Best Budgeting Strategies for the Self-Employed

Managing your own money is hard enough, let alone your company’s as well.

Best Budgeting Strategies for the Self-Employed
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You're a solopreneur. You have your own business. You are self-employed. Whatever definition you use, if you're working for yourself and don't have a full-time staff helping bring in a strong six or seven figures in revenue a year, you probably occasionally, or often, have budgeting issues. After all, you don't just have to do the work for your business – you have to collect your paycheck, possibly from a variety of sources, some who pay on time, and some who may not.

So if you're one of the estimated 15.3 million people in the country (according to Census data) who consider themselves self-employed, and you're looking for strategies to keep your budget in line, consider the following ideas from solopreneurs.

Underestimate income and overestimate expenses. That's what Hope Hunt does. Hunt, 38, a resident of Williamsburg, Va., owns EPOH, a virtual assistant service (it stands for Every Person's Office Help). She began her company seven years ago and says it took her 18 months before she made anything resembling a sustainable income. Lately, her annual income has been between $70,000 and $100,000.

"My worst month in recent years was about $1,600, whereas my best was about $10,000," Hunt says. "It definitely fluctuates and can be quite nail-biting at times."

[Read: How to Stop Depending on Your Paycheck.]

And so Hunt, who also has the challenge of being a single mom of six kids and lacking a second income in the household, always assumes the least amount of income will come in during a given month. She also doesn't pull any punches when planning out her expenses, estimating, for instance, that unfixed costs like school supplies or clothes shopping might turn out to be north of reasonable.

Bill often. That sounds like a given, but when you're busy working, it can be easy to miss the fact that if you don't send out invoices periodically, checks don't come in periodically, and then periodically you can't eat.

"The biggest cash-flow problem is my billing rate," says Peter Puglisi – and keep in mind he's a bookkeeper.

"I'm currently addressing that," adds Puglisi, a certified public accountant who hails from Wappingers Falls, N.Y. But not billing regularly is an easy trap to fall into, even for the best budgeters when they're deep in the weeds of work and in demand.

Careful on the unnecessary purchases. Everyone occasionally gives in and buys the flashy gadget their business doesn't really need, but make sure it doesn't happen often. "In other words, don't consume or gamble. Simply invest. Invest in what will make your business better," Puglisi says, offering the example that some small business owners will buy the most expensive scanner-fax-copier combo they don't really need.

Says Puglisi: "You don't need to go out and sign up for a standalone, super machine from Canon that comes with the monthly lease."

Keep a rainy day fund or a line of credit on hand. If you own your own business, you know this, but you may not do it. Joshua Carlson, a resident of St. Louis, does. He owns Carlson Galleries, which bills itself as the largest antique lighting store on the Web.

His company does very well, especially for being a two-year-old business run by a 25-year-old. His month-to-month sales "swing wildly," as he puts it, from $30,000 to $70,000 a month.

[See: 10 Questions That Will Help You Earn More Money.]

Of course, plenty of that money is reinvested back into inventory, although if he knows he is facing a slow month, he makes fewer purchases. Carlson says he doesn't have a structured salary that he pays himself, although he estimates he probably makes $150,000 a year.

"My personal costs change depending what I'm spending on travel and fun toys, so that's a moving target," he says. If his company is experiencing a slow period, he adds, he will go without a salary to make sure the business can cover its bills and run smoothly.

"I've never been in a situation where I have defaulted on any bills, but there have been a couple of times I have dipped into a small line of credit to get us through the month," Carlson says, and while he refers to "us," us is just him.