Budgeting in Self-Employment

I thought it would be fun to update this post exactly 5 years after I originally wrote it…let’s see what’s changed…

The ups and downs of income when you're self employed are so hard to navigate. Here's a solid approach to budgeting in self employment and striking out on your own with a plan in place. I'm glad I'm not alone!

Yes, even though blogging was/is officially paying me more than my day job ever did, I budget in self-employment.  Specifically, I really dislike the idea of irregular paychecks and we strive to make it less stressful.

My Paycheck Plan 5 Years Ago

I had been building up a blogging income account at ING (now CapitalOne 360).  My hope was to get it to $10,000 by the time I quit my day job so I’d have more than enough padding on months that I don’t bring in enough. That means searching for more ways to make money from home.  I made it to $9200 from online business opportunities as of July 15, 2011 and I took it right over the $10,000 mark with the last paycheck I received after giving my 2 weeks’ notice.

I was planning on paying myself a biweekly paycheck directly from this accout so we would never experience a budget crunch at all.  In order for this plan to have worked, I decided to pay myself $1500 every two weeks.

How It Has Worked for the Last 5 Years

I’m going to pat myself on the back because I used the best budget software to track all this stuff.  This plan has been slightly adjusted as our income fluctuated over the last 5 years, but in general, we stuck to this exact setup.  We still have the “Blog Income” CapitalOne 360 account.  It is now padded with $20,000 instead of $10,000 since Mr. BFS is also self-employed now.  We only pay ourselves $1000 from it every 2 weeks instead of $1500 since we earn the rest of what we live on through pet sitting, rental income, and his side hustle of sports officiating.  Overall, this system keeps the fluctuating income of the online world from affecting us much.  I highly suggest just paying yourself a set paycheck instead of trying to live on every cent you can squeeze out of your Paypal account.

Taxes 5 Years Ago

From that biweekly paycheck of $1500, I will be transferring $400 directly into our tax account. We’re using online tax software to track all this stuff.  I know that is only looks like about 27% set aside for taxes, but based on my monthly spending for blogging, it will actually come to about 30%-33% of my profits.  Plus we already throw an extra $150 a month into the tax account just in case there are any nasty surprises in April (now quarterly), which there hasn’t been since we started doing that 4 years ago.  In short, I am 99.9% sure that our taxes are covered with $400 from each of my biweekly contributions.

Taxes in 2016

We still move over money automatically to our tax savings account, but it fluctuates each year based on what we owed the previous year.  Right now, we save up about $1000 a month for income taxes, $1000 a month for property taxes and insurances, about $1000 a month for our Roth IRA’s, and another $1000 a month for our SEP IRA if we can squeeze it in…yeah, there is a reason we make ourselves earn $7000+ a month on average each year.  Running our online business promoting companies with affiliate programs and the pet sitting business at the same time can be exhausting, but worth it for our peace of mind in the future.


Of the $1100 left, it looks like we’ll be spending about $125 with me on my husband’s health insurance plan.  That $125 biweekly should cover my health insurance, dental insurance plans, vision plan, and a basic life insurance policy.  It’s not a fantastic plan – the deductibles aren’t great – but we have enough in our emergency fund to more than cover them.

I will know all of the details for sure in a few weeks.  If I’m right based on last year’s info, then I should have about $975 left out of the original $1500 every two weeks.  I was taking home $970 every two weeks at my day job, so I’ll have a $5 raise!  Woot!  Hahaha.  😉

Leftovers in 2011

In 2011, I was bringing in more than $1500 every 2 weeks.  All of my blog income is transferred into my blogging income account, which I want to keep above $10,000.  If I have paid myself all of my paychecks in a month and there is more than $10,000 left, we divided it up like this:

  • Taxes (30%)
  • Emergency Fund/Savings account (15%)
  • Extra Cash for Investments account (25%)
  • Vacation account (15%)
  • Our two individual Fun Money accounts (7.5% each).

Leftovers in 2016

We actually make less now than in 2011, so our goals are more exact-number and less percentage-based.  If we have extra over the $6000 monthly nut we cover, we usually divide it like this:

  • Taxes – 25% of the extra right off the top and the remaining 75% is split up in the accounts below
  • Emergency Fund – $15,000 if it’s not already topped off (usually already done)
  • Roth IRA savings for the following year – we save the $11,000 a year for our Roth IRA’s the year before so we can fully fund them the first quarter of each year.
  • SEP IRA savings – another $11,000 a year goal
  • Extra Cash for Investments – we start putting the Roth IRA and SEP IRA cash into stocks if we get them fully funded. I found great stocks apps for android that help with this kind of stuff.
  • Vacation account – Extra bits here and there, so it usually fluctuates between $100 and $2500 depending on when we travel.
  • Fun Money accounts – other little bits and bobs but usually we just try not to lose our minds and cover our short-term splurges with the monthly nut.

How do you handle your income and savings?  Any tips or tricks you like?

37 thoughts on “Budgeting in Self-Employment”

  1. Nicole

    Great planning! Calculated risks are the best kind.

  2. amanda

    There is nothing like a good plan to go after. this is the only way to achieve somthing in life, and you got it!

  3. Anna

    I admire your ability to Organize – an excellent plan!

  4. My University Money

    I always wondered if people who blogged for a living had problems come tax time due to the fact they wouldn’t have had anything taken off of their cheques and it takes a lot of discipline to save that much money. Great job. I’d mention some of the tax breaks that you probably qualify for now, but I’m sure you’ve researched all of those. Is your company incorporated or anything?

  5. Everyday Tips

    This is a great plan! The only category I would consider adding would be a business account. I would probably put a certain percent away for reinvestment purposes into your business. It could be used for tax software, new laptop (yours may die someday), business furniture, conferences, whatever.

    You are so organized, which is probably part of how you here in the first place!

  6. Financial Samurai

    Ahhh, the joy of taxes! I’ve discovered there are so many random types of benefits one can employ if you talk to an accountant. We should definitely start a tax thread in the Yakezie forums.

  7. Hunter

    I think your tax allowance will be sufficient, based on your income projections. One of the great benefits of being self-employed are the retirement plan options that are available. Compared to being employed, you should be able to save a lot more, tax efficiently, than you were previously.

  8. Crystal @ BFS

    @Nicole, thanks and good point!

    @amanda, I sure hope so, thanks for the support!

    @Anna, thanks!

    @My University Money, no, I have not become an LLC yet. Thanks to the fees and taxes for an LLC, at least here in Texas, it looks like I should wait until after I make at least $60,000 in one year. I know about some deductions like parts of my home and utility bills and all obvious blog expenses, but if you know of any others, please let me know. 🙂

    @Everyday Tips, oh, great point! I’ll readjust the monthly extra numbers to take that into account! I want to go to at least 3 conferences a year.

    @Financial Samurai, a tax thread would be great since I am a complete newbie at this!

    @Hunter, I feel like it will be harder but easier would be great! We’ll see…

  9. Mike - Saving Money Today

    Sounds like you’ve got everything thought out well. I think it’s smart to only take out the same amount you were used to getting and save the rest.

  10. Money Reasons

    Thanks for revealing what you are covering. I was curious if you took that all into account and aparently you have! Bravo (woot for you)!

    I didn’t really think of the $10,000 as a cushion (although I have such a thing in my checking account). Very clever of you to smooth out those slow months!

    Looking forward to living vicariously though your new adventure!!! Kick butt!

  11. Crystal @ BFS

    @Mike, we’ll see if it works. 🙂

    @Money Reasons, hahaha! I will try to kick as much butt as possible just for you!!!

  12. Car Negotiation Coach

    Crystal, welcome to the world of self-employment. Don’t forget that you can now contribute pre-tax money to a SEP plan for retirement if you so choose as well. I like to try to fill that up and then use a Roth after.

  13. Suba

    Don’t forget to set aside the same amount (and match from your employer) in a SEP-IRA. Even though your take home income now will be the same, the 401k doesn’t get saved automatically anymore. Regular IRA is good, but the SEP will reduce the tax even further. You can do profit sharing too, though that is more complicated than SEP. As long as you don’t need the money you might as well use everything the self-employment has to offer.

  14. MoneyCone

    Smart of you to set aside money for taxes! Make sure you put them in a high yield savings account so that it continues to earn interest till tax time.

  15. 20 and Engaged

    Great planning. I need to put this into my budget once I get the income steady and flowing. I think you covered everything.

  16. youngandthrifty

    Congratulations!! It is so amazing to see your goals accomplished one by one and the fantastic success you have achieved.

  17. Financial Samurai

    Sounds like a good days work to me! Hope you enjoy it forever!

  18. Tariq @ Yes I Am Cheap

    Budgeting is very important. All of us should plan a budget as I believe helps a lot. Savings are also very vital. So we should also think about keeping aside a certain amount of money every month.

  19. Laura @ no more spending

    Woot on your $5 pay rise!! 🙂

    All joking aside I can’t wait to see your progress!

  20. Crystal @ BFS

    @Car Negotiation Coach and Suba, I had no idea what a SEP plan was! Thanks!

    @MoneyCone, is high yield like the 1% I get at ING? 😉

    @20 and Engaged, thanks!

    @youngandthrifty, I’m still amazed myself, lol.

    @Financial Samurai, thank you!

    @Laura, hahaha, thanks!

  21. Little House

    You are so organized. I really need to separate out my blogging income from all of my other sources. It gets thrown into the mix and quickly dissipates faster than I can portion it all out!

  22. Crystal @ BFS

    @Little House, at this point, there is no choice for me. It’s organization or ruin, lol.

  23. Jeff @ Sustainable life blog

    Congrats on the huge raise! Good luck blogging full time!

  24. Khaleef @ KNS Financial

    I love that you have such a conservative plan for handling taxes, and that you are factoring in your husband’s increased insurance premium as well!

    Congratulations once again!

  25. Crystal @ BFS

    @Jeff, hehehe, and thank you!

    @Khaleef, I like being on the safe side. And thanks!

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