Method
Budgeting when you're self-employed: the three accounts
A freelancer rarely goes under from a lack of clients. They go under from having spent money that was never theirs.
The founding mistake
A 4,000 invoice paid is not 4,000 of income. Out of it will come business costs, social contributions and tax. What ends up yours is often around half.
As long as that money sits in the same account as the rest, it will get spent. Not through carelessness: because it is visible.
The three-account rule
On every payment received, the money splits immediately:
| « Costs » account — equipment, software, insurance, workspace | 25% |
| « Tax and contributions » account | 25% |
| Personal account — your salary | 50% |
These percentages are a starting point: adjust them after six months with your real numbers. What matters is that the split happens when the money arrives, never at the end of the month.
Social contributions are trap number one. For the self-employed they are usually billed as instalments, then revised afterwards against your real income. A good year produces a catch-up bill the following year — at precisely the moment your activity may have slowed.
Paying yourself a salary
The personal account isn't spent directly. It funds a fixed salary you pay yourself each month, worked out from the average of the last twelve months minus 15%. That is the method set out in budgeting on an irregular income.
The three most expensive mistakes
- Raising your standard of living after a good quarter. Fixed costs go up in a week and come back down over a year.
- Not billing for expenses. Travel, software, the time spent quoting: if they aren't in the price, they come out of your salary.
- Waiting to chase. An unpaid invoice isn't an accounting problem, it is this month's salary. Chase at day 7, not day 45.
The cushion, non-negotiable
Self-employed, you have no notice period, no bonus month and no unemployment cover on your activity. The emergency fund is counted in six months rather than three, and it gets built before any investment in the business.
Common questions
How do I budget when self-employed?
By splitting every payment received immediately into three: roughly 25% for costs, 25% for tax and contributions, 50% for your salary.
How much should I hold back for tax?
Around 25% of turnover to start with, adjusted after six months with your real numbers. With nothing deducted at source, the bill arrives all at once.
Why are social contributions a problem?
Because for the self-employed they are usually paid as instalments and revised afterwards: a good year produces a catch-up bill the following year, often at the wrong moment.
How big a reserve do I need working for myself?
Six months of spending rather than three: no notice period, no bonus month, no unemployment cover on the activity.
You might also like
Method
Budgeting on an irregular income: pay yourself a salary
Self-employed, temping, seasonal: the method of paying yourself a fixed salary.
See your real income
Record what actually comes to you, once costs and tax are set aside.
Download MonniFree to start · No account · No bank connection