Money, Money, Money…


Money & budgeting are two things people tend to avoid thinking about too much. Sure we all like to get paid, but actually sitting down and working with the numbers, that’s the least fun part of money. It is crucial to stay on top of your finances, whether it’s your personal finances or the company you work for.

So let’s break it down together, let’s get us off on to a good start. Let’s start with our personal/freelance finances.

Income vs. Outgoing 

The two most crucial bits to financing is Income vs. Outgoing, so the money that you earn and the money that you spend.


So let’s look at our expenses which are crucial and that we all will have in common: To give you an example of what life in London can cost, here are some numbers.

  • Rent: £670
  • Bills: £100
  • Food:£150-£200
  • Transport:£180
  • Health & Wellbeing:£60
  • Insurances: £50
  • Miscellaneous: £40
  • Student loan: £50
  • = £1,350/month
  • Total: £16,200/year

So that is over £1k on the basics every month, not including things like going for dinner with your friends, birthday presents, etc.

So we need to earn at the very least £1,350 per month to cover our basic day-to-day living.


So income is the most fun part of working and earning money, right? But it is also important that we spend our income wisely and go through our budget monthly to keep on top of things. So we know our expenses each month, so let’s look at what we can do with our profit if we haven’t been breaking even this month.

Say that we earned ourselves £2,000 this month. After having paid all of our expenses, we’re left with £650.

It would be lovely to think that we can spend that £650 on gear ( My guilty pleasure is synthesizers), but sadly we should probably not do that.


If you are a freelancer and have your own company we need to think about taxes and putting money aside for that time of the year where you need to declare your earnings. In the UK at a basic rate, you pay 20% in taxes.

So if we earn £2k a month, that’s £24,000 a year. 20% of 24,000 is 4,800 (24,000 x 0.20). However, in the UK, the first £12,500 are tax-free, so we only need to pay tax on £11,500 (24,000 – 12,500).  So 20% of £11,500 is £2,300 a year or £192 a month.

So out of those £650 in profit (after our expenses), we need to set aside £192 for tax which leaves us with £458.

I’d probably put £100 of that into a savings account, and the rest will likely cover some miscellaneous expenses.

If you feel like you cannot handle your finances on your own, it might be worth getting an accountant.


Budget – SUMMARY

It is important to estimate what you will spend, that is why you forecast. It’s always good to be a bit generous when you forecast to make sure you have some wiggle room. The example above is all a forecast; expenses vary from month to month.

Actual Spend

At the end of the month, you compare your forecasting to your actual spending. Did the numbers add up? Where you spot on or way off? What can you do differently next month? Here we can analyse our forecasting, spendings, and savings.

Yearly Summary

Whether you are a freelancer or working for a company/client, it is always good to do an annual summary. Compare the months, recognize patterns, spot the quiet months, and the busy ones. There is a lot to learn from a year, and planning for the next one gives you a head start.


Always account for the miscellaneous bits, there is still something we spend money on that we do not account for. A cab ride here, servicing there, something broke, and you needed to replace it. There are always unforeseen costs that are impossible to avoid, so it is better to give yourself some slack and account for a little bit extra for those times you need it.


Stay on top of your invoicing game. Make sure you chase your invoices and keep track of which ones have been paid and which ones are overdue. There is plenty of accounting software on the market that makes invoicing easier, keeps track of which invoices have been paid, and also makes declaring your tax easier.

Editors note: Wave Accounting is similar to Quick Books and free.

The Budget Given by a Client or Company

If you have been given a budget to work with by a company or client, it is crucial that you stick to the budget. No one likes an over-spender, and it can get you into real trouble if you do overspend.

The same way you budget for your personal or freelance finances, you can apply the same method when working with a budget that was given to you.

It is important to meet client expectations, but also to be honest and realistic with what you’ve got. If a client is asking for more than they are willing to pay for you, have to be open and honest about it. Look at different options or see if they are willing to increase their budget. Communication is key.

Money and budgeting can cause a lot of anxiety; it affects us all. But if you set yourself up and tackle it heads on, I can assure you it will be a lot easier to deal with. Set aside a day at the beginning of the month and at the end of the month where you sit down with a cup of coffee or a tea to go over your budget and finances.

If you find yourself in some financial difficulties, please seek advice from accountants and contact your bank. The sooner the better.


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