Beating Broke

Personal Finance from the Broke Perspective

Separate Your Business Accounts

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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.

The Walgreens Drugstore Game by Amanda Grossman – A Review

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If one of your resolutions for the new year is to save money, you’ll want to check out Amanda Grossman’s new ebook, The Walgreens Drugstore Game:  Strategies to Turn Pocket Change Into Thousands of Dollars’ Worth of Free Stuff.

Grossman is a penny pincher who blogs at Frugal Confessions.  She and her husband knocked out student loan debt when they married and are now living debt free (except their mortgage).  She also quit her job and is now living the dream of working at home.  A look through her blog shows she knows how to save money and get the best deals.

Now, she wants to share those deals with others.

I’ll confess that a few years ago, I played the CVS drugstore game with a fair amount of success.  However, I never conquered the Walgreens drugstore game.  It was just too complicated for me.  In the years since I stopped playing the drugstore game at all, Walgreens has only gotten more complicated (or so it seemed to me) by adding in a new rewards incentive.

However, after reading Grossman’s book, even I feel like I could tackle Walgreens drugstore game.

If you’re paying full price for toiletries and personal care items, you’re simply paying too much.  Grossman will show you how to pay less than a few dollars to get $20 or more worth of merchandise.

A Primer For Those Who Don’t Use Coupons

If you’re not much of a couponer, don’t worry.  Grossman explains in detail the many different kinds of coupons that are available.  She also explains where to find them, including how to get a steep discount when buying the Sunday paper for the coupons and advertisements.

If you’re an experienced couponer, don’t worry.  Simply skip over this section.

Clear Explanations and Examples

Once you understand the basics about coupons, Grossman delves into how to find the best deals for the Walgreens drugstore game.  What I like most about this book is that Grossman doesn’t just explain how to score the deal, she also provides real life examples from her own shopping trips.

In fact, she makes the process seem so manageable, that even I registered for a Walgreens Balance Rewards Cards and signed up for discounted Sunday papers to be delivered to my house.  I’m tired of paying full price for toiletries, and even if I’m only half as successful as Grossman at the Walgreen’s game, I’ll be saving a lot of money.

Advanced Savings Strategies

If you already save a fair amount with coupons, don’t worry.  At the end of the book, Grossman includes advanced savings strategies.  Frankly, at my current coupon skill, these strategies went over my head, but for others who are used to couponing, they could be very helpful.

At only $4.99, Grossman’s book, The Walgreen’s Drugstore Game, should save you enough money that you’ll recoup the money you spent to buy the book on your first trip to Walgreens using her tips.  Everything you save after that in the weeks to come will be extra money in your pocket, which we all can appreciate.

How Much Life Insurance Do I Need?

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Life insurance seems like a second thought to so many people.  You’ll notice that the title of this article isn’t “Do I Need Life Insurance?”.  That’s because there really isn’t much question about whether you need life insurance or not.  I suppose there might be a few exceptions, but pretty much everyone needs and should have life insurance.  It’s just a matter of how much you need.  There’s a couple of ways to figure out how much you really need.

How much life insurance can I afford?

This is probably the most popular method of choosing life insurance.  And it’s completely wrong.  If you ask most people how much life insurance they can afford the answer is almost always “little” or “none”.  Again, wrong answer.  Most of us carry car insurance because it’s something that covers us against a loss.  If our car is damaged in an accident, we have the insurance to help with the cost of repairing or replacing the car.  To the people who depend on us for income, we need to have life insurance in place to help with the costs of continuing on when our income is lost.

How much income do I need to replace?

This question is usually a pretty good place to start when determining how much life insurance you need.  If you’re a regular budget-maker, you probably have a pretty good idea of how much income you and your family need to pay the bills and keep food in the fridge.  It’s probably not your entire salary, but it might be close.  Take into account any investments you have, as well as assets that might become unneeded if you die.  You’re family probably won’t need that second car anymore, for instance.  Also, any payments on those assets that can be disposed of can be discounted as well.

How long do I need to replace the income?

Once you know how much income you need to replace, the next question you need to ask is how long you need to replace it for.  In an ideal world, you’d be able to buy enough life insurance to set your family up for life.  Your spouse would be able to quit work and take care of the kids full-time.  You’d be able to pay for the children’s college education.  But, the world we live in is far from ideal.  Most of us won’t be able to afford the premium payments on a life insurance policy that will pay out enough to do those things.  In a romanticist world, your spouse would grieve for your loss for the rest of his or her life.  That isn’t all that likely either.  It’s far more likely that your spouse will remarry at some point.

All of that still leaves us without a real answer to the time question though, doesn’t it?  You’ll have to make some assumptions in order to really answer the question.  Assume that your spouse will get remarried.  Assume that you’re not going to be able to pay for your kids’ college education with the pay-out.  I think a good starting point is somewhere around 3-7 years.  Some will say that’s too long.  Others will say that it’s too short.  I don’t think there is a perfect answer.  And, when you’re faced with a question that has no perfect answer, you’ve got to find an answer that is as close as possible.

Calculate, then purchase.

You’ve answered how much income you need to replace, and you’ve got a pretty good idea of how long you need to replace it for.  Now, you’ve just got to put the two together and come up with how much life insurance you need.  Multiply the income number by the length and you’re in the ballpark. Let’s say that you determine that you need to replace about $30,000 a year in income.  You’re married to a real hottie, who shouldn’t have any issues with finding suitable future spouses, but you don’t want him or her to rush into it, so you use the 5 year length.  $30,000 a year X 5 years = $150,000.

You might want to add a bit extra for sudden expenses at the time of death, like funeral, casket, and burial.  But, that’s a pretty good ballpark number for how much life insurance you should buy.  Now comes the big step…  You’ve got to purchase it.  Find a good place to compare life insurance policies and costs and get all the information compiled.  Then pull the trigger and purchase the policy.

That will be the hardest part of the whole thing.  If anything does happen to you, your family will be thankful that you did.