Tallying Up My New Savings Plan: October Edition

Previously, on Nicole’s Budget: After discovering that I needed to save a lot more for freelance taxes than I had been previously saving, I set up a series of sub-savings accounts. Every Friday, I tally up all of the freelance payments I’ve received that week and put 20 percent towards taxes, 20 percent towards debt, and 10 percent into regular savings.

In October, I received $5,521.62 in freelance payments. Here’s what I put into my sub-savings acccounts:

Taxes got 20 percent, or $1,104.32.

Debt also got 20 percent, or $1,104.32.

Savings got 10 percent, or $552.17.

This left $2,760.81 for my checking account.

October is the first full month I’ve spent in my new apartment, so it’s worth running the numbers on my new monthly overhead cost:

$995.00 on rent

$219.38 on health insurance

$17.13 on electricity

$14.75 on renters insurance

$77.91 on internet

$96.58 on smartphone

$20.00 on public transportation

$445.28 on grocery store purchases

Total overhead: $1,886.03

The $445.28 feels a little high for groceries, especially since I spent October stocking my kitchen. I’d love to get that down to $300–350 for November. But nearly everything on my overhead list is a fixed cost, which means I can estimate my new monthly overhead at $1,800. (Since my rent is $320 higher than my previous $1,500 monthly overhead, this makes sense.)

What does that mean for freelance earnings? Essentially, I need to earn $3,600 minimum to meet my monthly obligations. I should also keep the following ratios in mind:

If I earn $4,000/month, I get $200 in discretionary income after sub-savings accounts and overhead expenses.

If I earn $4,500/month, I get $450 in discretionary income.

If I earn $5,000/month, I get $700 in discretionary income.

If I earn $5,500/month, I get $950 in discretionary income.

If I earn $6,000/month, I get $1,200 in discretionary income.

That’s really interesting math, at least from my perspective, and it means I’m going to want to keep a close watch on my spending for the next few months. For example: I know I’m going to need at least $1,000 for holiday expenses, including travel. Does that mean I need to save all of my November discretionary income for holiday expenses? No haircuts, no restaurants, no aloe plant for the bathroom?

Looking at the math, it might. Or I could play the game that I’ve been playing for most of the year, where I borrow from my savings account and pay myself back. (My current savings account balance is $2,337.29, and I still owe it $500 from the money I took out to pay first/last/deposit on my apartment.)

I don’t know yet what I’ll do. But I do know that having the numbers, and understanding what they mean, will help me make a thoughtful decision.

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