If you're a small business owner that does your business bookkeeping, I have a lot of respect for you. You're probably one of those curious people who enjoy learning how things work. Or maybe you find it valuable to understand the process.
Anyone who has ventured outside of their lane of expertise has probably felt a tinge of fear that unbeknownst to them, they're doing something wrong. And if their error were to reveal itself, would it be a quick-and-easy fix, or will course correction come at a colossal cost?
Accounting errors can end up being costly if you don't catch them right away. And if you gloss over them, you run the risk of filing incorrect tax returns, which, if uncovered in an audit can cost you a lot in time and money.
Here are the seven most common bookkeeping mistakes I see clients make.
Managing joint finances isn't as joyous as laying in a meadow with a bunch of puppies, but unfortunately, for most of us, it's necessary.
I've met couples who have tried to keep separate finances for 15 years and couples who open up a joint account as sooner than any couple should. Most couples who are in a long-term relationship will have joint-ish finances no matter what.
Here is how I've learned to deal with managing joint-ish finances.
My wife is an interior (and event) designer, and when it comes to professionals in those worlds, she has "a guy" for everything. She has a list of general contractors who know how to demolish and build entire rooms. She works with fabricators who create furniture, fabricators who can make window treatments, ironworkers, fine artists, and art consultants. Not to mention painters, electricians, a neon sign guy, and the list goes on. Each vendor has a specialty.
The financial world, just like any other industry, has specialized professionals too. Sometimes it's obvious when you should hire a financial pro. Other times, you might not even know what you don't know. Finances are somewhat intangible, unlike laying down tile in your kitchen, so it might not be evident to you when you should reach out for professional help. So here's a guide to help you understand eight different financial professionals, what they do, and who should hire them.
A portfolio is a collection of like things. A photographer's portfolio is a compilation of photos they've taken. A graphic designer's portfolio is full of designs they've done from logos to brand identities, to websites, and illustrations. A portfolio is used to show the breadth and depth of whatever it is showcasing.
An investment portfolio is the entire collection of all your investments.
And just for good measure, let's review the definition of an investment. From an economic standpoint, an investment is when you purchase goods for the future purpose of creating wealth. From a finance perspective, investments are monetary assets bought to produce income or make a profit by selling the asset in the future at a higher price.
How many times have you thrown a penny away? Like you saw a penny on your desk, or you got it as a change, and instead of putting it in your pocket to use later, you throw it in the actual garbage? I'm not trying to judge you; I'm just trying to illustrate how the penny has lost its value over time.
In 1909, you could buy a copy of the New York Tribune for one cent. And in 1932, you could travel a mile in Southern Railway System. And I'm sure you might have heard a grandparent speak of buying candy at a local five-and-dime for a penny.
How does a penny go from getting you an entire newspaper to being so annoying that you'd rather throw them away than carry them around?
When money becomes less valuable, it's usually due to inflation.
I know, I know. You think investing is not for you. Trust me when I tell you, I know how you feel. As someone who has been in the finance world - like actually in it - it’s easy to feel like you don’t belong there.
But it’s kind of our responsibility to work through that so we can actively participate. We have to know how something works before we can make any judgement about it. And we have to understand it before we try to change it. So, if you want to make a difference or if you just want to get rich, you have to pony up and grab a seat at the table. Even if you think you can’t afford to play, the truth is you can’t afford to not learn how to play.
If you’re someone who has gotten close to investing, but never follows through, tried to learn, but has given up, it’s probably because you are letting these four common investing myths hold you back.
People always assume I am so deeply passionate and stoked about finance. Like I jump out of bed and get excited about interest rates. That's not exactly true. I am super stoked and passionate about helping people, feeling like my work matters and having autonomy over it. So when people ask me why I started The Hell Yeah Group, the answer is often that, " I looked inside of my tool box of skills and realized I had some sharp tools that all pertained to bookkeeping, running a small business and personal financial planning.” As much as I wanted to create a cool company that had nothing to do with finance, I had constraints: I needed to earn money and there was no denying the skills I had, no matter how uncool I thought it was. Not exactly visions of grandeur, more like shining a turd.
But I’ve really grown to love how my work makes me feel, regardless of it’s non-passion status. I want to share the industry-specific things I’ve learned and observed over the years that I think everyone should know.
We live in a world saturated in instant gratification. We can contact our friends through multiple channels at any time of day, from anywhere in the world. We can have the city’s best sushi or a even just single lime delivered to our front door. The amount of entertainment we have access to at our fingertips is a number that my brain cannot actually comprehend. And we can generate a rush of dopamine in the time it takes to write a caption for a photo.
It’s no wonder why we give up on the things that require more than a few minutes of focus. We have so many other ways to feel instantly good and to distract us from the real work we could be doing. But real work takes, well - real work.
I’m just going to come out of the closet and say this: I actually hate budgeting. And I think so many of us have sucked at it because it actually inherently sucks. A budget is the harsh fluorescent light the morning after, revealing all of our past personal mistakes. Not being able to stick to a budget highlights just how out of control we are in our daily lives, like how we are powerless to marketing that connects with us emotionally or how the market or an employer dictates what we can afford and ultimately, how we live our lives. On the surface, a budget is a bunch of numbers, but at it’s core, it forces us to confront ourselves.
No one taught me how to budget. Not my parents, not my undergrad financial planning professor or any of the professors who were teaching the personal financial planning courses that went towards a personal financial planning certificate. In my memory, there was at most, a short chapter on it, with a fugly, useless template and advice that was certainly a total unrealisitic crap pile.
When I got a job assisting a financial planner, my boss, who had been a financial planner for 7 years, asked me - a zygote in the professional world - what I thought is the best method was for budgeting. And that’s when all the failing started.
I’ve been thinking a lot about this fundamentally human thing: negative feelings like fear, worry, stress, overwhelm and how it relates to our financial lives.
Financial progress is often analogous to weight loss because it takes time for a true transformation to take place. You make a plan, work away it, live life, reflect on your progress, maybe stray from the course and then get back on track. Rinse. Repeat.
Sometimes, even when you have a plan in place, your amygdala won’t shut up. Your fears hijack your brain and take you out of the present moment. Doubt creeps in. Progress feels far. There’s so much to do, how could you waste time doing anything else?
Okay, this is going to sound extremely biased... but, as an accountant, I strongly recommend hiring a professional to file your business’s tax returns.
Sure, you’ll have to part with some of your hard earned cash in the short term. But I guarantee it will save you time and headaches. And if it helps you avoid making costly errors on your tax return (y’know, the ones that result in IRS fines), it’ll also save you money in the long run.
That said, I’m aware that it’s not always possible to hire a pro. So, if you’re doing your own tax return this year, here are some common mistakes to avoid.