Building a monthly budget

Gather two to three months' worth of documents that show your income and expenses. Some examples include: 

• Bank statements
• Credit card statements
• Application transactions (Venmo, PayPal, Zelle, etc.)
• Utility bills
• Any other records that show you receiving or spending money 

Try to use actual amounts of your income and your costs for greater accuracy. If you don’t have actual amounts for everything, use an average. For example, you may need average your electric bill because you don’t know exactly how much electricity you’ll use each month.

Calculate the money you bring in based on the number of children at different rates. Here are some examples of income categories:

• Subsidy
• Fees
• Grants
• Other

Categorize money that goes out each month.

When you offer childcare in your home, you can determine what percentage of it is being used for your businesses and base your expenses such as property tax, utilities, home repairs, and homeowner’s insurance on this amount. This helps you understand what part of your home’s expenses should be covered by your business. 

This percentage is determined by calculating your time percent and then multiplying it by your space percent. 

Your time percent is calculated by adding up the number of hours you're using your home for business purposes and dividing this number by the total number of hours in the year. There are 8,760 hours in a year. 

Your space percent is calculated by dividing the number of square feet your home is used regularly for business by the total number of square feet in your home.

Example: Let’s say you offer care for 40 hours a week for 50 weeks during the year. Your time percent is 23%. 
Time % = (40 hours x 50 weeks) ÷ 8,760 = 23% 

Let’s also say you use your basement for your daycare space. Your basement is 1,000 square feet and your house is 2,000 square feet in total. Your space percent is 50%. 
Space % = 1,000 sq ft ÷ 2,000 sq feet = 50%
Time % x Space % = time-space percentage 
23% x 50% = 11.5% 

Your time-space percentage is 11.5%.

Before you start the month, find your planned profit by taking all your revenue and subtracting your expenses. If it's positive, that’s the amount you're estimating you'll have at the end of the month. If it's negative, you're going to run at a loss this month, so you'll need extra money to get by. 

Track what you're really getting and spending in the month in the actual column in Table 2. As you know expenses or revenue, write them in. At the end of the month, subtract your actual revenue from your actual expenses so you'll know how much money you made. 

In the third week of the month, prepare your budget for the next month. Use the actual revenue and expenses from the current month to guide you. For example, if you see a cost increasing that you didn’t expect, make sure you increase it on your budget. 

 
Table 1: Calculate monthly revenue from fees 

Table 2: monthly budget 

This information uses, with permission, parts of previous guides created though the support of Maher Charitable Foundation, The Henry and Marilyn Taub Foundation, and the New Jersey Pandemic Relief fund. We thank them for their continued support of child care businesses. Prepared by Civitas Strategies Early Start. 

Disclaimer

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.