Mike Zornek

Self Employment Estimate Numbers

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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.