For most people, successful budgeting depends on steady, regular income and careful planning. Managing finances as a locum tenens provider, however, is more of a challenge. Since locum tenens providers are considered independent contractors that work temporary positions, your income can sometimes be uncertain. But there’s plenty of room for careful planning. In fact, budgeting is even more important when your financial picture can be unpredictable.
A typical budget will break down spending into categories of essential and fixed expenses (housing costs, utilities) which are added up with other categories such as non-essentials but priorities (gym memberships, restaurants). Most budgets will also include a category for variable or periodic expenses, like unexpected car repairs or yearly subscriptions.
Locum tenens providers essentially needs to work backwards to create a budget. Rather than starting with the income you have, your spending limits will be dictated by amounts you must spend to cover your needs. Receiving a daily rate during an assignment, rather than a fixed annual salary, may seem like a challenge. But many locums report that they earn the same amount, if not more, than their permanent counterparts.
Track Your per Diem Rate
While your overall income may fluctuate, the per diem amount you receive is fixed while contracted. Once you have your budget laid out, it will be easier to see what your ideal or target daily rate is and the number of days that you need to work each month to cover your expenses.
Taxes and Insurance
As an independent contractor, taxes are not taken out of your paychecks automatically. Use an online tax calculator to determine an estimated federal tax amount. This figure should be factored into your baseline income threshold, because it’s an essential to prepare for (and unavoidable).
Utilize Your Extra Income
When your income is above your minimum threshold, set the extra aside so that you have it set aside for your variable expenses category, invested or in an emergency fund, should your income ever dip lower than what you expect it to be. Having a savings cushion is one of the most valuable things you can do for yourself. Knowing your expenses are covered takes the mental pressure off of managing your finances as a locum tenens provider.
Categorize Your Bank Accounts
Equifax.com recommends that independent contractors have a spending account for your personal expenses and a separate spending account for work-related expenses. This will help identify legitimate work expenses in the event you are ever audited, and help you track them for reimbursement with your staffing agency.
In addition to having two spending accounts, you can have personal savings accounts that are set aside for unanticipated expenses, like car repairs and a separate savings account for long-term savings. Most banks do not put a limit on the number of accounts you can have, so you can set this up in a way that works for you and move money around as you need to. Plus, single bank account with a lot of money in it may lead you to think you can spend more than you realistically should.
Rigorously Track Expenses
As a locum tenens provider, you are able to deduct a wide array of business-related expenditures which lower your taxable income. In order to be reimbursed for expenses or to claim deductions, you’ll need receipts. Set aside a labeled folder in which to collect paper receipts. Additionally, an online program or mobile application can track your digital expenses. The important thing is that the information is organized and accessible when you need it.
What’s Included in Your Locum Tenens Package?
While locum tenens assignment packages do vary, basic things such as lodging and transportation are included. Before you embark on any assignment, the travel and support teams at Barton Associates will make sure you receive clearly defined terms that cover all basics like travel arrangements, lodging, rates and payment schedules. Even though a package will be offered to you, in many cases it is possible to work with your recruiter and negotiate a locum tenens package.
