Medium-term financial planning: In 3 easy steps out of financial chaos!

Do you regularly create financial plans as a freelancer? Okay, I admit the term “medium-term budget” doesn’t sound sexy. I still think it’s a very important topic. I create financial plans because they make it easier for me to plan and control my freelance work. In this article I would like to show you how I proceed as a freelancer when creating a medium-term financial plan (medium-term = several months to 1 year). It is not complicated at all : -)

Before I really get started I look for a nice environment. Between mountains of files on my desk financial planning is not much fun. I often go to a café with my notebook, smartphone or iPad to create a creative environment. After all, financial planning is not just about collecting bills. With the help of medium-term financial planning, I also define goals for my future as a freelancer. For this I need a creative environment.

1. Basis for medium-term financial planning: stocktaking

The first step is to gather all assets together. What do I own? Which invoices are still open? Which payments are still outstanding?

Specifically, my calculation looks like this:

Total bank balances (including deposits, current and overnight money accounts)

+ Invoices still being paid by customers

+ Credit on online portals (Iconfinder, Amazon etc.)

– outstanding payments

= existing assets

I do not include credit balances with long blocking periods (e.g. fixed-term deposit accounts) in the invoice because these balances are not very liquid.

At the end of this calculation there is a number. In the ideal case the number is positive : -)

As soon as I know my balance I know how long my “financial breath” is. Since I know roughly my expenses I get a first feeling for how long I can continue my freelance work, even if a worst case scenario occurs. Namely no income e.g. from prolonged illness.

At the end of the first step, I know exactly how much of my assets I have. I also have a first rough idea of how long I could survive in a worst case scenario (no income).

2. identify future expenditure

Now I want to know exactly. What are my projected expenditures for next year. Of course, this amount cannot be calculated exactly to the euro. It is much more important for me to record all kinds of expenses.

These include:

  • Rent
  • Service charges
  • Insurance (health insurance, pension insurance, liability, household contents etc.)
  • Cost of living (food, clothing, medicines, etc.)
  • Costs for tax consultants
  • Costs for internet and telephony
  • vehicle costs
  • Tax prepayments
  • Membership fees
  • Savings rate (e.g. for private pension provision)
  • Reserves for unplanned expenditure
  • Cost of goods (printing costs, image licenses, firewall & backup solutions etc.)

I always try to plan my expenses relatively precisely. With high probability your list looks a little different.

With the exception of the cost of living, fixed costs are relatively easy to calculate. To make the cost of living more calculable I use a trick from my childhood. I pay myself a fixed monthly allowance every month. In order to determine the amount of the “pocket money” I kept a household book for three months and recorded every expenditure exactly. From the average value of the three months noted, I determined the amount of my “pocket money”.

At the end of the second step of the medium-term financial planning, I recognize by the amount of my expenses how much I have to earn at least per month as a freelancer. In connection with the first step in which I determined my assets, I know at this point relatively exactly how long I could survive without income. For this purpose there is an economic key figure, the so-called cash–burn–rate.


assets amounts to EUR 32,000. 1.600 EUR per month are needed

Cash burn rate = EUR 32,000 / EUR 1,600 = 20

I.e. after 20 months I would be broke without further income. Or to put it more nicely: I can continue my freelance work even if I don’t make any income for 20 months.

3. plan future income

I find it much more difficult to plan future income than to plan expenditure. Expenditure can be controlled much better than income. I’m sure you feel the same way!? In my first years as a freelancer the income fluctuated extremely. In part this is still the case today. Since I unfortunately do not possess a crystal ball that predicts the future, I have to resort to other means.

Because I have been working as a freelancer for some time now, I often use an average value from the last three years for medium-term financial planning.

In order to be able to plan my income even better, I also acquire orders with regular payment agreements. In concrete terms, this means that as a graphic designer, for example, I design journals and magazines that appear monthly. Certainly there are more possibilities.

Sales in online shops also provide me with regular income. The cool thing about it: The more products I put in an online shop, the more income I get. This means that I can plan for a certain increase in income from online shops in my medium-term financial planning.

In concrete terms, the planning of my monthly income is as follows:

Average value of unplanned customer orders in the last three years / 12

+ secure monthly income from customers

+ monthly sales in online portals

= planned monthly income

It is nice when the planned income already covers the expenses in the calculation. This ensures a restful sleep. In order to be able to plan your income better, I would like to recommend the following article: “Confounded sales planning: 3 strategies for a plannable base income“.


With these 3 steps I plan the future of my freelance work every quarter. Medium-term financial planning sounds like a lot of Excel, tables and charts. For a first orientation pen and paper are sufficient, although spreadsheet programs can of course be very helpful for medium-term financial planning. But basically it is only about finding out whether a freelance activity is profitable over a longer period of time or whether it leads into the debt trap. The findings from my financial plan also form the basis for defining my future goals.

I hope that I could motivate you with this contribution to create a financial plan. Here is a small quote to strengthen your motivation. “There’s no shame in being broke. It’s a shame not to know when you’re broke.

Now you know my strategy for medium-term financial planning. What is your strategy? Write in the comments!

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