Budgeting for irregular income

Irregular incomeWhen I posted about the 28-day budget, I received a comment on G+ about irregular income. A lot of people believe they can’t do a budget if their income fluctuates. Don’t get my wrong, it is much easier to budget when your income is the same every month, but for most people that is not the case. Even for us, our income changes every month because of my tax business. We each have a base salary, plus my irregular business income. So how do you budget for this?

The most important tool for the small business owner

So you might think this is your computer or your cell phone. Maybe it’s your email or your social networking sites. I would say that none of these is correct. The most important tool for any small business owner is:

41xn6ak7n8l_sl160_Your day planner.

In an age of technology, many people have gotten rid of the day planner, instead using some type of electronic calendar. As a small business owner, you need a paper day planner for a number of reasons.

1. If you run a business where you are billing clients after the fact, a day planner can help you keep track of your billable time so you won’t forget later.

2. If you use your phone as your calendar, it’s much easier to talk to a client and write in a day planner at the same time than trying to talk to a client and type things into your phone.

3. Most small business owners keep terrible mileage records and mileage is one of your best tax deductions. At a little over 50 cents a mile, those miles really can add up to a serious tax deduction. Having a day planner helps you keep track of everywhere you’ve been each day. If you are really good, you’ll remember to track your miles in the car. If not, you can always google your  mileage when you get home.

4. Day planners are great for jotting down small expenses. Many times if I go to lunch with a colleague or client, I’ll write it down in my day planner along with the amount. For many expenses, like meals, you need to have a record of who, what, where, why and when to take a deduction. All of that can be put into your day planner.

5. Unlike a computer or cell phone, your day planner will not crash on you or run out of battery life. You can keep it with your tax records in case you are ever audited and you’ll look like a pro.

The key to running a small business is record keeping. The key to good record keeping is the right day planner. That can differ depending on your type of small business.

If you travel a lot or see many clients each day, make sure you purchase a planner that has enough space to write everything in. I like the planners that have a monthly display and then two pages for each week. This allows me to schedule appointments in the monthly view and put notes in the weekly view.

Make sure the planner is a good size that is convenient to carry around with you. Mine is small so it can fit in my purse. That way, I know I always have it with me.

Make sure you always carry it with you. If you don’t have it, it’s not very useful.

Since the end of the year is quickly approaching, start looking around for a new planner. Look  at lots of different options. Many stores will start discounting them soon. Amazon already has some pretty good day planner deals. Avoid the office supply stores. Their prices are not  very good on these things.

Starting a small business

A friend of mine asked me a question relating to starting a small side business via Facebook last week. I thought that this might be a good weekly series. Many people have small side businesses or have thought about starting a small business, but just aren’t sure where to start or how to maintain their records. Over the next few weeks, I’ll be addressing some of the things to think about when starting and running a small business. If you have questions regarding small businesses, feel free to ask them in this post or send me an email.

My first rule in small business is start it with cash. If you can not start a business without going into debt, this might not be the right direction for you to go into. 80% of small businesses fail. That doesn’t mean that your small business will fail, but I don’t want you getting into debt over it. Do your research, see how much start up money you need and start saving. You may not be able to go all out when you start your business, but starting slow and growing with cash will leave you in a much better financial situation.

My friend had asked me about getting a credit card to start her business because the representative she was working with said she could get miles or points for her purchases. Plus, it would help her keep all of her expenses seperate. You can do all this without paying any annual fees or interest charges. Open a free small business checking account. I work with Webster Bank in Connecticut. I get free checking, plus my debit card earns rewards points. Just open a checking account in the business’ name and get a debit card if you need one.

Here is my pet peeve with small business owners. Your business account is only for business transactions. Your personal account is only for personal transactions. Keep them seperate. If you want to take money out of your business because you have profit, write yourself a check and deposit that check into your personal account. If your business is low on cash, write a personal check to the business and deposit the money into your business account. Once you start mingling your funds, it becomes very difficult to keep everything straight for tax purposes. Keep the business stuff in the business account and that’s it.

When you keep your business finances separate, it makes doing business a lot easier, especially when tax time comes around.