Yes, even though blogging is now officially paying me more than my day job ever did, I will be budgeting in self-employment. Specifically, I really dislike the idea of irregular paychecks.
My Plan’s Beginning
You may have noticed in my weekly savings updates that I have been building up a blogging income account at ING. My hope was to get it to $10,000 by the time I quit my day job so I’d have more than enough padding on months that I don’t bring in enough. I made it to $9200 as of July 15th and it looks like it will definitely be at $10,000 or more before I receive my last day job direct deposit on August 3rd.
I will be paying myself a biweekly paycheck directly from this accout so we never experience a budget crunch at all. In order for this plan to work, I have decided to pay myself $1500 every two weeks.
Taxes
From that biweekly paycheck of $1500, I will be transferring $400 directly into our tax account. I know that is only looks like about 27% set aside for taxes, but based on my monthly spending for blogging, it will actually come to about 30%-33% of my profits. Plus we already throw an extra $150 a month into the tax account just in case there are any nasty surprises in April (now quarterly), which there hasn’t been since we started doing that 4 years ago. In short, I am 99.9% sure that our taxes are covered with $400 from each of my biweekly contributions.
Insurance
Of the $1100 left, it looks like we’ll be spending about $125 with me on my husband’s insurance plan. That $125 biweekly should cover my health insurance, dental insurance, vision plan, and a basic life insurance policy. It’s not a fantastic plan – the deductibles aren’t great – but we have enough in our emergency fund to more than cover them.
I will know all of the details for sure in a few weeks. If I’m right based on last year’s info, then I should have about $975 left out of the original $1500 every two weeks. I was taking home $970 every two weeks at my day job, so I’ll have a $5 raise! Woot! Hahaha. 
Leftovers
If my the numbers from the past couple of months are any indication, there is a great chance that I will be bringing in more than $1500 every 2 weeks. All of my blog income is transferred into my blogging income account, which I want to keep above $10,000. If I have paid myself all of my paychecks in a month and there is more than $10,000 left, we plan on dividing up the extra similarly to our normal monthly extra. The only difference will be taxes.
In short, this is how we plan to break the extra in the blogging income account down: Taxes (30%), Emergency Fund/Savings account (15%), the Extra Cash for Investments account (25%), the Vacation account (15%), and our two individual Fun Money accounts (7.5% each).
This is all tentative until I have some hard numbers, but you know me, I like plans. 
What do you think? Is there a big hole I’m missing?
Great planning! Calculated risks are the best kind.
There is nothing like a good plan to go after. this is the only way to achieve somthing in life, and you got it!
I admire your ability to Organize – an excellent plan!
I always wondered if people who blogged for a living had problems come tax time due to the fact they wouldn’t have had anything taken off of their cheques and it takes a lot of discipline to save that much money. Great job. I’d mention some of the tax breaks that you probably qualify for now, but I’m sure you’ve researched all of those. Is your company incorporated or anything?
This is a great plan! The only category I would consider adding would be a business account. I would probably put a certain percent away for reinvestment purposes into your business. It could be used for tax software, new laptop (yours may die someday), business furniture, conferences, whatever.
You are so organized, which is probably part of how you here in the first place!
Ahhh, the joy of taxes! I’ve discovered there are so many random types of benefits one can employ if you talk to an accountant. We should definitely start a tax thread in the Yakezie forums.
I think your tax allowance will be sufficient, based on your income projections. One of the great benefits of being self-employed are the retirement plan options that are available. Compared to being employed, you should be able to save a lot more, tax efficiently, than you were previously.
@Nicole, thanks and good point!
@amanda, I sure hope so, thanks for the support!
@Anna, thanks!
@My University Money, no, I have not become an LLC yet. Thanks to the fees and taxes for an LLC, at least here in Texas, it looks like I should wait until after I make at least $60,000 in one year. I know about some deductions like parts of my home and utility bills and all obvious blog expenses, but if you know of any others, please let me know.
@Everyday Tips, oh, great point! I’ll readjust the monthly extra numbers to take that into account! I want to go to at least 3 conferences a year.
@Financial Samurai, a tax thread would be great since I am a complete newbie at this!
@Hunter, I feel like it will be harder but easier would be great! We’ll see…
Sounds like you’ve got everything thought out well. I think it’s smart to only take out the same amount you were used to getting and save the rest.
Thanks for revealing what you are covering. I was curious if you took that all into account and aparently you have! Bravo (woot for you)!
I didn’t really think of the $10,000 as a cushion (although I have such a thing in my checking account). Very clever of you to smooth out those slow months!
Looking forward to living vicariously though your new adventure!!! Kick butt!
@Mike, we’ll see if it works.
@Money Reasons, hahaha! I will try to kick as much butt as possible just for you!!!
Crystal, welcome to the world of self-employment. Don’t forget that you can now contribute pre-tax money to a SEP plan for retirement if you so choose as well. I like to try to fill that up and then use a Roth after.
Don’t forget to set aside the same amount (and match from your employer) in a SEP-IRA. Even though your take home income now will be the same, the 401k doesn’t get saved automatically anymore. Regular IRA is good, but the SEP will reduce the tax even further. You can do profit sharing too, though that is more complicated than SEP. As long as you don’t need the money you might as well use everything the self-employment has to offer.
Smart of you to set aside money for taxes! Make sure you put them in a high yield savings account so that it continues to earn interest till tax time.
Great planning. I need to put this into my budget once I get the income steady and flowing. I think you covered everything.
Congratulations!! It is so amazing to see your goals accomplished one by one and the fantastic success you have achieved.
Sounds like a good days work to me! Hope you enjoy it forever!
Budgeting is very important. All of us should plan a budget as I believe helps a lot. Savings are also very vital. So we should also think about keeping aside a certain amount of money every month.
Woot on your $5 pay rise!!
All joking aside I can’t wait to see your progress!
@Car Negotiation Coach and Suba, I had no idea what a SEP plan was! Thanks!
@MoneyCone, is high yield like the 1% I get at ING?
@20 and Engaged, thanks!
@youngandthrifty, I’m still amazed myself, lol.
@Financial Samurai, thank you!
@Laura, hahaha, thanks!
You are so organized. I really need to separate out my blogging income from all of my other sources. It gets thrown into the mix and quickly dissipates faster than I can portion it all out!
@Little House, at this point, there is no choice for me. It’s organization or ruin, lol.
Congrats on the huge raise! Good luck blogging full time!
I love that you have such a conservative plan for handling taxes, and that you are factoring in your husband’s increased insurance premium as well!
Congratulations once again!
@Jeff, hehehe, and thank you!
@Khaleef, I like being on the safe side. And thanks!
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