Self-Employed? Best Ways to Manage Your Bank Account
Being self-employed has numerous advantages, including the ability to choose your own time, work from home, and take vacations whenever you want.
However, there are some key things to consider when you become your boss. They can be stuff such as handling your business money, keeping a schedule, and arranging for tax requirements.
With this in mind, many areas of running a business, including finances, necessitate a significant amount of time and attention. Learning how to handle your bank accounts is one of the most crucial things you should do.
Why Is It Important to Manage Your Bank Accounts?
Dividing your personal finances from your business expenses, while not required for most small enterprises, will assist streamline your tax and revenue reporting. Essentially, keeping track of your bank accounts allows you to stay organized and manage your business more efficiently.
Dedicated business bank accounts can help you restrict your liability as well as preserve your clients’ personal information. They can also build your company’s credit history.
Making the Most of Your Money
Businesses incur countless expenses, and keeping track of them will help you and your tax advisor to appropriately deduct them.
If a business expense is both usual for your industry and required for the course of business, the IRS considers it deductible. If you work remotely, for example, you can claim the home-office deduction. That will not only cover your office space but also your materials, utilities, and even a percentage of your mortgage or rent.
Similarly, if you run a client-based firm, you can utilize your business bank account to pay for meetings with clients, transportation, and other expenses related to acquiring new clients.
What are the best ways to manage your funds as a self-employed person?
Use these methods to remain on top of your business finances in addition to keeping independent business and personal bank accounts:
Keeping a new bank account for tax payments is a good idea: Put the money that should be set aside for monthly estimated tax payments into a liquid (interest-bearing checking or savings) account. This way you will avoid spending it.
Spend your money wisely: Economic cycles of feast or famine are prevalent in small firms. Preparing and keeping a budget that includes revenues, expenses, and profits can allow you to save more during prosperous seasons. So that you can withstand lean periods when your business isn’t making as much money.
Keep credit card expenses down: Credit card debt can creep up on you and catch you off guard when it’s time to pay your bills. If you really must use a credit or debit card, keep it to significant or necessary purchases. Use a distinct business credit card to keep track of your credit card expenditures.
Keep emergency money on hand: When unforeseen needs emerge, having a rainy-day reserve will save your business bank account from taking a severe hit. Keep your emergency savings in a non-volatile liquid vehicle like an interest-bearing savings account or a certificate of deposit.
Save for retirement: When it comes to managing bank accounts as a self-employed person, retirement funds are sometimes overlooked. When you start a business, don’t let your savings account stagnate. Make a modest contribution to a Traditional IRA, an independent 401(k), or another retirement plan from your self-employment earnings.
Taxes should be anticipated
Self-employed business owners who have been in business for a while understand the importance of staying on top of their tax obligations.
When you earn a W-2 income, your taxes are sent to the IRS on your behalf. If you’re self-employed, you’ll need to set aside a significant amount of your earnings to avoid large tax payments. Keeping a separate bank account for taxes can help to streamline the process.
You’ll also need to account for any tax payments, employment taxes, and state and/or municipal taxes that you and your company may owe. Based on the income and expenses in your specialized business bank account, you can plan for your expected taxes. Leaving aside 30 percent to 35 percent of your gross income is a decent rule of thumb. And doing it in a separate bank account can help you keep track of all your money and spending.
Small business owners are well aware that self-employment necessitates a high level of discipline. After all, you’re the CEO of your company, and you can’t blame or criticize others for your mistakes.
Your Part Time Accountant has a staff of skilled accountants who can assist you in achieving your financial objectives. We understand that being self-employed is difficult, so consider delegating your financial responsibilities to a professional. When you work with us, we’ll take the time to learn about your specific requirements and issues. You’ll work with a competent accountant who is familiar with your industry’s intricacies as well as local and state legislation. We will dedicate ourselves to your success and deliver consistent, high-quality support to help you achieve your objectives.