Freelance photographer - two budgets? (Personal/business)
Hi all, about to dive into NuYNAB after years with 4, as apple is about to kill 4 dead sadly.
TL;DR at the top: If you’re a freelancer with two separate budgets for your personal spending and your freelance income and spending, how do you handle it if you make a personal spend on the bank accounts tied to your business budget, and vice versa? What category do those spends get tied to, and does it screw up reporting for you? Is the solution to do what I’m already doing, which is run a complex single budget that handles both sets of figures?
Long question: I'm not a small business, I’m a freelancer. I try to keep two separate bank accounts though, but sometimes mistakes are made using the wrong card
I’ve been making do with a personal budget and freelance budget all rolled into one budget for years. I organise it with personal categories up top, business categories down below, and I try to run the business one inside the overall one by categorising all my freelance income into an 'Income' category to get it out of the ‘available to budget’ then moving some money to my 'personal wages' category, zeroing it out so its available to budget, budgeting to zero in my 'personal budget' half of the screen, then zeroing my 'income' category for that month so it’s now available to budget too, and budgeting all that to zero too.
I do it this way because it’s easier to handle mistakenly making purchases for my freelance business on my 'personal' debit card and vice versa. And I’m in a position now where I have tons of money in various pots, seriously thanks to using YNAB4 for years now, so I’m using the software less to budget myself out of a hole, and more to know what my money is actually for with loads of categories bankrolled for future spending.
I also don’t use Quickbooks or anything, YNAB is my only source of info for sending income and expense spreadsheets to my accountant. It works super well for that.
But this method of running two budgets in one budget is painstaking and can be annoying as I’m a bit of a pedant and it bugs me that it’s not cleaner. I keep reading that having a separate budget for each is the way to go.
But what if I separate them and then buy a bunch of hard drives on my personal debit card at Amazon by mistake! How do I get that transaction into my business budget? I can’t see a simple way of doing that if I have two budgets.
Sounds like you just have to reimburse yourself. More transactions, but cleaner when looking back. Turn in the receipt to the business and write a check from the business to you, then deposit the check. I'm not a freelancer nor a businessman now. When I had a small side business, I took a sharpie and wrote on my cards, business only and personal. Sometime people laughed at the cards, but whatever helps me is worth it. I like the idea of two separate accounts and septate budgets. In fact, depending on your business, maybe a separate budget for different clients or projects. Smith photos in France might have enough expenses you'd want to track alone. Just some ideas.
Reimbursements would be tracked in both budgets. Essentially, the freelance you loaned money to the personal you in your holiday example. Mirror reality with transactions in both budgets. Because you're dealing with both perspectives, you will have double the data entry.
And yes, this is extremely confusing to do inside a single, combined budget. Separate budgets make it very straight forward.
Blue Harvest said:
But, what happens when I book a holiday and put it on the credit card for the financial protection? Now that's going to be registered in the freelance budget, but it's a personal expense.
So, I'd pay off that expense on the credit card from my personal account, and then there'd be a trace of the spend in my personal budget when I pay off the card, categorised as holiday. And in the freelance budget where the credit card is listed, I'd just categorise that as a general 'Personal expense' category as a catch-all?
Freelance CC account: outflow $X categorized as Personal Expense
Personal checking account: <send $X to the freelance CC from a personal account>, record as outflow categorized as Holiday
Freelance CC account: inflow $X categorized as Personal Expense
(If you do something different for "payback", reflect reality. For example, you transfer $X from a personal account into a
There are two common approaches. Either a) offset the category so the balance is always positive or b) let the category go overspent. The advantage of (a) is the CC Payment category takes care of itself. Keep a record of how much you budget to offset the category (i.e., the "we're even" point), either right in the category name or set a goal.
If you choose (b), then the "rule" is: if the reimbursement category ever turns green, move those funds to the associated CC Payment category.
First, separate YNAB budgets keeps things much cleaner.
When I mistakenly spend money from my business account that should have been a personal expense, I log it under Owner’s Draw, the category for money I pay myself from the business. I try not to do this anymore and instead move money to my personal account first as Owner’s Draw, then make the purchase. I do this so that the bank account does not show transactions.
If I spend money in personal that should have been for business, I submit an expense reimbursement form to the business, with the receipt for my records. Then I pay myself from the business with the transaction going under to proper category for the related expense.
Always keep the possibility of being audited in mind, so keep it as clean as possible.