How to Catch Up On Your Bookkeeping

Photo by Wes Hicks

Staying up to date with your company’s bookkeeping is an uphill battle. When I first started my business, I didn’t update my books for a handful of months - nine, to be embarrassingly honest. As more time passed, more work added up and my fear of tackling it all grew to a critical mass. When I finally sat down to do all the work, I cursed myself and promised myself I’d never let me books get that out of control again.

I’m sure as tax season closes in many of you might also be filled with this same sense of dread. If that’s the case, worry not. Although we offer catch up bookkeeping over at Hell Yeah, Bookkeeping, there are lots of small business owners who prefer to handle bookkeeping on their own. If you’re in the latter camp, here’s a step-by-step guide to help you get your caught up on your bookkeeping. Let’s dig in.
 

Step 1: Sort and Organize Your Documents

The first step is getting organized. You’ll want to start compiling invoices you sent to customers, receipts and/or the bank and credit card statements where you made purchases that are business expenses.

 

Invoices

Find all the invoices you sent to clients and organize them in one place. Make a note of what invoices are still outstanding, if any. The invoices and their status (paid or unpaid) will help you compile your business’ income or revenue and your receivables (what’s owed to you).

But of course there is a caveat. You’ll need to know what accounting method your company uses to operate. The two methods here in the U.S. are cash and accrual. Most businesses operate on a cash basis. If you don’t remember, you can ask your accountant to confirm.

For a cash basis business, you technically only need to send the customer an invoice once they have paid. For accrual accounting, you record the income when the sale occurs.

For example, let’s say you made a sale in the amount of $1,500 in December 2018, but the client didn’t pay you until March 2019. With cash method, revenue isn’t recorded until March 2019, whereas with the accrual method, you’d record the sale in December of 2018.

Collect on Debt

Sometimes you’ll have invoices that are outstanding for a long time. At some point, you might need to cut your losses. In order to do this, you must first make a concerted effort to collect on the debt. If that doesn’t work, you can charge off the debt using accrual accounting or non-accrual experience method. I know, the names of these methods really just roll off the tongue, huh? 

For accrual accounting, when a customer flakes on their obligation to pay you, you’re able to write off this off as bad debt expense. Remember, you’ll need to prove to the IRS that you took reasonable steps to try to collect on the debt and recover the loss. The specific charge-off method means you can deduct a specific bad debt that becomes partly uncollectible during the year.

You can use the beautifully named, nonaccrual experience method to deduct what you were unable to collect. The deduction would reduce your gross income for tax purposes.

Separate Business and Personal Expenses

Most accountants will tell you that they prefer it if you’d keep receipts for every single business expense. Of course, this doesn’t always happen. But most accountants will advise that you should still deduct legitimate business expenses even if you didn’t keep the receipt.

At any rate, gather all your receipts for your business expenses and organize them in one place. I like to scan everything to Google Drive or Dropbox. I also like to include the date of the expense in the title of the scanned file so it’s easy to reference the receipts by date.

Here’s one hack that has made keeping meal receipts especially easy. I set up an email account, something like pacosreceipts (at) gmail.com. And every time I do business over a meal, a drink, or a coffee, I simply snap the picture of the receipt and email it to that email. In the subject line, I write who I was with and what the meeting was about. With this method, I have an audit trail that was kept in real time. This is important to the IRS if you ever get audited. They would like to see a real-time record as opposed to a spreadsheet that you threw together on one day of the year.

Vendor Invoices

If you’ve paid vendors and contractors, you should make sure that you’ve got all these invoices and bills organized in case you need to access them for an audit. If you don’t have all your bills, you can simply reach out to your contractors and vendors and ask them to send you whatever you’re missing.

 

Step 2: Update + Reconcile Bookkeeping

Now that you’ve gathered everything together, it’s time to get into your bookkeeping software updated and reconciled with your bank accounts. Bank account reconciliation is when you make sure your accounting records match your bank and credit card statements exactly. Each transaction in your account should be categorized and entered into your bookkeeping software. It sounds redundant to replicate your banking records within an accounting software program, but the software can allow you to run reports that your bank doesn’t. Reconciliations ensure your records are accurate.

Make sure to spend the time needed to ensure your accounts are accurately reconciled; it may be costly to have a bookkeeper or accountant go back and fix your books if they aren’t.

Alternatives 

Hire A Bookkeeper

If you don’t have a bookkeeping system, you have a few options. First option is to hire a bookkeeper to put your books together for you. This method will likely result in the most accurate records, saving you time, but costing you more to pay for someone else's time and expertise.

Use Your Statements

One method to add up all your expenses is to use the bank statements and credit card statements where the transactions occurred. For any expenses that were cash, you’d have to add that back in after. This method is super easy if you’ve kept your business and personal expenses separate. It’s not recommended for a long-term solution because you won’t be able to accurately and quickly generate financial reports.

 

Use Your Receipts

If you saved all your receipts, another method is separating your them by expense category and adding up them all up. Again, this is not a long-term solution or long-term bookkeeping alternative. It’s only a very small, limited picture of your company’s finances.

If you'd prefer to outsource all of the bookkeeping work and your feeling of existential dread, please get in touch, we'd love to help.

What Do You Need to File Your Taxes? Your Tax Prep Checklist

It’s the most wonderful time of the year, friends. Yes, welcome to the joys of tax season!

The tax checklist below can be used to help you find and organize the tax documents that you’ll need to prepare and file your taxes.

Personal Information

• Your social security number or tax ID number

• Your spouse's full name and social security number or tax ID number

I f you have a dependent or dependents, here’s what you’ll need to gather:

• Dates of birth and social security numbers or tax ID numbers of your dependents

• Childcare records (including the provider's tax ID number) if applicable

• Income of other adults in your home

• Form 8332 showing that the child’s custodial parent is releasing their right to claim a child to you, the noncustodial parent (this may or may not be applicable to you)

Records of Your Income

If you were employed during the year:

• Forms W-2

If you received any unemployment benefits:

• Unemployment, state tax refund (1099-G)

If you received income from being self-employed:

• Forms 1099-MISC that you receive for work you or your business performed.

• Schedules K-1 (usually your business’ accountant will prepare these)

• Records of all expenses — check registers or credit card statements, and receipts. If you have been keeping track of these things through bookkeeping, your expenses should get reported to your annual profit and loss statement.

• Business-use asset information (cost, date placed in service, etc.) for depreciation. If you have been keeping track of these things through bookkeeping, some of this data will show up on a balance sheet and some of the data your accountant will help you figure out.

• Office in home information, if applicable. What’s the square footage of the space you use for business only? How much is your monthly rent or mortgage?

• Record of estimated tax payments (Form 1040ES), if you made any.

If you earn Rental Income from renting a property:

• Records of income and expenses

• Rental asset information (cost, date placed in service, etc.) for depreciation

• Record of estimated tax payments made (Form 1040ES)

If you’re retired and you have Retirement Income from your retirement assets/accounts:

• Pension/IRA/annuity income (1099-R) - You can usually find this online.

• Traditional IRA basis - The amounts you contributed to the IRA that were already taxed

• Social security/RRB income (1099-SSA, RRB-1099)

If you earned interest or dividends from your Savings & Investments  

• Interest, dividend income (1099-INT, 1099-OID, 1099-DIV) - You can usually find these online.

• If you sold stocks or other assets/property, how much income did you earn from these sales. This information is usually reported on a 1099-B, 1099-S

• If form 1099-B doesn’t have the price you paid of the assets you sold, you’ll need to track that down.

• If you have reimbursements from a Health Savings Account or long-term care reimbursements (1099-SA or 1099-LTC)

• Expenses related to your investments - What fees do you pay for the privilege of investing your money?

• Record of estimated tax payments made (Form 1040ES), if you made any

Other Income & Losses. These may or may not be applicable to you:

• Gambling income (W-2G or records showing income, as well as expense records)

• Any income from jury duty records

• Hobby income and expenses

• Prizes and awards

• Trusts

• Royalty Income 1099 Misc.

• Any other 1099s received

• Re cord of alimony paid/received with Ex-spouse’s name and SSN

 

Deductions

If you own a Home:

• Forms 1098 or other mortgage interest statements

• Real estate and personal property tax records

• Receipts for energy-saving home improvements

• All other 1098 series forms

If you made any Charitable Donations:

• Cash amounts donated to houses of worship, schools, other charitable organizations. Usually the 501c(3) you donated to will provide you with receipt or letter that reflects the amount you donated.

• Records of non-cash charitable donations

• Amounts of mi les driven for charitable or medical purposes

Medical Expenses

• Amounts paid to doctors, dentists, hospitals

Health Insurance - The forms and certificates will be automatically sent to you, so just make sure to keep them with all your tax docs.

• Form 1095-A if you enrolled in an insurance plan through the Marketplace (Exchange)

• Form 1095-B and/or 1095-C if you had insurance coverage through any other source (i.e . an employer, insurance company, government health plan such as Medicare, Medicaid, CHIP, TRICARE, VA, etc.)

• Marketplace exemption certificate (ECN) if you applied for and received an exemption from the Marketplace (Exchange)

If you had any Childcare Expenses:

• Fees paid to a licensed day care center or family day care for care of an infant or preschooler.

• Wages paid to a baby-sitter.

• Don't include expenses paid through a flexible spending account at work.

If you had any Educational Expenses:

• Forms 1098-T from educational institutions

• Form1098-E if you paid student loan interest

• Receipts that itemize qualified educational expenses

• Records of any scholarships or fellowships you received

State & Local Taxes or Sales Tax

• Amount of state/local income tax paid (other than wage withholding), or amount of state and local sales tax paid

• Invoice showing amount of vehicle sales tax paid

If you made any contributions to a Retirement Account & Other Savings

• Form 5498-SA showing HSA contributions

• Form 5498 showing IRA contributions

• All other 5498 series forms (5498-QA, 5498-ESA)

Job Expenses & Tax Prep Fees

• Employment related vehicle expenses (tolls, mileage, gas, maintenance, license, property tax, interest expense, parking)

• For educators in grades K-12, receipts for classroom expenses

• Employment-related expenses (dues, publications, tools, uniform cost and cleaning, travel)

• Job-hunting expenses

• Record of moving expenses not reimbursed by employer

• Amount paid for preparation of last year’s tax return

If you suffered a Federally Declared Disaster

• City/county you lived/worked/had property in

• Records to support property losses (appraisal, clean up costs, etc.)

• Records of rebuilding/repair costs

• Insurance reimbursements/claims to be paid

• FEMA assistance information

• Check FEMA site to see if my your has been declared a federal disaster area

How To Do Your Taxes (The Freelancer Edition)

Photo by Pana Vasquez

Freelancing can have it's perks: choosing who you want to work with, having the freedom to take a midday nap and, of course, the joys and challenge of taxes.

If you've made pretty good scratch as a freelancer, then you've probably worried about the tax bill that may come due on April 15.

It's not uncommon for new freelancers to do well only to discover their profits get wiped out by taxes.

Here's a list of the best things you can to do prevent taxes from harshing your mellow. 

1. Work with a tax professional

Doing your own taxes might seem virtuous, but it has risks. If you aren’t familiar with the tax code, it’s possible to misinterpret it. Who knows the potential impact of your limited knowledge? You might take deductions that don’t apply to you or miss ones that do apply to you.

Humans still do it better than robots. And although it might be more expensive to hire a tax pro, a great one is definitely worth it.

2. Work with someone who understands your business

It's important to work with tax pro who is familiar with how your business runs. If they've never worked with anyone in your industry before, make sure to explain how things work. 

This information will impact the deductions you take or the tax advice they give. For example, let's say a graphic designer has contractors working for her. But after explaining to her accountant that the contractors work out the designer's office, on the designer's  computers and they're expected to be at the office at specific times, the accountant advises that the contractors should actually be classified as employees.  

3. Get a basic understanding of what you need to pay and how much.

Yes, it’s fucked up that as freelancers and small business owners, all of the responsibility falls on your shoulders to understand your tax situation. You don’t have to be able to reference tax code, but you should at least have a very basic understanding of what taxes you need to pay and how much.

A common tax for all freelancers is the concept of the self-employment tax. I say concept because the self-employment tax is a bit of a misnomer. Here in the states, all employees and employers pay social security and medicare taxes. Employees have these taxes deducted from their paycheck and employers pay them each time they pay their employees.

In 2017, the social security tax was 12.4% on up to $127,200 of income and the medicare tax was 2.9% on all income. A self-employed person must pay the employee and employer’s share of taxes, while an employee only pays for half the social security taxes (6.2%) and half of the medicare taxes (1.45%). If it sounds like a shit deal, that’s why as a freelancer, you often charge more than you would as an employee and the silver lining is that the employer portion is deductible.

4. Keep your business and personal separate

Make sure your business has its own checking accounts, savings accounts and credit card that are separate from your personal accounts and cards. Make sure to only use the business accounts for business expenses. Make sure that your business income is going into your business checking account.

Yes, even if you don’t have a formal entity formed, like an LLC or S-corp. Run your sole proprietorship like a goddamn business.  

Having things separate makes it easier for you, your accountant and/or your bookkeeper to understand what’s happening in your business. It’s easier to sort and organize all the information, which should make it easier to file taxes and make financial decisions within your company.

5. Save for taxes

As an employee, your taxes are automatically deducted from your paycheck; when you’re self-employed, you are the responsible party. If you have an S-corp, you can set yourself up on a payroll, just like an employee is setup. Using a payroll service will ensure your taxes being withheld and paid.

If payroll isn’t an appropriate option, setting up an income tax savings account is a solid way to make sure you’re saving for taxes. Talk to your account about how much they think you should be saving and each time you pay yourself, set aside a percentage for taxes in your tax savings account. 

It's generally accepted that if you save 30% of your income, you should have enough for taxes. But make sure to chat with your tax pro in case 30% is too much or too little. 

6. Pay quarterly taxes

Legally, you’re supposed to pay taxes as you earn them. If you don’t, you’ll owe a penalty.

So make sure to pay your taxes quarterly. You'll avoid paying a penalty and you can avoid having a high tax bill (assuming, of course, the reality lines up with the projection). You want to have your tax pro help you figure out what you should be paying each quarter.

They may do a projection up front and give you all the details like how much you owe and when it’s due. They might even prep little vouchers for you that have who to write the check to, how much to write it for and when it’s due. (Or, you can sign up on the IRS’s Electronic Federal Tax Payment System to have the payments automatically withdrawn from your account.)

Alternatively, your accountant might want to review your books every quarter and let you know what to pay after examining the financials. 

Here’s a pro tip: Make sure you put the payment due dates in your calendar. Here are the due dates for quarterly tax payments in 2018:

• April 16, 2018 for income earned in quarter 1 (Jan 1, 2018 - March 31, 2018)

• Friday, June 15, 2018 for income earned in quarter 2 (April 1 through May 31)

• Monday, September 17, 2018 for income earned in quarter 3 (June 1 through August 31), and

• Tuesday, January 15, 2019 for for income earned in quarter 4 (September 1 through December 31). 

7. Know what expenses are deductible

The IRS states that you can deduct business expenses that are “ordinary and necessary” in your industry. For example, a musician may be able to write off her Spotify monthly subscription because it’s part of her job to stay current with music. Whereas, a freelance business consultant might have a harder time arguing that her Spotify subscription is both ordinary and necessary in her industry.

Your accountant will most definitely be able to give you a breakdown of the things you are able to write off and pay for through your business.

8. Keep track of your income and expenses

The most sophisticated way to keep track of your income and expenses is through a bookkeeping software like Xero or QuickBooks.

If you’re just starting out, you can’t afford to outsource bookkeeping and the thought of bookkeeping makes you want to scratch out your own eyeballs, that’s ok. You can totally create a hodgepodge system using a spreadsheet, photos of receipts and a server, like Dropbox or Google Drive.

If you’re going to do that, here’s a pro tip: use each month as a reference point. Keep each month’s invoices, income, receipts and expenses grouped together so you can easily reference it while not being too overwhelmed with too much data. 

If you can’t pay all the taxes that you owe, you should still file and pay what you can so you can reduce the penalties and interest you’ll owe. Talk to your tax pro about calling the IRS to figure out your payment plan options are. 

There's plenty of scary shit in the world and taxes doesn't have to be. It's all about working with a great tax pro, being consistent and staying engaged. 

How Much Money Do You Need to Make?

Knowing how much money you need to make is crucial when you’re thinking about or have just started your own business.

In theory it’s simple, but in practice it can be challenging.

It starts with understanding how much money you typically spend and save. And it takes into account how much you want to change your spending and saving.

Once you have a general range of how much you need, you can start to do things to impact the income number. Control the things you can control like investing in your company to earn more or cutting back on unnecessary expenses.  

If you don’t even have a target, it’s tough to know where to aim or how to make your chances of hitting the target better.

The first step to figuring how much money you need to make is knowing how much you need for your personal expenses.

Step 1. Get the Data Together

I come from the school of thought that the best way to figure out how much to budget is to track your expenses for three months. I use actual data as a basis because at least you’re starting from reality and not your beautiful and wonderful and robust imagination. (Read: I don’t trust that you know how much you spend on things like clothing or over-priced avocado toast).

Your first option is to pull the last three months of statements, use a calculator and spreadsheet.  It’s tedious but it’s accurate, but you can start now.

Another option is you can track expenses for the next three months using mint or personal capital or some other app out there. It’s less tedious and you push off being financially responsible for three beautiful months.

Another option you have is to use the bank’s technology to help you. Most banks compile a year-end summary or a year-end spending report. Download yours from last year. It might have inaccuracies because the bank’s AI machine thingy is doing it, but it might be a good place to start.

Put Together Your Budget

After you choose your method, download the data you need and get organizing.

Even if you use an app, I still like using a spreadsheet, obviously because I’m a dork, but I like the creative control I have over how I see the data.

Get Your Free Worksheet: Know Your Numbers

The first layer of expenses are fixed expenses. There are the bills and expenses you have that you are obligated to pay each month. So things like rent, utilities, groceries and any loan payments. I call this category fixed expenses, even though groceries can vary, they’re fixed because you must spend in this area every month.

The next layer of expenses are called discretionary. They’re things that you don’t necessarily need to spend on each month, but they make life better. Often it’s clothes, your hobbies, your vices and other fun, recreational stuff.

The third layer of expenses are what I call ancillary expenses. Think of these as expenses you’d cut if you had to go on a wartime budget because you’re pivoting your business and it’s slow or your company isn’t as profitable as you thought it would be. So things like putting away money into savings, investments and giving it away as charitable donations.

Sidebar: Taxes I add taxes into this category to because they’re a function of income. If you aren’t earning money, you don’t pay taxes. But taxes are unique snowflakes, they’re dependent on everyone’s unique situation. More on that later.

If you’re only looking at the last three months of expenses, don’t forget to add in things you might pay only once or twice a year like property taxes or insurance payments.

Whether you use a spreadsheet or an app or a website, get a monthly total and an annual total. If you get sticker shock because of how much you spent, maybe you should create a projected budget and modify some of the figures.

Adding in Business Costs

Next, figure out how much your business will cost you… to set it up.

If you haven’t started your business, how much are startup costs or pre-launching costs. Do you need to pay for a website and business cards? Do you need purchase $10,000 worth of Herbalife before you can start selling (please, don’t do that). Or do you need to buy a building and set it up to grow 100 lbs of cannabis because you want to start a cultivation center? Figure that number out.

Then, figure out how much it will cost you to run your business each month. What are your monthly bills? How much is your email service and all the apps you need? If you’re already running your business, then take a look at the last three months of expenses and figure out an average cost.

You can also look at a range of how much spent. For example, $25-50/month.

The safest bet could be to take the maximalist approach and assume you’ll spend the higher number each month. It can be scary to take the maximalist approach, but likely safer because you’re building fat into the budget.

You’ll have variable costs the way you do with your personal budget. Things like the costs of having coffee meetings or marketing expenses.

Don’t forget the one-time costs like paying your accountant or if you pay for annual subscriptions.

A little commercial about taxes. Disclaimer, Im not an accountant, so this isn’t tax advice. This is advice that you should get tax advice. If you have a pass-through entity, like an s-corp or LLC, your taxes might be limited to city taxes or sales taxes and not federal income taxes.

But remember what I said earlier? About taxes being unique snowflakes. Let’s look at an example. Let’s say Marion is a florist and he pays himself $46,000 from his s-corp. His company, Flowerz by Marion, ends up with a profit of $50,000 at the end of the year. Now let’s say Charlie runs a company that teaches little kids how to play golf, Putz by Charlie. And she also pays herself $46,000 in salary, but her LLC ends up with a $15,000 loss at the end of the year. Even if their salaries are the same, their companies financials vary.

What I’m trying to convey is that small business owners have an additional layer of tax complexity because with pass-through entities (s-corps and LLC’s) the net profits (or losses) flow through to the owner’s personal taxes.

So now you can figure out your business’ monthly and yearly expense.

Get Your Free Worksheet: Know Your Numbers

Figure Out How Much You Need to Earn

Now that you know that, I want you to breakdown how knowing your monthly number breaks down into income goals.

For example, once you realize you need to earn $8,000 to pay yourself and run your company, how can you frame that in regards to how you make money? If you charge $150/hour, then you’d need to bill about 54 hours a month to earn that income.

If you work on an $8,000 a month retainer, how many clients on retainer do you need each month?

After you make your income goal, it’s up to you to reflect on how realistic the goal is. Maybe you need to change your spending and pay yourself less or maybe you need to raise your rates so you don’t have to work crazy, long hours.

Get Your Free Worksheet: Know Your Numbers

Why You Aren’t Achieving Your Financial Goals

Photo by Jad Limcaco

Goals are the measurement of the vague things we are chasing in our lives. The goal of success can be boiled down to a certain amount of money you earn a year. The goal of being healthier can be measured by your weight or the amount of miles you can run without stopping.  

Habits are the things that will influence your ability to achieve your goals. The good habits help you reach your goals and the bad habits will hinder you from the sweet, sweet glory of achievement. Ultimately, habits influence our automatic behavior and our automatic behavior influences our day-to-day life.

The difference between habits and goals is the action required for each. For example, you could have the goal of saving $500/month or you could have the habit of saving 5% of everything you earn. Creating a budget for the year is a goal, but implementing a system for sticking to it is a habit.

I’ve watched myself set goals and achieve them. I’ve watched myself set goals, grow exhausted, fight a cruel internal dialogue and ultimately fail at what I’d set out to do. At the same time I’ve watched myself build habits without a focus on goals and it’s amazing what I can achieve when my internal dialogue stops and my habits just kick in.

And for the last couple of years, I've joked that my goal is to have no goals, but the more I spend time watching the clouds and thinking about my life, the more I am compelled to quit having goals. 
 

The Problem with Goals

Goals are flawed to the point that they undermine what they set out to achieve. Goals rely on factors which are outside of your control, they have an endpoint and they require you to try to use your willpower.

There are so many factors outside of your control that impact your finances. The new tax code, a disruption in your supply chain or unexpectedly getting sick are all things that can impact whether or not you achieve your goals.

Goals have and endpoint which makes it easy to revert back to bad habits. Some people reach their savings goal, but spend it all a few months after.

Goals rely on willpower, which cannot be trusted in the long run. Willpower isn’t an automatic behavior, it’s like using a muscle. Overtime if that muscle is working hard, it can get tired. For example, trying to save money by spending less requires willpower and discipline. But automatically having a portion of your income going into savings is a habit that doesn’t require any willpower.

Some studies even cite that goals can cause risky behavior. Some people get so focused on achieving the goal that become blind to anything that appears unrelated to achieving said goal. There can be an overemphasis on short-term thinking or unethical behavior as a result of trying to reach an unrealistic goal.

 

The Power of Habits

Habits make things that were once difficult easy because habits are automatic.

Habits are easy to complete. You’re no longer beholden to your crappy willpower because habits literally rewire your brain. Your brain changes so the habit becomes easier to enact the than not doing so. You don’t have a mental battle about whether or not you’ll brush your teeth in the morning because it’s a habit that’s so deeply ingrained.

Habits can last for life. Our lives are structured around our habits and once a habit is ingrained, it can last for a lifetime. 

Habits can compound. A single habit can have a deeper and wider impact on our lives. Creating a habit in one area of your life can have an impact on behavior in other areas of your life. For example, someone who starts exercising might also eat less processed junk food. If you start automatically saving money in an emergency fund, you might find yourself making better choices when you're shopping.

Sometimes habits naturally allow you achieve more than your goals because of the automatic nature of them. It’s possible to still achieve results by ignoring goals and focusing on habits and systems. For example, a basketball team can still win a championship even if their focus lies in doing their best at each practice and each game. I've never had a goal with my meditation practice and now I'm going on year six of consistently meditating. When I shifted my focus on habitually adding value to my client's lives and businesses each month, I made more money than when I was focused on an income goal alone.
 

Fall in Love with Systems

Goals can be a source of joy when you are able to achieve them. Like so many things, they work until they don’t work anymore. And when that happens they can be a source of frustration. In order to continue achieving your goals, you’ll need to constantly seek motivation and inspiration. You’ll constantly be drawing from the ever-depleting well of self-discipline and willpower. You’ll be exhausted over the long haul.

The self-preservationist way around this is to create systems in your life, especially your financial life, that will remove your chatter-filled mind from the driver’s seat. Create systems for savings and fun spending so that instead of wasting time and energy asking yourself if you can afford this new thing you want but you don’t need, you already know that you’ve set aside money for savings, taxes and fun.

As you think about what it is you seek in your financial life, invest the time to understand what are the positive habits you need to form instead of becoming singularly focused on a specific goal.

A Totally Not-Boring Guide to Getting Your Financial Shit Together

Photo by Verne Ho

This is a beast of a checklist. It’s pretty high-level overview of the things you need to do, questions you need to answer and math problems you need to solve to feel like you've got control over your finances.

It’s going to take time. You might get stuck on the budget step for a while or on the figuring out how to make enough money to live your life step for a while.

You can do some of the steps concurrently, but you’ll see that it’s hard to jump around the list and make headway.

The contents of this checklist comes from an amalgamation of my formal education (s/o to everyone with a degree in finance) and my work experience in the years I was a financial planner, a small business consultant and how I work with folks currently.

Please realize that this is all total and absolutely nonsense, but it can help you feel a small sense of control in a universe of uncertainty; It can help you exist in the world we live in today, one that is governed so profoundly by economics and money.

1. What the hell do you want to do with your damn life? And how much will that cost you?

Figure out what the hell you want your life to be like. Am I asking you to create goals for yourself? Yes. Am I asking you to take a hard look at your life and to figure out what you want out of it? Yes.

Here are the questions you should ask yourself to help you figure out what the hell you should be doing to get your damn life together.

• What are your personal values?

• What are your personal goals?

• Map out your goals in terms of timeframe: short-term, intermediate, long-term.

• What are your business values?

• What are your business goals?

• Map out your goals in terms of timeframe: short-term, intermediate, long-term.

Not only am I asking you to explore the inner terrain of your damn self, I’m also going to make you turn that shit into a math equation.

• For your personal goals: breakdown your goals into dollar amounts. How much money does each goal need? Use the time frame to help you understand how much money you should save over time. For example, if you want to save $10,000 and you can save $500/month, that means you can reach your goal in 20 months. These figures might be arbitrary right now because you still don’t have a clear picture or other important aspects.

• For your business goals: breakdown your goals into dollar amounts. How much money does each goal need?

This breakdown will help you prioritize your goals and figure out which ones you can start moving towards. For example, maybe you think buying a house is a short-term goal, but the fact that you need to save $120,000 for a fucking downpayment might make you push it further to a long-term goal or maybe you’ll realize you ultimately value flexibility and you will decide to build equity and wealth in other ways.

2. Get Good At Earning Money

Now that you know what your goals are going to cost you, you may need to earn the money to make it happen.

Here are some questions you should ask and answer that will help you on your journey to stacking the cheese:

• What problem does your business/freelance work help solve? (If you work for an employer, what problems can you solve for your employer?)

• Who are you solving it for?

• Will those people pay you to solve their problem?

• Can your potential customers/actual customers afford to pay for what you’re offering?

• Is the price you’re charging a reflection of the value they’re getting? Is it too cheap?

3. Know Your Numbers

As you’re getting good at earning money, you should figure out how much you need to earn to live day-to-day, week-to-week, plus additional cash you need to stack for your silly goals. Here are the questions you need to ask yourself and answer to find out how much cash you need to be bringing in.

First, figure out how much do you personally need to live?

• Add up all your bills, monthly obligations, cash for spending on having a good life.

• Don’t forget to include savings and debt payments.

• Express that amount in terms of your business model. How many hours do you need to work, projects do you need to sign or milestones do you need to reach each month to fund your life?

Next, figure out how much your side hustle/business needs to earn to run.

• Add up all your business expenses. Don’t forget to include expenses that might happen in lump sum like insurance.

• Add in the amount you need to pay yourself (the first part of this exercise).

• Express that amount in terms of your business model. How many hours do you need to work, projects do you need to sign or milestones do you need to reach each month to fund your business?

• Taxes are also a variable. Talk to your accountant to help plan for this.

Figure out how you’ll keep your budget. Will you actively manage your budget or passively set up systems to protect you from overspending?

Finally, do a Reality Check: Can you realistically earn what you need to support the numbers? You might need to rework the numbers if it’s not realistic. Maybe you need to adjust savings goals for a longer term. Or maybe you need to do some Tony Robbins, voodoo magic shit to make your wild dreams come true.

4. Setup Your Savings

• First, fund your emergency fund. The general rule of thumb for an emergency fund is 3-6 months of your expenses. Make sure you’ve budgeted for this.

• Set up a high-yield savings account the bank you don’t have your checking account at (to protect yourself from yourself).

• If you can set up an automatic transfer each month or twice a month, do that. Get out of your own way. If not, then do it manually, but beware that robots are better at savings than you are.

• Figure out how much of a cash cushion you need in your business. The exact amount depends on the business, but 3-6 months of expenses is a good rule of thumb.

• Come up with a savings plan to reach your goal. You can set up your savings with the bank your business checking is at. Try to fund it regularly with an automatic deposit.

• NOTE: It’s uber important to save even if you’re in debt. So you might have to cut expenses to make this happen.

• Start saving for other goals in your life the way you do for your emergency fund: What’s the goal amount? What’s the deadline? How much will you save each month?

5. Get Your Shit Together (Get Organized)

The following checklist will help you tidy up your finances. You’ll feel great and you’ll great.  

• Make sure your checking accounts are only for spending and not for saving. Set up your emergency fund as a separate account from other savings like wedding or retirement or travel savings.

• Assuming you have the cash, pay your bills on time. Try setting aside time to look at your finances or making it a ritual, get booze involved, or just stop being a baby and handle your shit.

• Don’t forget about old 401(k)’s. Call HR and ask them where your damn money is. If you have money in an old 401(k), don’t forget about it and maybe even roll it over into a different retirement account.

• Keep your business and personal separate. Please, for the love of cute dogs, separate your side hustle from your personal accounts. Only business expenses and business income and paying yourself will happen with your business accounts. And everything you spend for personal stuff should be in the personal accounts.

• Start scoping out your business team: attorney, accountant, bookkeeper.

• Hire a great accountant.

• Understand when it makes sense to set up a proper entity so when you get there you know to set it up.

• Will using technology help you or make you less organized?

6. Make a Plan to Get Out of (High Interest) Debt

First ask yourself, how and why did you get into debt?

Next ask yourself, can you fundamentally alter the circumstances that got you into debt so you won’t get into debt again? Meaning, if it’s something like medical debt that you couldn’t foresee, then can you put systems in place to help you prepare in case something similar happens again?

Examine the options for getting out of debt and determine your plan. Options can include a loan from a rich friend or family member. Warning: there may be psychic or other types of non-monetary interest that you pay when you borrow money from someone you love.

Other options include a personal loan, negotiating with the credit card companies or starting a side hustle for extra income.

7. How to Care About the Long Run

You have to care about your future self because nobody else will. It’s sad, but it’s true. Here’s what you need to do.

• Understand that investing is magic and that cash can lose value over the long run, which is why we’ve been taught it’s important to invest. Then start actually investing.

• Your accountant can help you determine what type of retirement account you can and should open up.

• Learn about wealth and how you can build it, if you’re into that sort of thing.

• Make projections for how much money you’ll need in the future.

• First you might need a good cry when you see how much you need to save. The, start implementing a plan for your old self. Some examples include the following: getting a boring job selling insurance so you can earn money and save for retirement, planning to eat cat food in retirement, marrying someone rich. The options are endless, really.

• Stop not having a will and an advanced medical directive.

8. Love Thy Accountant

Get an accountant whose job is to learn the new tax code and help you navigate it when it comes to your unique tax situation. Here’s what your accountant might help with you:

• Figuring out all the types of taxes you’ll be responsible for

• Figuring out how you’ll pay for taxes

• Keeping you updated with important tax dates

• Ask around for accountant referrals, interview them and figure out if it’s a good fit.

9. Manage Your Risk

• Figure out what kinds of risks you’re exposed to and determine what risks you’ll outsource to insurance. For example, driving a car has a lot of risk, but you can outsource the risk by getting auto insurance.

• Understand what’s out there. In general there is health, auto, renters, homeowners, general liability, professional liability, disability and life.

• Determine what kind of insurance you need personally and professionally.

• Determine how much insurance you need.

• Gather quotes.

• Choose the insurance, buy the insurance, make sure the insurance policy covers what you need it to cover.

There you have it. The definitive guide to help you get your finances in order so you can live your damn life. If you’re more overwhelmed after reading the list, I’m sorry for the momentary discomfort. And you’re welcome for lighting the fire under your ass. Here are some pro tips to get through the list:

Pro Tip No. 1

Realize it might take time. Sometimes it takes years to master earning money or reaching a big savings goal. I feel you. I’m an impatient idiot about everything.

Pro Tip No. 2

Don’t beat yourself up. Control what you can, but realize there is a lot you can’t. What a fun ride life is, huh?