3 of the Best Budgeting Tips for Contractors

Contractors often find themselves falling a bit behind financially.  In today’s economy, it would be surprising if they did not.  Work is not guaranteed and there are times when demand is low, and rising prices are not making life any easier.

There are things however that you can do as a contractor to help make it to the month’s end without worrying about your financial state.  Budgeting is an essential part of any financial plan and preparing a budget is essential to your contracting business.  There are things that you need to do in order to stretch your cash in any job.

Keep Track

It is very important that you continually track your financial state.  Take down all of your income and savings, as well as any investments that you may have.  You must know where you stand financially in order to ensure that you are sticking within your spending limits.

Any good budget begins with a list of outgoing and incoming expenditures.  You need to know what you are paying every month and exactly how much you have coming in, before you can even think of beginning a budget.

There is various software that you can use to stay organized; you can simply set up an Excel spreadsheet with Microsoft Office, or alternatively, The Build Shop has a great piece of software that is supposed to help you reconcile your expenses and stay on budget.  Prospects also have a free budgeting spreadsheet which you can download.

Make sure that you know how many people owe you for work and how much they owe.  Also note the amount of work that you are doing at present and how much you may have in the queue for future orders.  This helps you to keep track of what you have coming in now and in the future.

Work out how much money you are going to be taking home with a specialist contractors take home pay calculator.

Shopping with the kids by mr brown, on Flickr.  This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Save When You Can

One of the easiest ways to budget your money is to have less money going out each month.  You can learn ways of cutting down on your expenses that will enable you to put away more money for emergencies and other needs.  There are a number of ways that you can cut your expenses:

Lower Utility Costs

Check with your electricity company and other utility providers to see if there is a way to lower these costs.  You can also ensure that you are doing everything possible to keep your energy bills lower.  Make sure that your home office is energy efficient in every way possible.

Use energy efficient appliances and light bulbs, keep the heat turned off when you are not there and ensure that all cracks and other draft-potential areas are properly plugged.

By implementing sustainable measures into your property, you could save a fortune.  For example, cavity wall insulation can save you £140 a year, which means it would pay for itself in less than four years’ time.  Are all your windows B-rated double glazing?  If they are, you can save £170 a year, and a solar heating system can cut your heating bills by up to 50%.

Shop Wisely

When it comes to buying equipment, shopping wisely is the best way to save.  Spend some time researching electronics and office supplies before you buy.  Online auction sites like eBay and Amazon are excellent for finding good deals on barely-used electronics, and some companies offer discounts on paper, pens and other office supplies when you buy in bulk.

Take the time to ensure that you are getting the lowest possible cost on the equipment and supplies that your business requires.

As well as shopping wisely, did you know that there are certain expenses that you can claim back?  Here is a list of rates and allowances for 2013-14 and here is a guide by HMRC on what you can and cannot claim for, such as travel expenses, stationery and equipment repairs.  Learn what you can claim back from your client – it will help you budget tremendously.

Plan Ahead

There are without doubt going to be times when you are not earning as much as you wish.  You need to plan ahead for these times and ensure that you have savings stashed away to cover the gaps in work that you may experience.  Preparing a budget is fine but you need to know that you will have the funds to cover that budget when the time comes.

Put 10% away each month so that you have something to fall back on, should you experience gaps in employment or in case you have clients that are not so quick to pay you.  Most businesses pay within 30 days, so you need to bear this is mind when planning your budget.

How much do you need to survive for one month?  Write down all the essential expenditures, work out the total and then try to have this figure put away so you are always at least one month ahead of yourself.

Essentials include:

• Gas
• Water
• Electricity
• Mortgage/Rent
• Food
• Car Insurance/Fuel
• Mobile phone
• TV license
• Council tax
• Sky/Virgin
• Home/Life insurance

as well as any monthly direct debits like credit card, pension and hire purchase agreements.

So there you have three budgeting tips to help you be money-savvy.  Got any other tips that work for you?  Let us know by commenting below.