Preparing Your Budget

Understanding how you spend money is critical in determining your budget. Know your annual net income (i.e., how much you earn after taxes) and total expenses: The difference is called your disposable or residual income.

Although you still might not know what type of space you want, remember that many options are available to you. You can choose to:

• Combine living and working in a single residential space
  
• Combine living and working in a single commercial or industrial space
• Keep your living and working spaces separate
  
• Lease space
  
• Purchase space
  
• Any combination of the above
  

As you look for space, you can either:

1. Remain within your current budget -- the amount you presently spend on space (i.e. apartment, loft, studio space, etc.); or
   
2. Increase your budget.
   

If you increase your spending on space, then your residual income typically represents your available amount of funds. For example, if your current apartment is $600 per month, and your studio, $150 per month -- and you end up with $150 in residual income after paying your other expenses -- you can raise your space budget to $900, which represents the cost of your apartment and studio combined with your residual income ($600 + $150 +$150).

Keep in mind, however, that a larger space typically comes with higher utility bills, insurance premiums, property taxes (if applicable), etc.

To help calculate these expenses, individual artists should fill out the Calculation of Annual Expenses for Individuals. Small businesses and nonprofits should use the Calculation of Annual Expenses for Businesses and Organizations.

• Worksheet Considerations for Individuals: List all your annual costs (no matter how minor), including art supplies, food, professional fees, child support payments, clothing, entertainment, insurance, transportation costs, cigarettes, etc. Also include the cost of your current living and working spaces, if applicable.
  
  If you now rent workspace, note your total rent for that space (including all taxes, utilities, etc.) at the very bottom of the worksheet as indicated. Calculate your workspace costs and household rental costs separately. If your live and work spaces are combined, then calculate everything together.
  
  Fill in the form as best as you can, ignoring those categories that do not pertain to you and adding those that are not listed.
  
  
• Worksheet Considerations for Businesses and Not-for-Profits: If your business or nonprofit wants to relocate, filling out these worksheets is a little more straightforward. Much of the information concerning your annual expenses is readily available in your annual financial reports.

If you need help with calculating your expenses, speak to an accountant. See the resources in Chapter 4: Professional Services for information on locating accounting services. In addition, CPA’s for the Public Interest and the Nonprofit Financial Center also offer accounting services for nonprofit organizations.

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Chpt.2_ AnnualExp_busorg.pdf	59.05 KB