Tag: expenses

Budgeting, Uncategorized

No crash budgets: 6 reasons budgeting is like dieting.

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My system of “No Crash Budgets” teaches you about interest, debt, savings and planning for emergencies while still living the lifestyle you want to live. My system is adaptable and flexible to you and your wants and needs. It allows you to still get your wants.

Saving money is a lot like losing weight or getting healthy. I advocate for a system of saving money and getting your finances in order that is sustainable unlike a “crash budget”.

  1. Be Real. You must set manageable, realistic goals. Just like when losing weight, you won’t go from $500 in savings and thousands in personal debt to $10,000 in savings in one year. Think about the times when you have gone on a diet and you cut out all sugar, soda and flour. It made you grouchy for a few days and then sometimes you come out feeling great. With a budget, a system allows you flexibility will help you keep on track.
  2. Focus. Find an area to focus on. Once you have a minimal amount in savings ($500-$1,000), it is more beneficial to focus on paying down your debt. But, if you’re paying down your debt and you don’t have a cushion for emergencies, then you go right back to the start. Dieting without a clear focus will not be as successful.
  3. Plan ahead. What actually constitutes an emergency? Things come up all the time. My kids need money for school things and it can feel like an emergency but it’s not. Christmas, birthdays and entertainment are not emergencies. So, I don’t touch my emergency fund.  I put away money every month for Christmas. I also look at whose birthday is during the month and set aside money for that. When you diet, if your house is full of brownies, you’re not going to lose weight. If you plan ahead and fill your kitchen with healthy items, you are prepared.
  4. Track. Track where you are spending your money. Tracking money is an important part of setting up a sustainable budget. Each time you get paid, you should be evaluating how much you’ve spent and where. If you’re out of money in a budget category, can you quit spending or do you need to evaluate another area to take the money from? Track where you are at every month. I even like to make a chart in Excel that shows my savings growing and debt decreasing. If you’re not stepping on the scale or noticing a change in how your clothes fit, the diet will not be as effective.
  5. Deal with setbacks. If you have an emergency fund established, you can handle emergencies. Does it seem like you have more emergencies than most people? Is your house old, your car old, or do you have medical expenses? Even when emergencies do arise, I can look at my budget and see where I could take money so that I don’t need to touch my emergency fund. When you use your emergency fund, start building it back up right away. Every few months, you can evaluate if your savings fund is enough for you. We had to replace a broken furnace during the first week of January. We had half of the money saved up because I knew it was coming. Along with that, we will be replacing our a/c unit in the spring. I am planning ahead and saving the money for that so it is not an emergency. Sometimes when you’re getting healthy you have an injury or just gain a few pounds back. You can quit or you can deal with the setback.
  6. Understanding debt, savings and interest. I recently saw a statistic that the average American owes $15,000 in credit card debt. I want you to understand debt. You can have a car loan and a mortgage as long as you understand exactly what it is costing you. Paying interest means you are sacrificing other things. You should understand interest, tax benefits and decide which is the most important debt to pay off first in your case. Muscle weighs more than fat so the number on the scale doesn’t mean everything. Sometimes, a few pounds is a good thing.

As always, I offer tax and budgeting advice for free. Contact me through my website. You can also follow me on Instagram at nocrashbudgets

 

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Bookkeeping, taxes

Check Register App Review

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I love Excel. So, I designed a spreadsheet to track my expenses. I’ve used it for years and it’s perfect for me because I can customize the spreadsheet to fit my needs. I decided to try the free apps on my iPad for a check register. I’ve tried a few and here is what I’ve found.

Checkbook – This is my favorite app. I like the categories for expenses  with pictures, the description that auto fills, and recurring payments. I don’t like that the upgrade is required to add more than one account. I also wish I could clear the transaction while I’m in the entry screen.

Balance – I haven’t tried this one too many times. You can clear the transactions on the entry screen. But, the downside is you can’t clear the entry on the transaction list screen. It looks pretty boring. It doesn’t have categories for transactions.

Check – This app allows you to add multiple accounts without upgrading. When you open the app, you are required to watch an ad. Like Checkbook, you need to click on a tab at the top for expense vs. income. I would prefer to put in a +/- sign as I am entering the amount. I can put in categories but it doesn’t have the cute pictures like Checkbook.

My Check Register – This looks like a paper check register. This app doesn’t have categories. It only allows transaction detail like a traditional check register. I also don’t like that you can’t print out category totals.

They’re all great apps but for my purposes, I’m most excited about Checkbook. I will be taking the other apps off soon. Checkbook fills all of my needs with being able to print out the reports of each category.

 

 

 

 

 

Tips

Personal and Business Expenses

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When you own a business, expenses can quickly add up. Businesses should try to keep personal and business expenses separate. Sometimes, that proves difficult for small businesses. So, if you do keep expenses together, keep all business receipts. Then, make a notation or category for business expenses so you can easily find those at tax time. 

“Business expenses are the costs of carrying on a trade or business, and they are usually deductible if the business is operated for a profit.” IRS Pub 535

Expenses should be ordinary and necessary. Ordinary means common and acceptable in your industry. The expense should also be appropriate and helpful. It is easy to find examples of expenses that the taxpayer disagreed with the IRS as to ordinary and necessary. 

For example, the IRS closely watches cell phone usage. You can only claim the business portion of expenses. So, you must calculate the portion of business usage because you likely use it for both.

“Generally, you cannot deduct personal, living, or family expenses.” IRS Pub 535

You should be careful to save receipts from large retailers, i.e. Costco, Amazon. In an audit the IRS will generally want proof that these expenses are for business purposes. 

Some additional expenses that can be tricky include:

  • Business Use of Home. If you use part of your home for business, you may be able to deduct expenses. The area of your home must be used regularly and exclusively for business. Calculate the percentage of your home used for business and then you can deduct this portion of mortgage interest, insurance, utilities, repairs, and depreciation. 
  • Business use of your car. If you use your car for both personal and business purposes, you must divide expenses based on actual mileage. Look at my post on this subject for more information.
  • Interest. If you borrow money and use part of the money for personal and part for business, figure out a percentage for each and only deduct the business portion of the interest you paid.

Always be careful when claiming expenses that they are for business purposes. In the weeks to come, I will add more information to help you complete most of your own accounting.