Budgeting is one of the most important things any Owner-Operator can do to ensure financial stability and freedom in their business. Without a budgeting program in place for your business and personal life is like driving your 80,000-pound rig down the highway at night with no lights on. It might be a straight shot to your destination, while vaguely seeing the white line on the shoulder of the road to keep you on track, but what about unforeseen obstacles, speed bumps, and construction zones? It’s the exact same idea when handling your business and personal cash flows. It’s time to get out of the “I’m living paycheck to paycheck” mentality and start budgeting for the future and the unexpected with a financial road map.

Budgeting for Your Small Business
You can only guess how viable the business will be if
you don’t put a budget in place. There are many factors to consider when calculating an operating budget. These include: How many miles a month will you run, pay per mile, fuel surcharge, miles per gallon, fuel cost per gallon, truck/trailer payments, insurances, escrow fund per mile, communications (cell phone, XM radio, internet, etc) and pre-passes/tolls. Here is a list of some budgeting do’s and don’ts. 

Budgeting Do’s

  • Set up a separate checking/savings account for your business and related expenses (taxes, repairs, etc.) This is also a reserve account that’s separate from your carrier’s escrow account.
  • Know the difference between fixed and variable expenses. Determine all your fixed costs such as truck payment and insurances. Your fixed costs will incur whether the truck moves or not!
  • When calculating your budget multiply weekly expenses (truck lease payment) by 4.33 weeks to compensate for months with 5 weeks.
  • Always be conservative in your calculations. For example, budget miles per gallon based on heavier loads and not based on when you’re bobtailing.
  •  Establish yourself a salary, pay yourself a set percentage of each check so you can save for taxes and build that business reserve account.

Budgeting Don’ts

  • Do not take cash advances, limit them if you must. If you haven’t heard it before I guarantee you’ll hear it again, and often. It’s not much different than a credit card except you don’t have an option to pay smaller monthly minimum payments. It gets taken out of your next check!
  • Don’t wait to pay your tax bill at the end of the year if you are an Owner/Operator. Uncle Sam wants his cut four times a year. It’s almost guaranteed that you will have trouble paying your tax bill in full at the end of the year, not to mention penalties and interest that will be assessed.
  • Don’t live in the “paycheck to paycheck” cash flow. Life will happen; there will be setbacks and unforeseen expenses inevitably. More times than not these situations will put drivers out of business. Have an emergency fund in your reserve account to cover fixed expenses when the truck is down. Preferably 4-6 weeks worth of fixed costs.

Personal Budgeting
In addition to budgeting and monitoring business operations, drivers need to formulate a personal budget as well to eliminate the need for cash advances and the urge to dip into the business account for personal uses. A simple and effective way drivers can implement a personal budget is by following the 50-30-20 rule.

  • 50% - Bills and monthly obligations
  • 30% - Disposable income (Sanity Money – always treat yourself to the simple wants in life)
  • 20% - Savings (A smart budgeter always saves in the event of an unexpected expense)

Depending on personal situations it may not be feasible to follow these percentages. Bills might be 60% or even 75%! If so, cut back first on disposable income. It’s important to keep the 20% savings for unforeseen medical expenses, car repairs, etc.

Instituting a personal emergency fund is also imperative to a budgeting plan. A good rule of thumb for anyone is to have at least $1,000 in their personal emergency fund. If you find yourself using emergency fund money, you need to build it back up immediately! Use the 20% savings money to build it back up and once you have done so, keep saving!

Money Management is 20% Knowledge and 80% Discipline
It doesn’t take a personal money manager or a CPA to ensure financial stability. All it takes is inner motivation, a goal setting and goal seeking attitude, and most of all discipline. A budget is in theory and only as good as the budgeter’s discipline. As the saying goes, Rome wasn’t built over night and same goes for being financially fit. Time and discipline are the most important variables when it comes to measuring financial success. Above all else remember this when budgeting; it’s not how much you make, it’s how much you save.

Comments (11)

Casey Barlow

Casey started at ATBS in January during the 2012 tax season in the Client Accounting department reconciling clients Schedule C's for their tax returns. After the tax season he was hired on as a Business Consultant. He works with various clients at many different carriers to improve their business profitability and aid them through the tax return process. Prior to ATBS, Casey ran his own yard aeration business through high school, college and still today. He graduated from University of Northern Colorado's business school, Monfort College of Business in the fall of 2011 with a Bachelor of Science in Accounting and Business Administration.

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Almost all truck/trailer expenses are known ahead of time. We know what are payments and insurance is. We know when the truck is going to need the truck serviced ahead of time. We know we are going to need tires months ahead of time. There are very few surprises if we plan ahead. My point is that you have to put a budget in place ahead of time. For example, if you are responsible for the tires on your truck and trailer, you need to be saving at least 5 cents per mile for every mile that truck rolls. If you run 10,000 miles this month, you need $500 in your tire fund. If you budget and follow guidelines, when it comes time for tires you will have the money available. Tires and maintenance costs enough. Don't add to that cost by having to pay interest on a credit card for items that could be set up in a budget. Plan...Plan...Plan. Run it like a BUSINESS.

September 24, 2012 21:35:31 PM

Rick - that's a really good tip. It can be hard to save that much, but would be worth it in case of any emergencies that come up!

September 10, 2012 15:43:03 PM

this article was very helpful for me I have definitely found a few gems to work with

September 02, 2012 8:18:29 AM

A common rule of thumb in order to be prepared for the unexpected is to have enough money put away in savings to cover six months worth of your total expenses (business and personal). I know that sounds like a lot in these difficult times but the closer you can get to whatever that figure might be, the better you will be prepared for the unexpected such as injuries that can keep you from driving or the cost of an engine rebuild etc.

August 21, 2012 7:31:23 AM

Having a budget and a set amount of each check that goes straight into savings are the two biggest parts of starting financial freedom and keeping yourself from being a slave of the pay check. That feeling of not being able to breathe until you get that next check, but you know it’s already gone before it hits the bank. I suggest putting some of your savings in a harder to reach place like a money market account. That way you can get to it if the medical bill comes around, but you won’t be tempted to use it on a whim.

August 10, 2012 8:48:21 AM

I may be wrong here, but under "Budgeting Don'ts" in the last sentence of the last bulleted paragraph, I believe that should read, "Preferably 4-6 MONTHS worth of fixed costs instead of "4-6 WEEKS". 4-6 weeks of fixed costs wouldn't get most people very far if something happened. I know it wouldn't get me that far.

Great article!

August 10, 2012 8:12:36 AM

The last sentence in this post speaks volumes... So many people say they will start saving money when they start making enough. That time never seems to come.

August 09, 2012 17:15:11 PM

Always plan for the unexpected... Any income we make above our budget goes into savings for an emergency or downpayment on our next truck ..... Or that next slow time and we need a little extra.

Be careful before you turn down all advances.... If we did not take an advance to load our t-chek card we would not receive our companies fuel discounts. All I heard was advance in orientation and my ears shut down lucky for us another driver explained how our fuel cards works.

August 09, 2012 11:30:36 AM

Successful budgeting keeps people out of debt. A simple pen and paper system for budgeting is better than no budget at all. Just get started and your level of discipline will determine your level of success!

August 09, 2012 9:19:33 AM

One of if not the best tools you can use to be successful!

August 09, 2012 8:24:57 AM

There are a lot of budgeting tools on the internet as well. Look at reviews before you sign up so that you know it's a re*****ble website. I use mint.com for my budget and it works really well for me.

August 09, 2012 8:21:45 AM