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.

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    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 5 mths ago
    • 1
    • Reported - view

    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.

    Like 1
    • Khaki Storm Cheers for the feedback! Although I'm not a registered business, I've opened a Monzo account for my personal spending, so I have two debit cards and one credit card - one bright orange debit card for personal spending (Monzo!), then one black debit card and one black credit card (First Direct) for freelance spending.

      So I'll have two budgets, and each budget will only focus on transactions from their relevant cards. And I'll hopefully be able to stick to that.

      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?

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 5 mths ago
      • Reported - view

      Blue Harvest Yep, I was very late at getting a personal cc, however after a hack on my debit card, I made the switch. Now cc is primary.

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • 1
      • Reported - view

      Khaki Storm I've had multiple fraudulent charges on my CCs over the years. So nice to not have to worry about losing all my money when it happens. The only issue is changing all the automatic payments, but at least the scheduler in YNAB provides a list of those.

      Finally the US is starting to get contactless payment terminals.

      Like 1
      • TechieM2
      • IT Professional and General Geek
      • techiem2
      • 5 mths ago
      • 2
      • Reported - view

      dakinemaui Even better that some cards let you do "fake" numbers for merchants that are tied to your card, so when the card inevitably gets compromised, you only have to update a couple places rather than everywhere you have a subscription.   I've only had one or two places that wouldn't work with the "fake" numbers.

      Like 2
  • 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.

    Like 1
    • dakinemaui Actually with the single budget it was easier, as it mattered much less which card was used for anything. Not being a registered business has that side benefit. All I need to do is show the HMRC what I spent and what I earned, doesn't matter what card or account was used. 

      What IS complicated is needing to file all the income away in the appropriate categories, then working through the top half of the budget (personal) before the bottom half (freelance) and keeping things zeroed out appropriately to keep track of what money is being used where...

      But, been doing it so long it actually makes some sort of twisted sense in my head! Hopefully two separate budgets will be simpler overall, just with the new wrinkle of occasional mistakes being a few more steps to correct.

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • Reported - view
      Blue Harvest said:
      Actually with the single budget it was easier

      Depends on what you're trying to do. It's easier to blur the line in a single budget, which may be exactly what is desired in a freelance situation. However, the very nature of your post suggests you may be developing more of a separation in your mind (i.e., wanting to "pay back" purchases). If you want the freelance side to "stand on its own" and have a process that prevents accidental injection of personal funds with a persistent trail for later reference, I believe that's easier in dedicated budgets. (I've done it both ways in a freelance role myself.)

      At any rate, good luck with the revised system!

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  • 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?

    Transactions --

    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

    Budget --

    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.

    Like 2
  • 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. 

    Like 1
    • Digital Diva Hi, thanks for your insight! As I'm not a registered business with specifically 'business' bank accounts, things are a little more relaxed for me. I'm a freelancer and technically could do everything from one bank account if I wanted - all HMRC wants to see if how much I spent and how much I earned, I don't need a specific business bank account as such. But I do want to run things more like that for my own organisational peace of mind! :)

      So, I'd not need to raise expense reimbursement forms or anything if I spent from personal on a business transaction, but I do need to record things such that this purchase ends up in the business budget.

      So I think in this case I'd have to do the following:

      1. register the transaction in my personal budget under a 'freelance purchase' category, and note what it was in the memo. I'd also snap/save the receipt in evernote same as I would for any other freelance expense.

      2. Then I'd move money from my 'freelance' bank account to my 'personal' bank account, and register those in the two budgets as money leaving the freelance budget and entering the personal budget.

      3. Then I'd categorise that outgoing money in the freelance budget as the specific category it should be, and put the actual payee in the memo (as my personal account will be the 'official' payee here).

      4. Then when it comes to exporting the reports of income and expenses that I send to my accountant, the memo will let me know what it was for, and I'll have the receipt in evernote as always, should I need it.

      For a personal expense made from my 'freelance' account I'd go the other way, but I won't need to snap the receipt.

      Hopefully I won't have to do this very often! ;)

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • 1
      • Reported - view

      Blue Harvest If you're going to have separate budgets, you need separate accounts.

      Like 1
    • dakinemaui Like I said, I have separate accounts. I'm saying that as a freelancer I don't *need* to. But that I've chosen to. :) And also that the accounts are not specifically 'business oriented' accounts, they're both just regular personal accounts. And also there are no rules about reimbursement forms or anything i need to follow, as literally all the law cares about in my case is recording my expenses and income. I have no 'registered business' laws to adhere to.

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      • Digital Diva
      • Go Go Gadget!
      • digitaldiva
      • 5 mths ago
      • Reported - view

      Blue Harvest The accounts don't have to be specifically a business account type but it sounds like that is how you are using it to keep spending separate. Even if it is not because of legal purposes, it is good to have a system. I think that we are all just answering the original question that was asked (separate accounts, separate budgets) although, I am not sure why it was asked since it sounds like you already have a plan. In the end, you've been using YNAB to the point where you have "loads of categories bankrolled" so keep doing what works for you.

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