By: Nathalie Ronan
The rise of remote work has brought many changes for today’s professionals. While there are financial benefits, there are also costs that those used to working in an office may not immediately realize. And if you’re preparing for your own transition from office-based set-ups to working from home, here are some practical tips on how to create and stick to a realistic budget.
Fast facts on remote work
The number of professionals choosing to work outside an office is rising. While the US Census report on ‘Commuting Characteristics’ reveals that some 5.3% of Americans typically work from home on any given day, at least two-thirds of the overall US workforce have experienced working remotely. This is only expected to become more common among working professionals moving forward, especially with the many economic benefits it provides for both employers and employees.
Remote work minimizes or, for completely remote companies, eliminates the need for overhead costs such as rent and utilities. Meanwhile, telecommuters can cut back on expenses such as transportation and eating out, especially as the average American household spends $3,008 per year in restaurants. That’s because dining out becomes the more convenient option for people wrestling with busy workdays and long commutes — an issue that remote work alleviates.
Budgeting for remote workers
Remote work might be the key to cutting some costs, but that doesn’t mean that you should be playing fast and loose with your budget. For one, our how to work from home article highlights that some companies are only able to offer limited assistance to their telecommuters. On top of that, tax deductions for full-time remote workers are no longer in place as of 2018, which underscores the importance of financial responsibility for remote employees.
That said, you can be proactive with your finances by budgeting. The most basic technique is to write down your monthly income and subtract your expenses from that figure. However, the disadvantage of traditional budgets is that they’re not exactly specific, and for better control of your spending habits, you need a more detailed measure, like the 50/30/20 method. A guide to monthly budgets breaks down the 50/30/20 rule — a tried-and-tested financial technique that suggests allocating 50% of your budget to essentials, 30% to personal wants, and 20% to savings. What makes this rule better is that it also factors in savings so you can pay yourself on top of monthly expenses, instead of just treating it as leftover cash. This money serves as one’s safety net for emergencies, future expenses, and more importantly, retirement.
Moreover, of particular concern in this method for remote workers is the allocated budget for essentials. Start by identifying what your ‘work essentials’ include, as those are now out-of-pocket expenses that most likely won’t be reimbursed, especially for freelancers. While you will be spending less on commute, professional clothes, and food, you also need to increase your budget for groceries and utilities. During the transition, you might even have to make some initial investments, like a home office set-up and Wi-Fi, if you don’t already have them.
Alternatively, you can allocate funds for working at a coworking space or even a café. A post discussing whether you should choose a coworking space or a cafe points out the added benefits of the former. On top of your own desk or private office, coworking spaces have community events, high-speed internet, unlimited refreshments, and even IT support. This can be especially beneficial for freelancers who don’t have a steady stream of clients yet, but keep in mind that this type of membership is also an investment.
The bottom line
Ultimately, your budget will be dictated by the kind of worker that you are. You need to sit down and compute your income and expenses in order to create a realistic budget. Keep a note of your added costs as well as the investments you have to make. If you can spring for a membership at coworking spaces, go ahead. But if it’s not within your current means, then do your best to make your home office conducive to work.