Solopreneurs: 2 Steps for Keeping a Separate Biz Budget

October 20, 2021

When it comes to starting a small business, it’s easy for personal and professional spending to become as tangled as a plate of spaghetti. Is your morning cup of coffee a business expense? Did you save the receipt from your purchase of office supplies? And where should you deposit those first checks?

All of a sudden, you have to pay closer attention to the flow of money—both income and expenditures. And, if your small business is a side hustle you have to pay attention to two (or more!) income streams and, potentially, create two different budgets.

If that sounds overwhelming, don’t worry! We’ve got you. Budgeting your business and personal income really boils down to two main steps:

  1. Setting a budget
  2. Tracking your spending

Let’s discuss setting a budget first…

There are several approaches to budget-setting, but one of the most common is known as the 50/20/30 method. Essentially, this method breaks up your spending into 50% on essentials, 20% on savings, and 30% on everything else. This is an oversimplification, but that’s the gist of it!

Though this is an effective method for personal budgeting, it gets more complicated when you throw business expenses into the mix. These expenses could be lumped in with the “essentials” or they could comprise their own, separate bucket (something like 40% to essentials, 20% to business, 20% to savings, and 20% to everything else).

And here’s another wrinkle: What if your monthly income is inconsistent? That can make budgeting even tougher, BUT the 50/20/30 method can still come in handy. Since it deals with percentages of your income, you can parse out your budget accordingly. The only thing that won’t change are your monthly bills (which fall into the essentials category).

Another budgeting approach is the envelope method. The idea is similar to the 50/20/30 method, except it can be more specific and customized. Picture putting all the cash you earn in a given month into different envelopes—one envelope for each type of expense. For example, you might have a Monthly Bills envelope, a Groceries & Dining envelope, a Business Expenses envelope, etc. Using this method can help you divide up your budget as much or as little as you like.

Play with these different budgeting methods and see what works for you! The important thing is to allocate your money, stick to your budget, and revisit it and adjust whenever you need to.


So…how do you track your spending?

Tracking your spending can seem tedious and tricky, especially if you’re juggling business endeavors with family commitments, household expenses, and leisure activities. Fortunately, modern technology can help! Pair that with a few simple tricks, and tracking your spending will be much simpler and more manageable.

Take advantage of these tools to help track your spending:


Open a separate checking account

Dividing your personal pot of money from your business funds is essential for effectively tracking your spending. When you open a separate business checking account, you’re able to easily see how much income flows into the account and how much flows out for expenditures. Designate one debit card for business, and another for your personal account.

The only trick here is remembering to only use one account for personal expenses (and income if your business is currently a side hustle), and the other for business expenses.


Use two separate credit cards

If you prefer using a credit card over a debit card for purchases, it’s a good idea to designate one credit card for personal use and another card for business use. You’ll still want to open a separate checking account for your business, since you’ll be using this account to pay off your monthly credit card bill. 

Be cautious with your credit cards, and do your best to spend within your means. Credit card companies often charge a staggering amount of interest if you do not pay off your balance in full.


Use a tracking app

Today, most bank accounts will automatically track your spending and assign it a label (groceries, utilities, shopping, etc.). However, the capabilities of these programs are usually limited, and they don’t always give you the depth of information you might want. If that’s the case, try downloading a budgeting app to track your spending. You can set up many of these apps to give you alerts when you’re nearly over-budget, which can help curb your spending. The popular website Nerdwallet has put together a nice list of money tracking apps, which includes the main features of each app.


Create a filing system

Even in our highly digitized world, paper receipts are still necessary. Whenever you make a business-related transaction, be sure to keep the receipt and file it in a folder labeled for the current year. The folder could be kept in a separate filing box or cabinet—somewhere easily accessible, so you’ll remember to file your receipts. You may also want to add your expenses to a spreadsheet, so the tax season goes a little smoother!


HINT: Many business expenses are tax-deductible. When you’re tracking expenses on a spreadsheet, assign them a category, such as utilities, office expenses, advertising costs, etc. Click HERE for a list of tax categories.


Though it may seem daunting to separate your personal and business finances, it is absolutely necessary if you want to track your profits and keep your business running smoothly. Fortunately, many tools exist to help you track spending or set a budget. Take advantage of these tools, be mindful of your spending, and don’t forget to keep those receipts!

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