One way people have coped with hard financial times is by developing an alternative stream of income. Whether you’re worried about layoffs or are looking to speed your debt reduction efforts, this can be a great way to get a leg up on things.
Some people start out with something like consulting or programming from home for a few hours each day. Others do their freelance work outside their home. Virtually all of these people have to set aside time and space for invoicing their customers and managing their business finances.
One thing that most freelancers need is their own home office space. Having a home office for your side business is a great idea, but it can be easy to start focusing on the wrong things and turn that extra income into a big expense. Managing and maintaining a home office takes a mix of frugality and creativity.
Organizing your bookkeeping
Quite simply, if your side business isn’t taking in more than it’s costing, then you’re in trouble. If you haven’t already, open a separate checking and savings account for your business, even if it’s only a small amount of side income right now. It’s good practice to separate your personal finances from your business finances — especially if you want to set up a formal business and limit your personal liability.
After determining your budget, you need to figure out how you’re going to keep track of your finances. Besides keeping your own ledger or spreadsheets, you’ll probably want look at software to keep yourself organized. Popular bookkeeping programs include:
When comparing financial programs, see if this is something you actually need or if it will complicate your finances. If you’re spending most of your work time getting the invoices right, you need to switch to another program.
Equipping your office on a budget
Decide on Your Budget
Don’t just go out and buy the latest equipment in hopes of deducting it at tax time. As you look at your finances, decide if you really need a certain piece of equipment. Can you justify the extra expenses? Or are you just looking for an excuse to buy a fancy new gadget? Look at your regular expenses for your side business and plan your budget accordingly.
Deciding where to have your office
Next, spend some time finding the ideal spot for your office. You need your office to be in a quiet, less trafficked part of the house if you plan on getting any work done. Don’t have your desk and equipment in your bedroom if you can avoid it — this will blur the lines of work and home, and you may find yourself struggling to stop (or start) working.
Office furniture and office equipment
If you’re looking for office furniture, consider starting off with Craigslist and grabbing a deal from an entrepreneur who is moving up. Get creative and hunt around at local yard sales. You will be surprised at what you can find if you’re willing to explore. If you really want to upgrade your furniture, wait until you hit a financial milestone. That way, every time you sit down in your new chair, you’ll think of the 5 new clients you’ve acquired.
When you’re first starting out, you should also learn to make do with what works instead of drooling over top of the line business equipment. For example, Google Voice is a free communication system that allows you to manage your calls, voice mails, and text messages all in one place. If you’re a one person operation, this can be a great option. You won’t have to buy a separate line for your business, which may be overkill anyway.
Unfortunately, Google Voice is by invite only right now. For their part, Google says they are trying to keep the wait short, so you might want to go ahead and request an invite. Another alternative is Skype, which allows you to upgrade from their free service to an inbound landline number.
It can be hard to work from home for some entrepreneurs. If you have children at home, they may have a hard time understanding why you’re working even though you’re home with them. Try to have set work hours and try to be consistent with them.
Some people work after the kids are in bed, while others wake up a couple of hours early to get their work done, or do it while they’re in school. The point is you have to have a set amount of time to hustle if you want to generate a consistent income.
How do you know if you’re wasting valuable work time for frivolous activities? Just like you would with finances, you need to see how your spending your time first before optimizing it. I find Rescue Time to be helpful with keeping track of what I’m doing.
Your thoughts on managing a home office
The wonderful thing about having a home office is that you don’t have to buy the latest equipment and software to get started. You can start small and build slowly according to your business needs.
Do you work from home either part-time or full time? If so, how do you keep your finances organized? What steps have you taken to create a useful work space? And how do you remain productive?