Finance for a Freelance Life

Working While a Student – Try to Get Ahead or Find a Job for Which You’re Overqualified?

Mrs. Micah — Wed, 10 Mar 2010 11:00:00 +0000

One of the responsibilities I have in my current position is training and supervising several student workers. The work they do is pretty easy for the intelligent ones (don’t get me started on some of the others), it’s definitely not rocket science and it’s better for people who can thrive doing tasks which don’t require full use of their mental powers. It’s the sort of job you can do while listening to music or podcasts or books on tape, which some do.

Most of my students are undergraduates, but there’s one who stands out above the others. He’s got an excellent work-ethic, he’s good at his job, he’s personable, and he’s vastly, vastly overqualified. When I saw his résumé, my first thought was “Why would he want to work for us? This guy could be earning more than I am!”

The answer is precisely that—because he’s overqualified. He’s in an intense graduate program. He needs part-time work which doesn’t tax him mentally or physically, something he doesn’t have to think about when he’s not at work.

Working “Menial” Jobs in College

I realized that I did the same thing in college, taking on a bathroom-cleaning job (mostly men’s rooms) because I found it therapeutic to get up from my computer every night and spend an hour and a half doing something else. Like the position I’m supervising now, this job gave visual evidence of progress and would leave one feeling satisfied about having made a concrete, if small, difference.

On Saturday, we had dinner with some friends, one of whom is going back to school and working at Starbucks. Sure, he could get a better job, but the hours allow him time for class and the job doesn’t carry over into after-hours. He was temporarily promoted to supervisor because he was so good at it, but he stepped down when he found that it was interfering with his primary goal—getting his degree and moving on.

Afterward, I realized that a whole set of Micah’s friends do the same thing by working in the circulation department of the library at the university where they also study and teach. That particular job allows for a little studying when there’s no one they need to assist at the deck. We have similar positions at my workplace, even door guards who do almost nothing but study during their shifts.

The Alternative: Starting Your Career or a Small Business in College

A number of my friends in college spent their Senior years kick-starting their post-college careers. The teachers and social workers did year-long practicums. The business majors, accounting majors, and some of the communications/writing majors found internships with local businesses. The engineers disappeared, but I’m pretty sure they were just building machines in the basement of their building.

Other college students focus on starting their own small business instead of pursuing outside work. It means they have more control over their hours and the scope/scale of their work. On the other hand, it also means they’re more heavily-involved, since they’re the boss, sales, and labor.

Since I didn’t have a car (and didn’t have a car payment!), there was no public transit, and there were no good jobs I could easily walk or bike to, I stayed on campus. And there were times I felt like a slacker for doing so. On the other hand, I felt lucky compared to my student-teaching housemate who tried to juggle teaching English classes in an underfunded, low-scoring school with finishing her senior projects and other senior year classes. Her work consumed all her free time and took away from her studies (though it was necessary for licensing, so it’s a good thing she did it).

But I think that both routes have their merits if you do them right. Working a less-challenging job won’t look as good on your resume, but it allows you to focus on what you’re in school for—learning. On the other hand, real-life work experience in your field may look better on your résumé and should provide you with references and contacts you can use later.

I actually did both in college, since I worked in the library for three semesters before I switched to my more mindless job. It did count toward library experience and even helped me land the job I have now, since I was working in the same department and had an idea of what the work entails.

For other people’s musings on college this week, check out the pair of articles from the Studenomist and Brian Scheur of My Next Buck on whether parents shouldn’t pay for college or whether parents should pay for part of their kids’ college educations.

Did you attend college and work at the same time? What kind of job(s)? How do you think it paid off in the long run?

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

I reserve all rights to decide who is a legitimate blogger and to report scraper sites to Google, possibly serving them a DMCA notice. But if you’re an ordinary blogger, feel free to use an excerpt!

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Putting Together Your Tools to Achieve Financial Goals – Textbook Personal Finance

Mrs. Micah — Fri, 05 Mar 2010 11:00:15 +0000

This post is part of the textbook personal finance series which covers basic personal finance skills by going through an actual textbook, chapter-by-chapter. Check out the intro post for more information.

This week, the post is over at Being Frugal, it’s on putting together the tools we’ve been building to achieve your financial goals. The post wraps up chapter 2, covering money management and taking the first steps on getting our finances together.

Next week we’ll start on chapter 3, taxes. It’s a coincidence but an excellent one given the time of year.

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

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TurboTax Home & Business Review

Mrs. Micah — Wed, 03 Mar 2010 11:00:17 +0000

I filed my 2009 taxes on Sunday using a review copy of TurboTax Home & Business Online, which allows me to file Schedule C—a necessity for almost all freelancers and sole proprietors.

Until this year, I’d been using the comparable TaxCut (now H&R Block at Home) product, which I won in a giveaway for my 2007 taxes and bought in 2008 since I was already used to the interface. This was also my first time using an online tax filing product instead of a program installed on my computer.

Who is TurboTax Home & Business Online For?

TurboTax Home & Business is for sole-proprietors, consultants (including freelancers), 1099 contractors, and single-owner LLCs. It’s not just for your small business taxes, you can enter your and your spouse’s W-2s, if you have any, and do regular taxes using it as well. I’m going to be writing about the Online version, not all the things I mention may be included in the software.

The Online version is simply an easier way of using the program and done in a browser. The major advantage is that it doesn’t require installing software on your computer. Since I don’t like installing extra software on my computer each year and having to uninstall if afterward, I liked the idea.

The other big advantage is that you can try any of the TurboTax Online products before you buy. You pay at the end, right before you file. To save information between sessions (or just to make sure you don’t lose it if your computer/browser crashes) be sure to create a free account.

TurboTax Home & Business also includes the features of TurboTax Premier for people with investment and rental property income.

Doing Your Freelance/Small Business Taxes

Using some of the screenshots I took, let me walk you through parts of the business income section. I didn’t take a shot of each page and I did black out some information, of course. You can click on the images to see larger versions with more detail.

TurboTax Home & Business doesn’t assume that you have just one small business or consulting project. If you have a few businesses in a few different areas that you want to keep separate—blogging, web consulting, etc, you can set up a profile for each one:

For each business, you set up a profile (including the IRS business activity code), import information from any record keeping software, add income, expenses, and misc:

In the income section, there are places for any 1099 forms you received as well as general income (income not in a 1099), other types of income, and income you refunded/rebated or otherwise gave back:

Because I had my payment data in order, I found the whole process quite easy and straightforward. There are two options in this section—one is the TurboTax guided tour, the other is an overview screen which allows you to navigate on your own. I decided to use the guided tour, but when I went back over it after finishing I navigated using the other method.

The guided tour was a little slow, but I wanted to be sure that I didn’t miss anything.

Things I Liked About TurboTax Home & Business Online

Import Your W-2

An exciting feature of TurboTax that I wasn’t able to use (so it’s more potentially exciting than actually exciting) was a new feature which allows you to import your W-2 form. Intuit partners with a number of companies so that you can use your name & SSN & place of employment to access your W-2 right there. But my employer doesn’t participate, so I put it in manually.

If I had been able to import it, I still would have double-checked all the numbers.

Flag Areas to Revisit

One feature I really liked was the ability to flag specific “pages” inside the return. In the past, I’ve found tax software programs hard to navigate. It’s not like a normal website. The flagging feature allows you to bookmark sections so that you can easily return later. It’s very helpful when you don’t have all the information in a section at your fingertips right away.

Live Community Sidebar

A feature I didn’t use but thought looked interesting was the Live Community Sidebar. The sidebar allows you to ask tax questions which will be answered by a whole community of users. The (answered) questions displayed in the sidebar are contextual and popular for whatever page you’re currently on.

I asked the TurboTax team just who was answering these questions. I wouldn’t want to get tax advice from just anyone. The forum is made up of regular users as well as TurboTax employees and techs (if you have a technical issues) as well as tax experts, superusers (often ex-CPAs), and moderators. It’s their goal to delete or correct misinformation and to answer questions properly. It’s still not the same as hiring your own tax professional, but it’s probably as good as any tax research you can do on the internet.

The PDF Copy

I have my last two years of taxes saved in lovely PDF formats produced by TaxCut. But those were nothing like the beautiful PDF I downloaded after filing with TurboTax. I’m not sure if TaxCut has upgraded now, but the TurboTax document was awesome. It had a navigation section to let you skip between forms, it wasn’t just a digital printout, it was very easy to jump around in. Since I’d been using the PDF of last year’s taxes for a few things, I saw a huge contrast.

Things I’d Improve About TurboTax Home & Business Online

The flagging system is great. Still, I would have liked a table of contents that shows where you are and allows you to navigate, at least in the section you’re in right now. It would have augmented the guided tour nicely, especially if I wanted to skip over a few pages that I knew were irrelevant.

But other than the pace, I found it very easy to use and I found it very thorough. I’d say that my experience was on-par with the TaxCut software. I actually enjoyed doing my taxes more this year, but I think that was mostly due to my own preparedness. My documents were in order, my records were arranged, and I even had money set aside to pay the extra that I owed.

Disclaimer: As I said at the beginning of the article, this was a review copy of TurboTax, meaning that I did not have to pay for it—though it was not contingent on a positive review. The links to TurboTax are affiliate links, meaning that I will be compensated if you choose to buy TurboTax Home & Business through them. Regular readers know that I very rarely do product reviews because I’m not really a review blog, but this one was useful for me and I hope will be useful for you as well.

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

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How to Document Your Possessions for Insurance

Mrs. Micah — Mon, 01 Mar 2010 11:00:07 +0000

Whether you rent or own your dwelling, having insurance for your dwelling is very important. Our lease actually requires us to get it. Since we’re in a one-bedroom apartment and almost none of our stuff is new (or if it is, it’s well-used), we didn’t insure it for a huge sum, but do have enough insurance to replace it all should something happen. It costs just under $100/year and it’s worth every penny for peace of mind.

About a year after we got insurance, when I was renewing the policy, I suddenly realized that we didn’t have any documentation of our possessions, were we to have a fire or other catastrophe. While the insurance company might believe we had 2 couches, a bed, a dining room table, etc, they might not be willing to take it on faith that I have a lovely violin or the number of computers we seem to have acquired (though some are so old & feeble that they’re not worth replacing).

So I grabbed our little digital camera and made a sweep of the place, documenting. It’s been on my mind again recently, after I wrote about creating a personal balance sheet in my textbook personal finance series. Here are some tips for documenting your possessions for insurance.

Use a digital camera. If you don’t have one, borrow a friend’s or buy a disposable digital camera. Having the pictures in digital format makes them much more useful.
Photograph everything. Photograph the most important items carefully, bu also take pictures of rooms so that you can point out that you lost two sets of hand weights, a couple quilting hoops, several wicker baskets of fabric, etc. If you end up having to use the photographs, having broader pictures will help you figure out everything you need to replace. Also pull open kitchen drawers to get an idea of what’s inside.
Store remotely. Don’t just keep everything on your local computer or in your camera. You can use everything from online storage like dropbox to gmail to a friend’s computer to web albums to store pictures. But wherever you do store them, make it private. You don’t want to end up on someone’s shopping list!
Document on “paper” too. Santa’s not the only one who makes a list and checks it twice. Having a list will help you recall specifics down the road. It
Don’t sweat tidiness. Don’t put it off just because things aren’t as neat as you’d like. Better to do an initial documentation, find time to clean later, and then re-document if you want to. The only thing I’d avoid taking pictures of are any big fire hazards (and I’d get those fixed so you don’t have to use the insurance!).

Insurance is good, but without documentation your bases aren’t fully-covered.

Do you have homeowner or renter’s insurance? Have you documented it yet?

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

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Learn Effective Budgeting – Textbook Personal Finance

Mrs. Micah — Fri, 26 Feb 2010 11:00:09 +0000

In the last two sections, we looked at discovering your net worth and creating a cash flow statement. Both of these steps help you assess your financial situation—the big picture and the day-to-day. From figuring out where you are now, the textbook moves into concrete plans for the future: budgeting.

I’ve written about budgeting before. I’ve talked about how it’s different on an irregular income and how I findnot budgeting more frightening. But because it’s the next step in the book and the next logical step in what we’ve been reading. Plus, I’ll be working from the book’s approach, which is a little different from mine.

The textbook lays out seven main steps to building and keeping a budget.

Step 1. Set Financial Goals

I like that the book starts here. Rather than thinking of your budget as a tool to rein in your spending the book encourages you to think of it as a way to achieve your financial (and other) goals. Sure, it covers things you’d have to pay for anyway, like rent, but what you spend and where you spend it has an effect on how you live now and how you’ll live in the future. Your budget is what gets you to the future you want.

Step 2. Estimate Income

If you have your cash flow statement on hand, it should be easy to estimate your monthly income. Remember that this may change at times if you’re paid biweekly (in which case you should have several months with three pay periods instead of two).

If you’re a freelance or someone with a highly irregular income, start with a low estimate based on the least you’ve earned in a month in the last six months.

Step 3. Budget an Emergency Fund and Savings

I’d forgotten that the book prioritized the emergency fund and savings, paying yourself first. It suggests having three to six months of living expenses on hand. Set a date when you want to have finished saving your emergency fund as well as a goal for the fund. Then divide the amount by the number of months to go until you want to have that saved. Add it to your budget.

If you already have an emergency fund, take this opportunity to budget for other financial goals.

Why put this first? Otherwise it may get lost in the other expenses and despite having a budget you may end up living paycheck to paycheck.

Step 4. Budget Fixed Expenses

Again, if you have your cash flow statement, it’ll be easy to write down your fixed expenses. Otherwise, look over your last few months of bank statements and get the numbers for things like rent/mortgage, any regular loan repayments, insurance payments, etc. You may want to split an annual insurance payment into monthly portions and put them aside for the end of the year.

Step 5. Budget Variable Expenses

Now that you’ve budgeted for your future and set down your fixed expenses, the rest of your income goes into variable expenses. It’s harder to budget for variable expenses at first, but each month you learn more and more about your spending habits.

Step 6. Record Spending Amounts

A budget doesn’t do you much good unless you record your income and expenses. The free 2010 Budget Spreadsheet I created has a section for this up front. At the end of the month, find out what kind of variance you had. If you had a surplus, that’s great—put it toward a goal. If you had a deficit, look for places where you can cut back next month. It may be necessary to revise your spending or, if your income has dropped, to revise your financial goals (or find more income).

Step 7. Review Spending and Saving Patterns

You’ll get the most out of a budget if you review not just at the end of every month but if you look over a few months of budgeting every quarter of so. Are you still on progress? Areas where you’re consistently falling short? Or are you doing just what you expected to?

A good spending plan is well-planned (not just thrown together), realistic (based on your current income and needs), flexible (we budget a bit to a car fund each month just in case), and clearly-communicated to all spenders in the household.

I used this chapter to create my first real budget back in college. If you want a budget spreadsheet that grew out of that original budget, check out my free, downloadable 2010 Budget Spreadsheet.

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

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Plutus Award Nomination and Best Posts

Mrs. Micah — Wed, 24 Feb 2010 13:02:16 +0000

On Monday I got a series of congratulatory e-mails and tweets concerning my nomination for a Plutus Award. While I was aware that Flexo had created the Plutus Awards to spotlight the best personal finance blogs in various categories, I was unaware that Finance for a Freelance Life had been nominated and was one of the five finalists in the running for Best Personal Finance Blog for Generation Y or X.

I’m honored and excited, as one of my external goals for the blog is to help Gen Yers who are dealing with a unique set of challengers and goals. If you would like to vote for Finance for a Freelance Life, you can go here to cast your vote. If you came from the Plutus Awards & are trying to make up your mind before voting, here are blog highlights from the last 2.5 years:

Getting Out of Debt and Getting a Handle on Your Finances

I started this blog just a month after getting married in order to get a handle on our new combined finances and because my husband carried over $100k in student loans (you can read more on my About page). One of the primary focuses of the blog remains getting a handle on finances and getting out of debt—a problem faced by many young people leaving college or graduate school as well as GenXers looking towards retirement.

While we’re not staunch followers of Dave Ramsey, I’ve found his debt snowball method quite useful. We’ve also learned how to “snowflake” extra payments to increase the speed at which we pay off debt.

Since Micah is currently employed as a teacher and only paid during the school year, we’ve had to tackle the challenge of paying off debt with a teacher in the family. And for those who are pursuing similarly low-paying jobs with high student loans, I’ve written about an income-based student loan repayment program (though we’re not using it ourselves).

Financial and Other Resources

I enjoy creating resources, whether compiling information and creating how-tos or creating simple spreadsheets and documents.

If you’re looking for information about taxes, check out my Mammoth list of 2009 tax credits and deductions. Each section links to the appropriate details form the IRS so you can be sure of your information.

Would your spouse/partner or do your family members know how to handle your finances if something happened to you? I’ve created a resource sheet to help you save and store critical financial information for your family. Over two thousand people have already downloaded the spreadsheet.

Another set of free resources I created are budgeting, goals, and entrepreneurial sheets for 2010. Over 5000 people downloaded my 2009 budgeting worksheet—a simple and easy-to-expand tool. This year I added additional spreadsheets for financial and other goals and updated my sheets for freelancer and entrepreneurs.

Next year, I plan to go to grad school (but pay my own way rather than take out student loans). In November, I took the GREs and scored a 1580. After taking them, I wrote a series of posts on how to study for the GRE Writing, GRE Quantitative (Math), and GRE Verbal.

Budgeting, Working and Living Cheaply

If you’ve never budgeted before, check out my month-long series — “Where’s My Money Going Month?”, in which I follow-my money for a month and then write about creating a budget from those numbers. And if you’re budgeting on an irregular income of any kind, check out the companion post to debt-repayment with a teacher in the family: budgeting with a teacher in the family.

For young people, finding work in a recession isn’t always easy. I wrote about my experience using a temporary agency and how a placement agency should work. I also asked “what kind of work is beneath you?”, a question more and more people are facing now. And I calculated the real cost and real earnings of a part-time job I held in 2008.

The best way to make your money go farther is to continue living like a grad student. I shared my thoughts on how we live cheaply and why we’ll continue to do so while paying off the loans.

Freelancer Posts and Resources

Though the blog was nominated for the GenY finance side of its focus, not the freelance side, it is Finance for a Freelance Life. Here are a number of posts I’ve written for freelancer finances and other challenges they face:

If you’re considering going freelance yourself, check out these posts on preparing financially for a career change and doing a financial dry run before freelancing.

I created a simple and free spreadsheet to help freelancers keep track of potential deductions. By filling this in throughout the year, you can be prepared when doing your taxes (specifically for bloggers).

Other challenges of freelancing I’ve addressed include setting a fair price for your work, pacing yourself to avoid overworking and emotional strain, handling clients who don’t pay (ugh), and setting your own schedule.

This blog is over 2.5 years old and I’ve written a lot in that time. Not all of it’s constructive, not all of it’s still useful, but I hope that everything I’ve presented in this post can still be used by its target audience. Finally, I wanted to include my favorite post, which is not related to finance or freelance in any way but is the post I think may offer the most value (and is certainly the most valuable to me) on this blog: why I’m glad I didn’t kill myself.

There are four other great blogs in the running for an award: Budgets Are Sexy, Well-Heeled, Bargaineering (a.k.a. Blueprint for Financial Prosperity), and GenXFinance. I know all of them—two I’ve even met in person and the other two I’d be happy to meet sometimes—and I think that each of them deserves the award for different reasons. I won’t mind if you decide that one of them does a better job for GenX &/or Y than I do, they’re excellent blogs.

Content © Mrs. Micah 2007 – 2010. This content may only be reproduced in excerpts by legitimate bloggers.

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Why Paying the Minimum Amount Due on a Credit Card Doesn’t Work

Mrs. Micah — Mon, 22 Feb 2010 11:00:19 +0000

I don’t read Cracked.com(likely NSFW) for financial information. Or really for anything but amusement. It’s like Mad Magazine if most of the stuff were true and you could easily tell which parts were humorous falsification. However when I popped over there recently looking for a laugh, I found an excellent and sobering graphic about credit card interest rates that’s all true. Mostly.

You can read the whole page here, or you can view the pretty-much-safe-for-work graphic here.

The gist of the article is that if your card is one of the many which carry 24.99% interest rates and if you currently have $10,679 in credit card debt (the average American credit card debt) or more and never accrue any more debt, you will never pay it off while paying the 2% (often-used) minimum payment. In fact, your debt will grow.

Most debts you can get into are fixed and therefore have a payback plan. Your monthly payment is based on getting the debt paid back within a certain timeframe. However, credit cards are meant to be revolving so that you can always take out more or pay back more. And because the line of credit is open, there’s no plan for you to pay back in any time frame.

Fortunately, if your credit card’s interest rate is lower or you have less debt, you may be able to pay off the debt while making the minimums. But even then, you’re going to pay a LOT in interest. Bankrate’s minimum payment calculator demonstrates this.

Suppose we start with only $5,000 on a credit card, no new purchases, 18% APR, and a minimum payment of 2%. According to the calculator, by paying the minimums it would take you 472 months to be rid of your debt. In that time, you would pay $13,396.73 in interest. I would put that in a chart, but 472 months of payments would make this post extremely long. You can run the calculation yourself to see how it looks.

If, on the other hand, you started with the first month’s minimum payment, $100, and paid that every month, it would take you 94 months to be rid of your debt. In that time, you would pay $4,311.18 in interest. That’s 1/3 of the interest and less than 1/4 of the time, plus the interest is less than the principal.

If you try running the minimum payment scenario Cracked used, Bankrate throws an error and tells you that the minimum payment will never pay off the debt.

Looking at how much interest you would pay, you can see why the credit card companies have no motivation to raise the minimum payment. They’ll make their money back several times over. And really, it’s not their job to make the minimum payment larger. The minimum payment is to make sure that you pay them the money you borrowed and therefore owe them. And it’s to make sure that they get something back each month.

They’re not working with your interests in mind because that’s not their job. It’s your job to use one of these free and easily available credit card interest calculators (I highly-recommend Bankrate’s based on years of using them) to find out how much you’d spend in interest paying them back and to decide how you’re going to pay it off faster. Bankrate lets you run fixed-payment scenarios on the same debt to see how much faster you could pay it off. Studies show that the minimum payment printed influences what people pay, but don’t be fooled—it’s the minimum payment for their interests, not yours.

Paying off $5,000 shouldn’t cost you over $18,000. Do your own research, take charge of the financial decisions you’ve made, and, to quote Cracked, “for the love of God pay more than the freaking minimum!”

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Preparing a Cash Flow Statement – Textbook Personal Finance

Mrs. Micah — Fri, 19 Feb 2010 12:30:45 +0000

While creating a personal balance sheet is the best way to find out your net worth, your net worth doesn’t necessarily reflect your everyday life. If all your money is tied up in your house, then getting your hands on it may be difficult if you’re out of work, etc.

A cash flow statement is like the records sheet (or the spending side) of a budget. It is a summary of cash receipts & payments over a given period. Your weekly cashflow may be tighter than your monthly cashflow or your annual cashflow, especially if you have a seasonal or teacher’s income.

Creating a cash flow statement is similar to preparing for a budget. The focus can be similar—to figure out what spending you can cut, to figure out how much flexibility you have to work with. Or you may just create a cash flow statement in order get a look at your last month or quarter and make sure you’re spending less than you earn.

Cash flow statements can substitute for budgets as long as your outflows are smaller than your inflows (otherwise, you’ve got a problem). If you’re already budgeting, then your end-of-the-month results are already your cash flow statement. Move to Princess Lolly and have a good weekend!

Step 1. Record Income and Inflows

For most people, the primary source of income is from a job. And for most, this is a predictable income since it’s based on the same salary for the same number of hours/workweek. Be sure to put down your disposable, take-home income, not your salary.

For freelancers and others who income comes mostly/partly from unreliable sources, this is a much more important number and making cashflow sheets is a great way to track your progress—by putting your earnings up against your outflows. Primary sources of income may also be retirement savings or Social Security.

Other numbers to consider are commissions, interest, dividends, alimony, and child support. If you’re living on savings after having lost a job, or while in school, then put down the amount you plan to spend each month.

Step 2. Record Cash Outflows

The best way to track cash outflows is to sit down with an entire month of receipts or, if you use your debit/credit card for everything, a month’s statement. The only benefit of receipts is to a) jog your memory about the specifics of your spending and b) remind you of cash transactions.

There are two kinds of cash outflows, fixed and non-fixed. A fixed outflow is the same every month. Our rent and cable bills are fixed. When we had a car payment, that was fixed. Some variable expenses are nearly fixed. Our water bill hovers around the same $5 range every month, so we budget just a little extra and stick it in the fixed expenses.

Most expenses are variable. Your gas costs for the month may depend on whether you were snowed in for a week or were working at a different site or decided to visit your family who live a few hours away. Don’t leave anything out—this is a picture of how your cash actually flowed this/last month/quarter/year, not how it looks on average.

Step 3. Calculate Net

Add up inflows and outflows. Subtract outflows from inflows. This is your cash surplus (if positive) or deficit (if negative). If you’re happy with the number, you can just stop here. Or, proceed to step 4 and start planning your next move.

Step 4. Plan for Surplus or Defecit

Surplus is good. There’s nothing wrong with letting it just sit in your account and add up. But you may want to move it to a savings account so it earns interest, apply it to any debt, or use it for other financial goals like funding a Roth IRA.

If you have a deficit, it’s time to work on a financial plan for either earning more or spending less. Cash flow statements are a great start when creating a budget. Without addressing problems and creating a spending plan that keeps you within your income, it only gets worse.

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How to Export PayPal Data and Check Your Records for Taxes

Mrs. Micah — Wed, 17 Feb 2010 11:00:18 +0000

Even if you keep records of payments made by clients or advertisers during the year, it’s important to go over them again before tax time. You can check any 1099s received against your monthly records, but what about payments made through PayPal?

Whether you’ve been keeping financial records all year long or you’re putting together your records just in time for taxes, this post will help you limit your exported PayPal data to avoid duplicate entries. Also, learn how to deal with PayPal’s “Gross,” “Fee,” and “Net.”

How to Export Monthly PayPal Reports

I find that exporting each month separately keeps comparison from getting overwhelming. Also, I’ve had problems with not all the dates showing up on my PayPal reports. Limiting it to a month at a time keeps me in a range, plus I keep my monthly data in different sheets inside the same spreadsheet workbook. But you can export by the quarter, or even a whole year if you feel like it.

To download a PayPal report that you can open in Open Office Calc (free) or Microsoft Excel, hover over “History” in My Account and select “Download History” from the drop-down menu.

Select the dates and choose what type of report to export. While “All Activity” sounds safest, it’s actually full of duplicate content. Every invoice will be reported as “Paid,” but there will be a second entry for the payment itself. eChecks will show up twice as well, the first entry being for the date they were send and the second for the date they cleared.

To avoid confusion and duplicate entries you’ll have to delete, choose to export all completed payments. Excel and Calc will understand both Tab Delimited and Comma Delimited reports, even though they aren’t .xls or .ods documents. You can also choose to save your exports as a different format once you’ve opened them.

Understanding PayPal Gross, Fee, and Net

When comparing your records (or building them for the first time), be sure to use PayPal’s “Gross” amount, not the “Net.” If you reported the amount you actually received (Net) when creating the record, change it back to the Gross and make sure that you’ve used the same set of data across the board.

The fee PayPal charges for many transactions is a business expense, so be sure that your records contain a column for PayPal fees as well and add them all up. I keep all three columns—Gross, Fee, and Net—but I don’t use Net for my taxes.

Honestly, the end result will be the same whether you report your Gross earnings and then deduct the fee as part of your expenses calculation or you just report the Net. BUT, this method is more thorough and technically accurate.

Keeping good records makes tax time far easier. Going through your records with copies of your monthly PayPal exports gives you accurate records and peace of mind.

If you’re a blogger trying factor a variety of income into your taxes, check out my post on taxes for bloggers.

As always, I am NOT a tax professional. I have a few things to say on organization and double-checking your records, but I cannot guaranteee anything which may be interpreted as tax advice.

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Still More Reasons Not to Use Gift Cards

Mrs. Micah — Mon, 15 Feb 2010 11:00:23 +0000

If you’ve been reading this blog for long, one thing you’ve probably noticed is that I don’t like gift cards. Ever. Almost. I love gift cards to Joann fabrics, but that’s because I’m a crafter and will always use them. And I love Amazon gift cards because there’s so much you can buy.

But, for the most part I believe in giving cash in red envelopes or other pretty ways instead. I could cite the billions of dollars wasted in unused gift cards. I could talk about limiting your recipient to just one store or the limitations of redeeming some gift cards. I have.

But today I’m putting out another reason not to use gift cards. A few weeks ago, The Consumerist reported the story of a woman who was briefly taken to jail for trying to pay with legitimate Amex gift cards.

These cards were a Christmas present. The relative had even been thoughtful enough to give her something she could use at a number of stores. But because of a glitch and then a glitch on Amex’s end, the woman was handcuffed, taken to a police station, patted down (including under her shirt), and briefly held before Amex changed its answer and verified that the cards were legitimate.

The woman reported that as she left the station another young man was being brought in for the same issue only with MasterCard gift cards.

One lesson we could draw from the story is “don’t shop at this Best Buy because they will screw up your gift cards & call the police.” But when Best Buy did its part and called Amex the first time, it was told that there was a problem and confirmed in its decision to call the police. It wasn’t Best Buy who actually sent the woman to jail, it was an Amex representative. If another Amex representative hadn’t cleared things up quickly, she might’ve stayed longer.

Sometimes not dealing in cash makes sense, like putting your money in the bank. Keeping all of it in cash can be tragic. You want to earn interest. And debit/credit/checks allow you to purchase things quickly without bothering with bills. But why tie up gift money in a gift card, a gift cheque, etc? The reasons not to just keep piling up.

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