Working from Home – Step Three, Preparing for a Variable Income

Now that you've got a handle on where your finances stand currently, it's time to consider how you can prepare for working from home and budgeting with a variable income. I've written previously about realistic income expectations for transcription, and Mandi has given us a great chart that provides us with pricing structures, so you can refer to those for some information on the income potential that general transcription has.

But how do you really know if you can earn enough to be able to stay home? Well, quite frankly, you probably can't be 100% positive. It's going to be somewhat of a leap of faith, so first and foremost you have to have confidence in yourself and your abilities. But beyond that there are a few steps that you can take to pave the way and make the transition a little easier.

1.) Look at ways you can cut back or save money by working from home. This is the time to be ultra realistic. You may have to make some tough decisions, but you just have to weigh them against how much it means to you to be able to stay at home. For example, if you're a two-car family currently, you may be able to cut back to just one car. Think of the savings to be had by eliminating a car payment, insurance, maintenance, fuel, etc. Other areas that you can cut out of your current budget are business attire, lunches on the go, office gifts, and possibly even daycare.

2.) Try to secure one or more contracts before leaving your current position. Try taking on some transcription work in the evenings or over the weekends to hone your skills and get a better handle on the kind of income that you personally can earn. Not only will this trial period help you increase your speed and get comfortable with being an independent contractor, but you'll get a better feel for how much work you can anticipate from the companies you're working with and determine whether you need to seek out additional contracts before you take the plunge.

3.) Finally I highly recommend setting up an emergency fund. Consider using the earnings from your trial period to build a backup fund for when you fail to meet your budget in a given month. You will have to make the determination as to what you feel comfortable with as a backup. The key to really making it work is that on months when you exceed the amount you need for your budget, you need to be disciplined in depositing the additional funds back into your emergency account.

I find that what really helps me stay disciplined about my emergency fund is to keep it in an online savings account. This serves two purposes. First, it's not as simple to just transfer over the money immediately or to withdraw it at the ATM as it is with a local account, and second, they tend to have much higher interest earnings than a traditional account. I personally like FNBO Direct for this purpose. They offer a 3.5% APR currently, no monthly fees, no minimum balances, and you can open an account with as little as $1.

I truly believe that by following these three steps you can help mitigate some of the anxiety of making the transition from working outside the home to working from home. Being prepared for fluctuations in your monthly income is half the battle!

Next up in the series I'll offer some additional tips on how you can stretch your budget to allow you some extra wiggle room in your endeavor to work at home. If you want to get a head start though, check out my other blog, Deal Seeking Mom, for lots of great money-saving suggestions!

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.

Working from Home – Step One, Track Your Expenses

Leaving a brick and mortar position and making the leap to working at home can be a scary and risky proposition. I'm sure there are numerous questions running through your mind – "Can I earn enough to pay the bills? What happens during slow periods? What will I do about insurance?" and on and on. While you may not be able to answer every question definitively before taking the plunge, we can help walk you through the steps to determine if it's financially feasible and piecing together an action plan to make it work.

You've probably heard this time again again, but creating a budget is one of the most important steps in determining if you can make it financially while working from home. I can hear your collective groans, and I'll be the first to admit that sticking to a strict budget is not my cup of tea. However, at least going through the motions and building a budget will give you much needed insight into your spending patterns and finances in general. You will be able to identify areas where you can cut back on unnecessary spending or even cut out it completely.

The first step in building your budget is to track ALL of your expenses, and I do mean ALL of your expenses. Find a small notebook to carry with you, and enter every single little purchase you make – the 50-cent candy bar from the vending machine, the $2.99 magazine, the $1.25 20-oz. Coke, all of it. Ideally you want to do this for a month, but at the very least, track them for a week.

I know this sounds a little tedious, but it's a crucial task. You might be tempted to just guesstimate your weekly expenses, but it's human nature to forget about these little purchases that can quickly take a big bite out of our income. Now, go track those expenses, and come back next week to analyze your spending!

Lesson 1: Track your everyday expenditures for a period of at least one week, ideally for one month.

Can You Afford to Work At Home as a Transcriptionist?

This is an important question that we hear on a consistent basis. We get lots of emails asking our opinions on whether we think an individual can be a work-at-home mom or dad. While our blog isn't strictly focused on work-at-home moms and dads and we're not financial experts, we have all managed to achieve this personally with a good measure of success.

We've mentioned before that working from home is not easy. It's involves some risk, as well as planning, determination, and resourcefulness. When deciding to make that leap, there are some important factors that you will want to consider. Budgets must be drawn up. Cost-cutting measures must be implemented. And we want to help you make the best decisions possible for your personal circumstances.

To that end, we're going to embark on a new series that will help you determine if you can make it as a work-at-home transcriptionist (or you could use the same tools to determine if you can make it as a work-at-home mom or dad period). If you have any specific questions you'd like to see addressed, please leave a comment on this post or send us an email!