Getting your finances in shape isn’t scary - all it takes is discipline, consistency and a little fun.Read More
One of our favorite things to do at Money & Mimosas is to listen your questions about money and help you find the answer to them. Here are eighteen of the most asked questions we had from you about managing your finances as an entrepreneur.
What kind of money goals do should I set? There are five categories for financial goal-setting. 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 to the causes you care about.
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.
How often should I set money goals? I recommend setting one goal for the year. And three-month money goals throughout the year.
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. During your weekly money date, commit to transfer a fixed percentage of your earnings into your savings.
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, such as the Money & Mimosas BOSS club, to find other people that are passionate about reaching their financial goals. Once you find your money buddy, have a weekly date to chat about goals & challenges. We all need support.
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 25-30% of your earnings for potential tax payments.
What tools do you recommend for tracking my finances? Personal Capital and Mint are two of our faves for tracking personal finances. Xero, Quickbooks and Freshbooks are our faves for business finances.
Is there a bank that you recommend? There are a lot of options when it comes to choosing a bank account. One account that we really love for personal use, is the Radius Hybrid-Checking account. They offer you the ability to earn interest* from your checking account - which is unheard of!
What is bookkeeping? Bookkeeping is the process of categorizing your business transactions.
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.
Do I have to hire someone to do my bookkeeping? No. We recommend waiting until your business reaches at least $250,000 in annual revenue before outsourcing your bookkeeping. Why? 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.
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.
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.
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.
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 find a bookkeeping program that works for you (refer to question #4) and use it consistently.
When should I hire an accountant? This is a personal decision. We 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 someone to help with your bookkeeping and/or with financial strategy, once you reach a minimum of $250,000 in annual revenue or feel that you have a good understanding of your books.
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.
Have a money question that’s not listed here? Click here to submit your question for a chance to have it answered on Money & Mimosas.
This post was in partnership with Radius Bank.
*Annual Percentage Yield (APY) is accurate as of 05/2/2018. Minimum amount to open account is $10.00. Rate tiers are as follows: 0.00% APY applies to balances of $0.01-$2,499.99, and 0.85% APY applies to the entire balance on balances of $2,500 or more. Rates may change after account is opened. Fees may reduce earnings.
If you are like the majority of Americans, you have a mound of debt that you are eager to pay off. In fact, the New York Federal Reserve released a report that the total household debt for Americans reached $12.73 trillion in 2017, surpassing the 2008 peak. Yikes!
From student and auto loans to credit cards, the increasing level of debt is a source of anxiety for many. According to the Prosper Marketplace Financial Wellness Survey, 44% of Americans rank debt relief as a top priority for improving their financial standing. Companies like Prosper can help you get your finances back on track by consolidating your debt, so that you can sleep better at night.
Paying off your debt is one of the first steps to achieving financial wellness. And while we all know to spend less than what we earn in order to pay off our debt, it may often feel as if this is easier said than done. As a financial coach, I have worked with hundreds of individuals and have helped them pay off nearly a half million dollars in debt.
One of my clients had over $70,000 in debt that she had been accumulating over the past fifteen years. Within one year of working with each other, she was able to pay it all off. We did this by slightly increasing her earnings and, more importantly, we worked on shifting her mindset. Because when it comes to finances, there is a little known fact that most financial advisors may not have shared with you. In order to experience a shift in your financial situation, you must have a mindset shift, first.
No matter where you are on your financial journey, it is important to remember that having a positive mindset is the key to getting to your next stage of financial wellness. And who better to know the connection of a positive mindset and financial wellness, than Oprah Winfrey.
“The great discovery of all time,” Winfrey once said on her TV show, “is that a person can change his future by merely changing his attitude.”
And sometimes, as Winfrey says, it’s our own mindset that’s blocking the path forward.
When we have debt that continues to haunt us, we become frustrated and often spiral into negative thinking. You may say phrases such as “I am bad with money” or “money doesn’t grow on trees” or “being broke is just the way my life is”. These thoughts turn into beliefs that are sabotaging your ability to pay off debt.
Imagine that you were talking to a young child and trying to teach her how to do long division. The first few times, she may get the answer wrong or take a long time to figure out how to do the problem. Would you yell at her to hurry up? Or tell that she is stupid for not getting the problem right? Of course not! You would gently show her a few mathematical short cuts. And encourage her by saying that she is smart and good at math. Why? Because no one is motivated by shaming or negative talk.
The same holds true for you. In order to pay off your debt, you have to encourage yourself throughout the process. You are not doing yourself any favors by beating yourself up and having negative thoughts. The key is to remain positive and become your own biggest cheerleader.
As you work on paying off your debt, here are five steps you can take to improve your money mindset.
Step #1: Write down all of the money mistakes you have made on a sheet of paper.
Step #2: Grab another sheet of paper and write "I forgive myself for ..." followed by each mistake.
Step #3: Go to a mirror and read the second sheet of paper out loud to yourself. Look yourself in the eye as you say, "I forgive myself for..."
Step #4: And then, tear each sheet of paper into a million pieces. Because the past is over. And now it is time to move on...to a much brighter future.
Step #5: Repeat these steps daily until you pay off your debt.
Now we'd love to hear from you! Is paying off debt one of your financial goals? If so, why is this important to you? Leave us a comment below.
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This post was sponsored by Prosper.