Self Employment Estimate Numbers

Posted on Sep 4, 2018

In a world of being self-employed you need to constantly be evaluating your finances. I was lucky enough recently to finish paying off some long standing debit and so I did a revisit. Today I want to share with you how I do my estimate numbers and hopefully you can use some of these ideas to help plan your own independence and/or make sure your current indie life is in good shape.

The software I use to do this is Soulver. Think of it as a really smart text editor for crunching numbers. Watch the demo video on their site to see it in action. If you are not interested in Soulver, any spreadsheet should do fine. Just keep it on file somewhere so you can come back and rework it as needed.

First thing you need is a list of personal expenses. If you are single you can do this yourself but if you are married or in a relationship where you share expenses get them involved too. You want to have a full and truthful collection of costs here. The goal is understanding what you need to survive and ultimately what you can cut to help make your dream that much more possible.

I did this by first using my credit card and debit card statements as a source. Every item needs to be recorded. Make three lists, some will be monthly expenses, some yearly expenses and some one-time expenses. Once you get done with the statement history try to brainstorm where the undocumented cash goes. Hopefully these lists will help.

Personal Monthly Expense Examples:

Rent / Mortgage
Home / Renters Insurance
Car Payments
Car Insurance
Car Maintenance
Car Fuel
Health Insurance
Expected Monthly Copays / Medicines
Netflix
Hulu
Monthly Gaming Subscriptions
Game Purchases
Eat Out Food
Spotify
iTunes
Patreon Gifts
Podcast Subscriptions
Haircut

Some of these items might be hard to quantify as monthly. If so just make a yearly entry for them.

Personal Yearly Expense Examples:

Christmas Presents
Birthday Presents
Yearly Clothes Budget
Vacations
Car Inspection

Once I have my yearly and one time costs I like to total them as a monthly expenses (YearlyTotal+OneTime/12) so I can later think in terms of months. This is fine for back of the hand estimates but if you need to plan out your money for specific times (summer vacation, fall back-to-school kind of stuff) you’ll need to do more planning.

Now do the same for your company.

Company Monthly Expense Examples:

Coworking Membership
Downtown Parking
GitHub Membership
Linode Hosting
Amazon Hosting
Books
Google Apps
Verizon Phone
Dropbox
Micro.Blog
Clicky / Web Statistics
Cushion / Finacial Software
Frontend Masters / Online Education

Company Yearly Expense Examples:

Two Conferences Events: $4000
Tax Preparation
New Mac every other year: $4000 × 0.5
New iPad every other year: $1100 × 0.5
New iPhone every other year: $1000 × 0.5
Vimeo PRO Membership
Apple Developer Membership
Trello
Hover Domains
Other Software

Notice how I distribute the costs of various hardware upgrades, which are bi-yearly, and do keep in mind this is all for rough estimating. I in-fact have held off on upgrading my iPhone recently so that’s extra money in the bank (kind of).

Next I work out my income:

## hours a week
## hours × $### per hour
{WeeklyRevenue} × 4 weeks
{MonthlyRevenue} - {TotalOfCompanyMonthlyExpenses} tax-free
{AdjustedMonthlyRevenueA} - 0.10 for Savings
{AdjustedMonthlyRevenueB} - 0.30 Tax Estimate Payments
{AdjustedMonthlyRevenueC} x 10 months // assuming 8 weeks off
{AdjustedYearlyRevenue} / 12 months of payouts
{AdjustedMonthlyIncome} $/month personal income

This last number needs to be able to cover your personal expenses. Using this formula you can get an idea of how many hours and at what rate you want to target for the year. Also, just covering personal expenses is probably a risky goal. You might want to up that savings calculation until you have 12 months of living expenses in the bank.

These things vary person to person, hopefully you’ve found this post useful. If I’ve forgotten anything blog your additions and share along. Thanks for reading.