With millions of Americans making a living as an entrepreneur or at least keeping a steady side hustle going, many find themselves living on an irregular income, which could lead to problems with budgeting. Although going into business for yourself provides you with invaluable freedom and unique ways to make money on the side, your paychecks are sporadic and managing finances can become more difficult than the traditional guaranteed compensation from an employer.
To help you take control of your finances and income, here are some great tips on what every entrepreneur needs to know about budgeting.
What Every Entrepreneur Needs To Know About Budgeting
Keep Your Overhead Expenses Low
Let’s get a handle on monthly necessities, shall we?
First, determine what your monthly necessities are and then find the bare minimum of its cost. Basic needs such as your car payment, groceries, rent or mortgage, and utilities should be analyzed annually.
Financially, your goal is for your income to be more than the minimum amount of your bills. Always keep this number in mind so you can budget responsibly on a consistent basis. An easy way to do this is by reducing your overhead costs–live with roommates, shop for certain items at a thrift or Habitat store for better deals, and buy store-brand groceries instead of name-brand.
Save Extra Cash
Depending on what you do for a living, you may be subject to periods of abundant feast or devastating famine. I know it is tempting to splurge during the time of prosperity, but it is always a good idea to set aside some of your extra income to prepare for leaner times. Plus, when you want to take some time off from your side hustle it is always nice to have a cushion; unlike traditional employees who get sick-leave or paid vacation, your time off comes out of your pocket.
Tip: Even if you can only afford to set aside $10 each paycheck, save it! It will build up over time.
Be Prepared for Tax Season
Believe it or not, many small business owners do not take full advantage of their tax deductions. There are several business expenses you can write-off during tax season, especially if you are an entrepreneur or have a side hustle. When you fail to capitalize on these deductions you are basically leaving money on the table.
For example, a home office can be deducted as an expense for the business use of your home. Most equipment– computers, software, and other necessary supplies for your work– are often tax deductible. Read more about other common business expenses here.
It is also important to remember that unlike traditional employees, you likely haven’t had your income tax withheld. That means if you are not setting aside a portion of your income each month to pay your taxes, there will be some not-so-pretty surprises waiting for you come tax time.
As an entrepreneur, you must file your quarterly estimated taxes to the IRS! If not, you will be left with a bone-crushing bill when you file your tax return.
Make sure you’re using the tools inside your free TaxBandits dashboard to keep your records up to date before tax time! At TaxBandits, we love supporting small business owners because we believe that when you succeed, we succeed! We can help you efficiently file your business taxes on your own using our IRS-authorized e-filing process!
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