire cars, trains, flights etc.

Total Monthly Transport Costs

Total Annual Transport Costs

Personal Costs

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Groceries and Household Supplies

Your monthly grocery shop plus any take- aways and other incidental food purchases.

Incidental purchases

On the go snacks, coffees, meals, newspapers, magazines etc.

Entertainment

Eating out, theatre, cinema, pubs/bars, sporting events and any other social events

Technology / Clothes / Beauty / Fitness

All technology, clothing, beauty and fitness spend not forgetting the incidentals

Gifts / Holidays / Other personal items

Remember to include all incidental spending

Other personal expenditure

Any other personal purchases not already included

Total Monthly Personal Expenditure

Total Annual Personal Expenditure

Financial costs

Calculate these as regular monthly costs - if they aren't regular amounts then estimate a monthly average over a year

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Loans and/or credit card debt and/or repayments

Savings plan

Pension Contributions

Other financial products

Total Monthly Financial Products

Total Annual Financial Products

Other Costs

Such as medical, childcare or tuition fees, anything that hasn't already been covered - if they aren't regular amounts then estimate a monthly average over a year.

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Monthly other expenditure

Total Monthly other expenditure

Total Annual other expenditure

Subtotal costs

The costs below are the totals of all the costs you've inputted above. These costs are all paid out of income earned AFTER tax has been paid.

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Monthly total costs

Annual total costs

Contingency(Required)

Unexpected costs come up from time to time. Adding in a contingency allows you to have something in reserve for when something unexpected happens. Use the drop down below to choose what level of contingency you want to build in.

Monthly Individual Living Budget

Based on your calculations above these are your monthly costs which you estimate need to be paid from post-tax income

Annual Individual Living Budget

Based on your calculations above these are your annual costs which you estimate need to be paid from post-tax income

Calculating Your Annual Turnover

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Your Annual Turnover is the total amount you need to earn over a year including business expenses, tax and national insurance.
In order to calculate your Annual Turnover you now need to add in Income Tax and National Insurance to the Annual Individual Living Budget figure you have already estimated. Tax rates change regularly so in order to ensure this calculation is up to date it's best to go to the UK Government website and input your figures into the HMRC Ready Reckoner tool.

The HMRC Ready Reckoner tool will estimate your self-employed tax bill.
NOTE: HMRC uses the term profit - this is equivalent to your individual living budget figures.

HMRC Ready Reckoner

Copy the figures from the Ready Reckoner tool into the boxes below. Your previous estimates for your monthly and annual Individual Living Budget are pre-populated, you can override these if you’ve adjusted these in any way.

Monthly Profit

Equivalent to Monthly Individual Living Budget

Monthly Tax and Class 2 and 4 NI(Required)

Calculated from monthly Individual Living Budget

Yearly Profit

Equivalent to Annual Individual Living Budget

Yearly Tax and Class 2 and 4 NI(Required)

Calculated from annual Invidividual Living Budget

Gross Profit

This is what you need to earn after business expenses have been deducted from your Annual Turnover.

Business Expenses

These are the costs of running your freelance career. Eligible expenses can be deducted from Annual Turnover before tax is calculated.
When you are starting out you may need to buy things up front that are classed as business expenses. You will need to pay for these up front even though they are deductible against tax.

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Office

Office supplies, software, equipment

Office Repairs

Repairs, maintenance and alterations

Clothing

Uniform, PPE, costumes

Business Travel

Travel and subsistence costs

Training Courses

Business related training and development

Advertising and Marketing

Website, trade subscriptions, sponsorship

Monthly Business Expenses

Annual Business Expenses

Annual Turnover

The figure below shows your Annual Turnover. This is the total amount that you would need to invoice across the year in order to pay for all your business expenses, settle your tax and NI liabilities and have enough to cover your Individual Living Budget.

Annual Turnover

How many days do I need to work in a year based on my estimated rate?

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Now that you have calculated your annual turnover it's time to look at whether what you might charge on an hourly basis will enable you to earn enough over the course of the year.

And whilst there are 365 days in the year you certainly aren't going to be working all of them. Plus remember freelancers have to work on as well as in their freelancing so you won't earn every day you are working either. The calculations below are based on the following:

There are 52 weeks in the year however, let's assume you take 4 weeks' holiday.
That leaves 48 working weeks in the year, or 240 days (assumes a 5 day week) that you could work in the year.
And let's assume that a week is 37.5 hours and a day is 7.5 hours.

Pick your hourly rate(Required)

From the drop down below pick an hourly rate that you feel is closest to what you charge.

Number of days needed to work per year

Remember you won't work 365 days per year so this is out of 240 possible working days.

Number of weeks needed to work per year

Remember you won't work 52 weeks per year so this is out of 48 possible working weeks.

Not enough days in the year

You would need to be paid on more than 240 days / 48 weeks of the year at this hourly rate in order to make your Individual Living Budget work. This isn't going to happen. You need to look again at your hourly rate as well as your Individual Living Budget and Business Expenses to see if you can make the numbers work.

You are going to struggle to work this much!

You would need to be paid on 75% - 100% of the 240 working days / 48 weeks of the year at this hourly rate to make your Individual Living Budget work. This will be extremely challenging both practically and mentally. Look again at your hourly rate as well as your Individual Living Budget and Business Expenses to see if you can adjust the numbers to increase your sanity.

Looking Good!

You need to work less than 75% of the 240 working days / 48 weeks of the year at this hourly rate to make your Individual Living Budget work.

What is my estimated rate based on number of paid days I work in a year?

If you don't have an idea of your rate you can estimate it by dividing your Annual Turnover by the number of paid days you will work in a year.

Annual Turnover

Percentage of time in paid work over a year(Required)

Weekly rate

Daily rate

Hourly rate

The figures above are your estimated rate (by hour, by day, and by week) based on number of working days in the year you anticipate will be paid ones.

The calculations are based on a maximum of 48 weeks' or 240 days' paid work in a year, and assume a 7.5 hour working day. Use this information to do benchmarking research to assess if this is an achievable rate for your desired work. Look and see if you can find any of the following information about rates in your sector:

Unions or Guilds may have published ratecards or recommended rates;
Advertised opportunities (either live or historical) are likely to have rates information;
Ask people you know how much they might suggest you charge for a piece of work.

Benchmarking research

Put some notes here on where / who you will conduct your benchmarking research

Your Report

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Important(Required)
I understand that any calculations in this form are based on my inputs and nothing here should be construed as financial advice.

Report for {user:first_name} {user:last_name}

Finances: Calculating Your Individual Living Budget

Your Individual Living Budget

Household Costs

Transport Costs

Personal Costs

Financial costs

Other Costs

Subtotal costs

Calculating Your Annual Turnover

Business Expenses

Annual Turnover

How many days do I need to work in a year based on my estimated rate?

Now that you have calculated your annual turnover it's time to look at whether what you might charge on an hourly basis will enable you to earn enough over the course of the year.

What is my estimated rate based on number of paid days I work in a year?

The figures above are your estimated rate (by hour, by day, and by week) based on number of working days in the year you anticipate will be paid ones.

Benchmarking research

Your Report

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