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Wednesday, September 17, 2008

Working from Home – Step Two, Analyze Your Expenses

Hopefully by now you've been able to track your expenses for a minimum of one week, so now it's time to take a good, hard look at where your money is going. Were you surprised to find just how much those little impulse purchases are eating into your income?

According to Redbook magazine, a recent study by VISA found that almost half of all Americans lose track of an average of $45 a week. Those afternoon vending machine trips and spontaneous magazine purchases that you grabbed while waiting to check out really add up!

Now you'll want to gather up all of your regular bills as well as any documents pertaining to income over the last month (or last year if your income is irregular).

Compile all of your regular expenses, along with the weekly expenses to come up with a number representative of your monthly expenses that is as close to accurate as possible. Don't forget to include any quarterly, annual, or other irregular expenses. You'll just need to divide this out to come up with a monthly figure.

Add up your monthly income from all sources. If your income is regular, this will be easy. If your income is sporadic (as it likely will be if you pursue a career in transcription), it will be to your advantage to look at your yearly income and convert it to a monthly rate. You might be wondering how you could ever budget on a variable income, but this makes a good budget even more imperative because it will help to curb overspending in "good" months leaving you some excess to cover your shortfalls in the "bad" months. We'll go into more detail on this later in the series.

Finally deduct your total monthly expenses from your total monthly income. If your balance is negative, don't despair. It just means we have to take a serious look at cutting costs and determining if you can cut back enough and earn enough from transcription to make that balance positive.

If you've got a positive balance, congratulations! However, you will still need to look closely at the income you can derive from transcription and whether it will cover your expenses to maintain that positive balance. You may find that you need to cut some costs as well.

Now hold onto those spreadsheets or scraps of paper with all of your numbers, and next up we'll talk about determining what kind of income you can expect to make from general transcription.

Lesson 2: Calculate your total monthly expenses, including any variable expenses, and determine what your total monthly income is to define how your finances stack up currently.