Bookkeeping and money FAQs

Got money and bookkeeping questions? Danetha answers your FAQs below.

  1. Why is it important to set money goals for the new year or at anytime during the year? Goal setting gives you clarity of purpose, motivation and holds you accountable to your dreams. Money is a tool to live your best life. Setting a money goal for 2016 is a promise to yourself to live your best life. 
  2. What KIND of goals do should I set? There are five categories that you should set money goals.  Earning, Saving, Investing, Spending and Giving. Ask yourself how much do you want to earn and by when; how much of your earnings do you want to save and invest; what do you want to spend your money on (and yes, a brand new wardrobe is a great goal); and how will you use your earnings to give back. An increase in your earnings should also be reflected in an increase of giving back.
  3. What is the first step in setting money goals? The first step is to get clear on your priorities. Want to buy a home? Increase your investments? Redo your wardrobe? Launch a business? Is this in the next year? Or five years from now? Figure out where you want to spend your money, and calculate how much you want to spend in each area and in what timeframe. The total will be your money goal.
  4. How often should I set money goals? I recommend setting one goal for the year. And three-month money goals throughout the year. 
  5. It's really hard for me to save money.  How do I get better at saving? Most of us have trouble with this! Automate and use a separate savings account. One that is not linked to your checking- so that you can't easily spend it. 
  6. I'm really good at setting money goals, but it's hard for me to keep them. How do I stay on track?  Find a money friend aka accountability partner.  This could be a spouse, friend or colleague. If that doesn't feel comfortable to you, check out money groups to find other people that are passionate about reaching their financial goals. Check out Society of GrownUps and LearnVest to find other like-minded people. Once you find your money friend, have a weekly date to chat about goals & challenges. We all need support.
  7. I am self-employed. How much should I pay in taxes? This completely depends upon your business structure and a lot of other factors. Generally speaking, if you live in the United States, aim to save 30% of your earnings for tax payments.
  8. What tools do you recommend for tracking my finances? I am big fan of Personal Capital to track my expenses, debt and investments. I also like Ally Bank as my separate savings account. If you need help paying down debt, check out Ready for Zero.
  9. What is bookkeeping? Bookkeeping is the process of categorizing your business transactions. 
  10. What is the difference between bookkeeping and accounting? Accounting is the process of analyzing your business transactions to make decisions. Bookkeeping can be completed without accounting. Accounting can not be completed without bookkeeping.
  11. Do I have to hire someone to do my bookkeeping? No. My recommendation is to wait until you have reached six-figures within your business before outsourcing. Because you have to understand how the cash flows in and out of your business, before you can expect someone else to be able to do so. Remember, no one cares more about your money than you do.
  12. Do I need to use a bookkeeping program or can I use pen and paper? There is no legal requirement to use a bookkeeping program. Use whichever method makes most intuitive sense to you- an internet program, pen and paper, Excel or a shoebox. The key is to be consistent. However, using an internet program will save you time and money when analyzing your financial statements and filing your taxes.
  13. Is bookkeeping only important for filing taxes? No. Bookkeeping is necessary in order to file taxes. However, managing your finances is one of your #1 tasks as a business owner. Bookkeeping allows you to stay on top of your money throughout the year.
  14. How does bookkeeping help my business? Bookkeeping allows you to determine when it is time to hire someone, expand your business and make strategic tax filing decisions.
  15. I don't have an accounting background. Will I mess up my books? It's ok if you don't have an accounting background. As the boss of your business, you can easily learn how to manage your books. The key is to stick with a bookkeeping system (refer to question #4) and use it consistently. Check out the free resources below for more assistance and my Organize your bookkeeping in 7 days course and Bookkeeping 101 course
  16. When should I hire an accountant? This is a personal decision. I recommend working with a tax accountant as soon as possible. Keep in mind, not all accountants file taxes. And most tax accountants do not offer strategy services. You should hire a business accountant, someone who helps with your bookkeeping and/or with financial strategy, once you hit six-figures or feel that you have a good understanding of your books.
  17. Which bookkeeping program is the right fit for my business? Xero is my favorite bookkeeping program. It's intuitive and beautifully designed. Click here to learn more about it.
  18. Should I write off as much as I can in business at the end of the year? Your tax filing strategy is a personal decision. While most business owners want to write off a lot of expenses at the end of the year, remember to consider your future goals. For example, if you plan on purchasing a home next year, you will want to show a healthy profit in your business as opposed to writing off a lot of expenses. You may also want to consider your retirement planning before spending your money on other business expenses.
  19. Got a questions not listed here? Submit your question here and we'll do our best to answer it.

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