Women entrepreneurs: It’s time to prepare your 2021 budget. Let Barbara Weltman help you. (Credit: PXHere, Creative Commons License)

It’s that time again — time to prepare your budget for the coming year. This is an annual chore that should not be overlooked or delayed, especially in today’s challenging business environment.

As noted in last year’s blog on the same topic, money expert Dave Ramsey says: “A budget is telling your money where to go instead of wondering where it went.” So in preparing your budget for 2021, be sure to consider the following actual and projected changes:

[Related: Here’s a Look at the Post-Pandemic Business Picture]


Are you planning to give raises? Most companies surveyed in the 2020 General Industry Salary Budget Survey conducted by Willis Towners Data Services said yes. The average salary increase for all employees—management, exempt and nonexempt employees—for 2021 is projected to be 2.8%. As the owner, are you giving yourself a pay increase? Be sure to consider the impact of a greater payroll in 2021 on the amount of the qualified business income (QBI) deduction, if applicable, you can take on your 2021 personal tax return.

The tax rate for Social Security and Medicare taxes (FICA) remains unchanged for 2021. But payroll taxes will increase due to pay raises, as well as an increase in the Social Security wage base to $142,800 (up from $137,700 in 2020) for companies with employees earning up to or more than this new amount. And if you opted to defer the employer portion of Social Security taxes, you’ll have to pay 50% of the deferred amount by the end of 2021, so budget accordingly.

Health Care

If you provide health insurance for your staff in 2021, expect to see premium increases of 5.3% or more. The increase expected relates to large employers; there are no stats for small businesses (anticipate that premium increases will be greater for them). If you offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), the reimbursable amounts for 2021 are increased by cost of living adjustments announced by the IRS later this year. If you offer an Individual Coverage Health Reimbursement Arrangement (ICHRA), it’s up to you as the employer to fix the reimbursable amount for 2021.

And workers compensation premiums may change. According to an article in the Insurance Journal, rates could start to increase in 2021. Of course, rates are state-by-state, so check with your state or insurance agent for what to expect in your locality.

[Related: Is Your Business Ready for a $15 Minimum Wage?]


If you have a line of credit or anticipate the need to borrow money in the coming year, factor in low interest rates in your budget. The Federal Reserve cut the federal funds rate (the rate that banks charge each other overnight and on which other interest rates are tied) in March 2020 to zero. Because Federal Reserve Chairman Powell doesn’t see a recovery until 2023, it’s likely rates will remain low and the cost to you of repaying interest on lines of credit or credit card debt should be comparably low.

Energy Costs

Next year’s utility bills and what you pay at the pump for your business vehicles may not be too different than now. Decreased economic activity due to the pandemic has reduced demand, so the government is not projecting any dramatic changes in prices. But there is considerable uncertainty about the economy, and what this could mean for energy costs.

[Related: 5 Tips for Building a Brand on a Budget]

Travel Costs

Traveling on business is still likely to be minimal due to the pandemic; teleconferencing continues to be the norm.

With that said, it’s unlikely there’ll be cost increases for those who do travel in 2021. U.S. Travel expects business travel in 2021 to be slightly better than in 2020 but still considerably lower than in 2019.

Bottom Line

While projections are only guestimates, you need to factor them into your 2021 budget. Setting up your budget now enables you to make decisions on pricing, marketing, salary, and benefits for the coming year, as well as whether to give year-end bonuses for 2020.

Barbara Weltman is the founder of Big Ideas for Small Business, Inc., which publishes Idea of the Day. She is the author of J.K. Lasser’s Small Business Taxes 2020 and other books that inform the small business community of tax, financial, and legal information they should know about.