Separate Your Business Accounts

I don’t think it’s any secret, in this online world, that just about everyone is trying to make a little bit of money with a website.  After all, it’s not terribly difficult.  It’s not necessarily easy, but it is far from hard.  Throw up a website, put some work into it, and start bringing in money.  I do it with this site and others.  There’s work involved, but you can make money.

If you’re going to do it, you’ve got to treat it like a business from the start.  I don’t mean that you have to create a company, license it with your state and the IRS, and create a board of directors.  What I do mean, is that you need to have the business assets and accounting separate from your personal assets and accounting.  Using your own personal checking account, savings account, and trying to keep them separate come tax time (and you’ll want to) can be very difficult.  So difficult that you almost have to be a CPA in order to keep it all straight.

Keep your business accounts separateWhen I first began making money with blogs and websites, I didn’t separate anything.  The money to buy the domains came directly from my personal checking account.  The money to pay for the hosting of the websites came directly from my personal checking account.  And then tax season came around.  While I hadn’t made much money from the sites, I did make some.  I wanted to be able to use the expenses of the sites to reduce the income from the sites, so I needed to figure all of that out and get totals for my taxes.  Instead of just going into my accounting software, pulling up the business accounts, and running a profit loss statement, I had to go through each months’ statement of my checking account, and single out the transactions that were related to the sites.  After I’d pulled them all out, I had to compile them into a spreadsheet and create a profit loss statement from them.  It easily took twice as long as it should have.  And that was when things were simple and I only had a couple of sites with a couple of transactions every other month or so.  It would be much more difficult now.

How should you separate your business accounts?

I’m still a fan of keeping things as simple as you can.  I don’t think you need to go through the whole filing process to create a company.   That’s something that can wait until you’re making a decent amount of money.  Ask your CPA if you want a more accurate number.  You can keep it simple.  What you really need is separate accounts and separate bookkeeping.

Start with setting up separate accounts for the business funds to flow into.  You’ll need your own business savings account. Add a checking too if you think you’ll have need of a debit card or actual checks to write out.  I’ve got a checking account and several savings accounts set up that are used solely for the business funds.  If you’re not going to use the business account debit card for online purchases (it’s probably safer not to), you’ll also want a credit card that is used only for business transactions.  Again, it doesn’t have to be in the business’ name, it just has to only be used for business use.  I use one that has a 1-5% cash back feature to save a little extra on expenses.

When it comes to keeping your books, you probably don’t need anything too fancy for your personal accounts.  Just enough to create your budget, and keep track of accounts.  For business, you really need something a little bit more.  I prefer a full on business accounting software.  There’s a couple out there, and you can probably pick one up cheap off of eBay.  They’re a little more complex than the software created for personal accounts, but I like the detail the complexity gives me.  Maybe you can get by with a robust spreadsheet.  But, something that you can use to give your CPA (even if that’s you) a full detail of the profit/loss of the company including all sources of income and expenses.

It may sound a little difficult, but it’s not any more difficult that it would be if you didn’t separate them first and then tried to separate them after you need to.  You’ll thank yourself later.

All Is Not Lost

I can’t tell you the number of times that, in our seemingly never-ending struggle with debt, that I’ve seriously contemplated just giving up.  Just throwing in the towel and saying f-it.  You know it’s bad when you catch yourself fantasizing about it.  About how much easier your life would be without the struggle.  Just declaring bankruptcy, taking the hit on your credit score, and moving on with your life.

Even now, after having written about personal finance for over five years, I still find myself in that place occasionally.  We let our budgeting lapse, and inevitably our spending gets out of whack again.  Something happens, and the emergency fund just doesn’t seem to cover it all.  Or, worse, doesn’t seem to replenish itself as quickly as it should.

someecards.com - I can't believe I work this hard to be this poor.I can try and lay the blame somewhere.  That always helps, right?  If it isn’t my fault, then I can’t be blamed for it.  I can’t be the one that everyone points to as the failure.  I can deflect that attention to someone or something else.  That helps.  Until it doesn’t.

Every single time, it’s really me that deserves the blame.  It wasn’t the boss that refused to give me a raise.  It wasn’t the heater in the car that needed to be fixed.  And it certainly wasn’t the kids that needed to eat.  It was me.  Every.  Single. Time.

I failed to negotiate the raise.  I failed to have enough saved up to make that repair.  I failed to budget properly to make sure that we wouldn’t have to cut corners at the grocery store.  Me.  I did that.

I could just give up.  I could miss having to work harder to be paid appropriately.  I could miss having to pay attention to my budget to save money for car repairs, or to pay for groceries.  I could do that.  Giving up would be so easy.

Until it isn’t.

5 Ways a Better Credit Score Leads to Better Finances

BookkeepingEverybody knows that you want to have the best credit score you can.  Why?  Because the better your credit score, the better the rates you can get on your loans, of course!  But, did you know that there are other reasons to try and improve your credit score?  In fact, here’s five ways that having a better credit score can lead to better finances.

  1. More money.  This is the obvious one.  A better credit score leads to better rates on loans (see above), and better rates lead to less interest paid over the life of the loan.  And less interest paid leads to…  (wait for it) a  better bank balance!
  2. Better rentals.  It’s a sad fact that many landlords are doing credit checks on prospective tenants these days.  They’ve got assets to protect, so it’s a smart move for them, but the fact that there are so many landlords out there getting burned that it’s become necessary is sad.  But, having a good credit score can help make sure you don’t get turned down for that great apartment down by the beach!
  3. Quicker payoff.  This one goes really closely with the first point.  With those lower rates, and lessened interest also comes the ability to pay the loan off quicker.  And, of course, a quicker payoff means a much better financial situation.  Especially if you avoid any new loans afterward.
  4. Any loan you like.  If you must loan money, at least do it smartly.  With the current state of affairs, you can’t just walk in and get a loan that has a pulse as it’s only requirement.  In fact, many banks and credit unions are cutting way back on their sub-prime lending for anything.  (P.S. the term “sub-prime” doesn’t just apply to mortgage loans) If you have poor credit, it’s much more likely, today, that you’ll get turned down for a loan altogether.  Better credit means that if you really need a loan, you probably can have one.
  5. Less fees.  We all hate fees.  Well, all of us except the financial institutions.  A growing number of them are making a growing amount of their revenues from fees.  And many have moved to an account structure that is based off of risk.  And risk is determined by credit score.  A lower credit score could mean an account with higher fees, or with monthly fees that some accounts might not have, while a higher credit score might qualify you for a different account without those fees.

So, you see, having a good credit score can really send your finances in the right direction.  And, having a bad credit score can really send them into the dumps in a hurry too!  Unless you’re very dedicated to the extreme frugaler lifestyle, and never plan on really using money, it still pays to have a good credit score.  It doesn’t take much to build it, and you might be glad you did someday.

photo credit: o5com