The Importance of Managing Your Budget in a Pandemic
Since the onset of the pandemic, millions of Americans have found themselves without work. Many of these people have shifted towards lessening their reliance on a W-2 by launching businesses (or side hustles). If you’re reading this, you probably have too.
The upsides are limitless: managing your own time, working on projects that interest you, and achieving the American dream of owning a business. But with all of this comes new headaches all too familiar to seasoned entrepreneurs – budgeting.
Fortunately, the self-employed industry has made significant improvements in the last decade to help people like you obtain the support they need to put their businesses upkeep on autopilot.
Here are some steps you can take to manage your budget during a pandemic.
Separate Business and Personal Expenses
The clarity in how you’re doing is key to managing a successful business. Unfortunately, for many of us, we get into 1099 work, unsure that we’ll continue long term. So we start by using our personal credit cards for expenses and personal checking accounts for client payments.
Commingling funds leads you to spend an unnecessary amount of time untangling a messy spider web of expenses regularly. To avoid this, do not commingle funds. Separate your personal and business accounts.
Forecast Your Earnings and Quarterly Taxes
An additional benefit to having a separate business account(s) is that it allows you to track historical revenue and expenses incurred through your business. This information will enable you to establish a baseline to forecast future earnings and expenses. Ultimately, this will help provide peace of mind and allow you to grow by project workload, hiring needs, and even if you want to reevaluate how you bill clients. You might be asking yourself, what should I be tracking? Keep on reading to identify ways to maximize your tax deduction.
To Start, Track Everything
Track everything, especially when it comes to your business spending. Below are a few examples of deductions that can save you money if you qualify for them, but without adequately tracking your earnings and expenses, you might not identify them quickly.
- Business equipment such as computers, office desks/chairs, publically-available software can generally qualify for a Section 179 deduction.
- Healthcare insurance premiums.
- State and Local taxes are generally deductible from your federal returns.
- Business-related meals and entertainment are generally deductible at 50% of the total cost.
How Technology Can Help
If all of this sounds too daunting, you aren’t alone. Many freelancers leave money on the table by not properly tracking and documenting their revenue and, even more so, their business expenses.
To help you understand your earnings, Hurdlr has developed a free freelance tax calculator to estimate your 1099 income taxes. The freelance tax calculator allows you to break down your finances by week, month, quarter, and year. Simply plug in your rate, hours per week, estimated expenses, and your state to get a projection.
In addition to the free freelance tax calculator, check out Hurdlr. Hurdlr automatically tracks all of your mileage, expenses, income streams, and tax deductions in real-time, helping you manage your business finances so you can focus on the work you enjoy.