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Monthly Archives: April 2016

Manage Money Tips for Self Employed

manage-moneyAfter you have measured the advantages and disadvantages of a home-based business and chose that independent work is ideal for you, your next stride is to build up an arrangement. Your marketable strategy ought to characterize your business and distinguish objectives. At the point when building up your arrangement, research laws that may affect your business. First off, you should see whether you require a permit or allow to work your business. A decent marketable strategy likewise incorporates budgetary data, for example, an asset report and pay proclamation.

When working on your business’ financial plan, don’t forget to develop a method for managing your new personal financial situation. Unfortunately, statistics show that many home-based businesses fail often due to poor financial planning. Following are some ideas to help make self-employment work for you.

# Keep tabs on your taxes. Some self-employed individuals may have to pay up to a 15 percent self-employment tax in addition to their regular income taxes. To avoid tax-time surprises, periodically review your taxes throughout the year. Don’t forget to make necessary quarterly tax payments to avoid under-withholding penalties.

# Don’t underestimate your expenses. Fortunately, more than 40 percent of all home-based businesses require less than $5,000 for startup. However, there are many other costs associated with running a business. In your spending plan, don’t forget expenses such as childcare, insurance, postage, gas, and dry cleaning.

# Manage your income. Most self-employed workers have sporadic incomes. If your income varies from month-to-month, determine your average monthly income. Then, if you have a month where you earn more than average, put the extra amount into a savings fund to supplement less lucrative months.

# Avoid relying on credit cards. Borrowing from a credit card can quickly lead to costly trouble. If you need to use a credit card for business expenses, open an account specifically for that purpose. If you need money to launch your business, consider a small business loan instead.

# Keep accurate records. Complete all of your paperwork on-time, particularly if you are billing clients or customers. Many companies will take several weeks to process invoices. Keep copies of all receipts for tax time. Because networking is so important, keep business cards and contact information in an organized manner.

# Get help. Consider working with a lawyer who can help you with necessary, and sometimes complex, legal matters. You should also contact your insurance agent to make sure you have appropriate coverage.

Spending Personal Budget

As soon as you start spending your own money, it’s time to start tracking your spending so that you can create and follow a personal budget. Tracking your spending, while sometimes tedious, is the best way to find out exactly where your money is going.

The simplest way to track your spending, especially your cash, is the low-tech way, with a notebook and a pen. By carrying around the notebook with you, you can track exactly where every dollar is going–from a small coffee on your way to work to a spending splurge at the mall. If you’d prefer, on a daily or weekly basis, you can transfer your handwritten notes to a computer spreadsheet.

Once you have collected information for about a month, you’ll have a good baseline of information to use to create your personal budget. Some major categories that you’ll want to include are housing, utilities, insurance, food (groceries and dining out), gasoline, clothing, entertainment, and “other”. Using a spreadsheet program (such as Excel), online service, or other personal finance program, add up the expenses that you’ve been tracking, and then calculate what you’d like to budget for each category. Keep in mind that you’ll need to budget for some items, like gifts and automobile repairs, which will be necessary but won’t occur every month. You can either create a budget for each individual month, with variances for irregular expenses (e.g., heating expenses which will be higher in winter months, or car repairs and gifts), or a standard monthly budget where you include an average amount for expenses such as car repairs, heating, and gifts.

Your budget should also contain some personal savings amounts for retirement savings, college savings, an emergency fund, long-term savings, and any other savings goals you may have. Don’t wait until the end of the month to see what’s left–budget for your savings first.

Creating the budget is a good first step, but the most important thing is to follow the budget. Make time weekly or monthly to track your spending, and start to see if you are actually keeping to your budget. Using a personal finance program or an online service is probably the easiest way to do this on an ongoing basis, but make sure you continue to track where your cash is going. You could also use this simpleBudget Worksheet. You may be surprised to find out how the frequent small amounts you spend actually add up to big money.

After tracking your personal budget, you may notice some areas where you’ll have to make changes. Don’t just increase your budget without considering alternatives. While you may have no choice, if prices or expenses go up, shop for better deals before giving in to the extra expenses.

Question and Answer About Personal Finance

# How should I track my personal spending?
The simplest way to track your spending, especially your cash, is the low-tech way, with a notebook and a pen. By carrying around the notebook with you, you can actually track exactly where every dollar is going—from a small coffee on your way to work to a spending splurge at the mall. If you’d prefer, on a daily or weekly basis, you can transfer your handwritten notes to a computer spreadsheet.

# What financial reports should my family have?
Each family should spend some time tracking their financial progress, and the best way to do that is to develop a few financial reports that you’ll update monthly or semi-annually. These reports include a family budget and a balance sheet.

# When do I create and update my personal budget?
Individuals should start budgeting and tracking expenses as soon as they begin their first full time job. Revisit your budget every few months, and whenever significant life changes occur, such as raises, marriage, the birth of children, and divorce.

# What financial professionals should I consider working with to help manage my personal finances?
If you find that you need help with your finances, professionals such as tax advisors, credit counselors, financial planners, and lawyers can help. Before working with any financial professional, be sure to check their credentials. You may choose to ask your friends and family if they have any trusted financial partners that they recommend. Ask specific questions about their history and areas of expertise. Finally, be sure that you are comfortable with the advisors you choose; ideally, you will be financial partners for life.

# Why is a personal balance sheet important?
A balance sheet calculates your net worth by comparing your financial assets (what you own) with your financial liabilities (what you owe). The difference between the two is your personal net worth. Don’t be discouraged if your net worth is negative—keep in mind that this should be an accurate depiction of your financial situation. Setting goals is much easier once you know what your current net worth is.