One of the first questions people have when they start thinking about becoming a location independent freelancer is ‘How much money do I need?’ Well, you can simply calculate that answer! When you sum it up in your head, you might feel overwhelmed, but when you break it down, you will see that it’s very achievable.
Step 1: Download the Budget Planner
I created an example budget planner. You can download it from the Google Drive and fill in your own numbers.
I do realize that the example costs in the sheet might seen very high, depending on where in the world you live and what your circumstances are. Not everyone has to pay rent in The Netherlands, not everyone has a car and not everyone has student loans, which would make the costs considerably lower. So don’t get scared away by the example costs!
Step 2: Go through your banking system and fill in the Budget Planner as you go
Go to your online banking system and trace back all your payments for the past 12 months. Boring? Yes. Necessary? Absolutely! And it will take less time than you think.
Go through all the payments and decide if they were recurring costs or one-time costs. The recurring costs would be your rent, insurances, debt payments like a student loan, but also subscriptions to your gym, magazines and spotify.
Also keep an eye out on yearly costs. These would be taxes you pay yearly, yearly insurance costs, and yearly subscriptions.
When you look at the Budget Planner, you will see columns for monthly & yearly personal costs and monthly & yearly business costs, like web hosting. Simply fill in all your expenses in the correct column.
→ Bonus! When you go through this, be critical! Decide which subscriptions you don’t really need and cancel them immediately.
Step 3: See your monthly expenses
Once you’ve gone through all 12 months, you’ll see the total monthly costs in the document. Keep in mind that you still need extra for groceries, fuel, fun stuff and travel, but at least this gives you a good indication. If you have a good budget for those flexible costs, you can also fill them into the columns to include them into the total monthly budget.
Step 4: Realize what this means
The examples in the sheet are close to what my own realistic costs were when I started. After writing all that down, I decided that I wanted to make €1900.00 a month - that would mean over €500.00 for groceries, unforeseen circumstances and savings, plus fun stuff and travelling.
A minimum of €1900.00 means:
Keep in mind that this is not exact, because you have to keep in mind the tax rate in your country! But it does show that it’s very manageable.
→ Bonus! Thinking of moving to another part of the world, like South-East Asia or Eastern Europe? Do some research on rent prices and general cost of living there and you’ll see that it’s even more easily achievable!
→ Keep in Mind! The bigger your business grows, the higher your business costs get as well. Where I paid €10.00 for Buffer back then, I’m now paying €100.00 and I added more tools to make client work easier. But as your business grows, you’ll also make more money. I still go over this sheet once every 3 months or so and I recommend you do the same.
Was this useful? Got further questions? Join the Freelance Kickstarter Facebook group and let me know your thoughts!