Your bathroom is one of the smaller spaces in your apartment, but it also is home to many items. From […]
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Municipal Credit Union (MCU) was founded in 1916 by and for city employees in New York City as a loan alternative to predatory lenders who operated in the area and charged city workers excessive fees for suspect loan products. By 2018, the credit union held $2.68 billion in assets and served 425,000 members throughout New […]
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After graduation can be a whirlwind and trying to figure it all out can be confusing, especially finances. We’ve got you covered.
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Alliant Credit Union is a not-for-profit, member-owned financial institution that has been around for more than 80 years. Though technically located in Illinois, Alliant Credit Union is open to members nationwide. And with more than $12 billion in assets and 500,000 members across the country, Alliant is not just the largest credit union in the [â¦]
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Money Girl Laura Adams: When did you decide that you wanted to become an author (or other career)?
Sara Fujimura: Not until after college where I earned a B.S. in Public Health Education. My favorite class in college was Epidemiology, and deadly diseases used to be my jam…that is until March 2020. I am infinitely fascinated by the Spanish Flu and did several articles about it, including one for Perspectives in Health, published by an arm of the World Health Organization. While doing research, I came across all kinds of captivating stories in diaries, letters, newspaper articles, and even some video interviews (much later on) from survivors. I took these true stories and wove them into my young adult historical fiction novel Breathe, which came out in 2018 on the 100th anniversary of the pandemic. Who knew that only two years later, everybody would suddenly become an expert on the Spanish Flu and pandemics in general? While I was doing research (so much research!) for Breathe, I decided to keep going with my storytelling, slowly moving from magazine articles to young adult books full-time.
MG: Do you write full-time?
SF: I do, but I am also blessed to have a spouse with a stable job and health insurance. I didn’t start writing full-time until after my children finished high school. Before then, I wrote part-time and donated a lot of time to my children’s schools/activities. I don’t regret this at all. It was a time of story-collecting and educating myself on writing craft.
Writing tends to be a feast-or-famine occupation, and the pandemic hit our profession just as hard as everybody else’s. COVID19 has been the great equalizer. Whether you were the Big Fish or the tiny minnow in your publishing house, NOBODY went out on book tour. This is where being an indie-pubbed author first saved my bacon. Tor Teen (publisher for my third and fourth books) can definitely do things that I can’t, like getting my book reviewed on NPR. But I can also do things that they can’t, like tapping into my local networks and keeping my books alive even when all of my in-person events went *poof* in 2020. Yeah, releasing a new book two weeks before the country goes into lockdown…1 out of 10 stars. Highly would NOT recommend it. With America slowly opening back up, I hope to combine my entrepreneurial spirit with Tor Teen’s fantastic marketing team to make an exponential jump in sales with my latest book, Faking Reality (July 13).
MG: Did you study writing (or something else) or has it always come naturally to you?
SF: People are often surprised to hear that I do NOT have an English degree. It was my Public Health degree that led me to write. My senior year, one of my professors asked me to be his intern because he knew I could take complex topics and boil them down into accessible information for the general public. Fast-forward to the early 2000s when I received a call from an editor of a homeland security magazine who had seen my articles on the Spanish Flu. He wanted me to take cutting-edge scientific information and boil it down so that first responders could implement it into their jobs. Though I stopped doing magazine work so I could concentrate on book projects, in a way, I am still using this skill. You can enjoy my books as funny, sweet romances. Or, if you want to dig deeper, there is a lot of fact behind the fiction woven into them. I do Behind the Book posts on Instagram frequently to show readers how I brought my books to life.
MG: When you first started writing (or something else), were there any financial challenges? How did you manage them?
SF: Definitely! For most of my twenty years of writing, money has flowed more out than in. Granted, that was a choice. I could write on staff at a newspaper or edit for other authors to create some kind of financial stability in my business, but I don’t.
I reinvest my paychecks into my LLC and update my equipment, attend conferences, and pay for marketing. My first two books were independently published. To ensure that the final product was of the same quality as something found on a Barnes & Noble shelf, I had to spend money. A lot of money.
I hired content editors, copyeditors, experts, historians, and graphic designers. I also needed a large chunk of money for the business side of my book-making. That included everything from purchasing tax licenses, a tent and tables, bookmarks, KDP ads, travel to events, and more. It adds up very quickly, but it paid off. I’ve finally started turning a profit. If Netflix wants to make one of my books into a movie or series, that would definitely help my bottom line.
MG: What advice would you give someone who's creative or wants to change their lifestyle about balancing passion for their art and earning an income?
SF: Start small and build. I had the safety net of my husband’s job and healthcare underneath me so I could experiment more than maybe some can. Keep reinvesting any income into your business and education. Take the time to build your community and lift up other creatives in your circles.
Talking about money always feels squidgy, but we need to do it!
MG: What productivity tips have helped you achieve success?
SP: My productivity hacks continue to evolve as I listen to a lot of productivity and entrepreneurial podcasts. I agree with the experts that success *doesn’t* come from time management but instead focus management. Not only do I have the usual distractions (social media, snacks, a toddler cat who will eat the couch if she’s feeling ignored), but I also have new ideas pinging around my brain all the time.
Success doesn’t come from time management but instead focus management.
I often sing to my cat the line from the great contemporary poets/songwriters LMFAO…“Every day I’m shufflin’. Shufflin’. Shufflin’.” If I’ve been burning the midnight oil too much, Tiger Lily might even get some interpretative dance along with it. (For the record, she is not impressed by either.) Seriously though, I’ve yet to turn into the type of author who keeps the same strict writing schedule. I’m always out of balance, and that’s not necessarily a bad thing. I can write a complete (crappy) novel in two months, but it tears up my body, and I become a hermit. With a new book coming out on July 13th (Faking Reality with Tor Teen), launch prep and promo for the new book is my primary focus this month. This fall, I’m planning a long vacation to the East Coast to see my family and probably won’t work at all while I’m there. To help me decide where to put my time, focus, and energy, I use a couple of tools.
MG: What do you like to spend money on that some people might consider a splurge or luxury?
Travel. I would rather live a modest retirement with thousands of stories to reminisce about than retire with a billion dollars after working non-stop until retirement age. Though I would be okay with having a billion dollars *and* going on multiple vacations around the globe each year. Netflix, call me!
Also, cute washi tape. Moving on.
SF: What’s the best thing you’ve bought in the last few months?
Renting an Air B&B up in Sedona for a long weekend with my husband and two grown kids. Being outside and hiking around the gorgeous red rocks recharged my spirit more than any expensive purse or shoes could have.
MG: What’s the biggest money mistake you’ve ever made?
Early in my writing career, I didn’t always write with a contract. I got burned so many times. Yes, it was for only a few hundred dollars each time, but the bigger issue was that I didn’t feel confident enough to insist on a contract.
SF: Tell me a financial rule that you never break.
Errr…how about I tell you the rule that has continued to plague me? It is the same problem as the previous answer, only in a different form: Undervaluing my work and giving away too much of my time, energy, and expertise. Yes, I want to be generous and helpful to others, but when a male counterpart is paid more than you for the same work (or worse, subpar work but done with chutzpah), you need to reevaluate your fee schedule. I get on my female friends regularly about undercharging for their products/services. I have lost count of the number of times I have overtipped or refused a discount because a businesswoman was undervaluing herself. This is where having a community is paramount.
You need to know what the going rate is in your area. If you have a mastermind group with other women in your field, then I challenge your group to set an agreed-upon amount so that your price becomes the area’s norm, not the exception.
My author mastermind group recently had a frank discussion about school visit fees, where I realized that my rates were way too low. Talking about money always feels squidgy, but we need to do it!
Say goodbye to cluttered, messy kitchen cabinets!
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Years ago, I broke away from the traditional nine-to-five world and started working for myself. I wanted to do fulfilling work without fighting layers of bureaucracy or attending hours of company meetings. But I started my entrepreneurial journey slowly by creating a business on the side. Keeping my day job allowed me to test out my business ideas while maintaining my extra income.
Keeping my day job allowed me to test out my business ideas while maintaining my extra income.
If you also pine for the freedom and flexibility to do truly gratifying work and wake up excited about being your own boss, you can do what I did, too. Even starting a part-time business on the side has plenty of benefits. Today we'll look at critical financial issues to consider before you begin a venture that will help you succeed.
Here's more detail on each of these must-know financial considerations before you become an entrepreneur.
When you work for yourself, there's a lot to do. You might need to look for new clients, create deliverables for current clients, bill customers, search contractors, or do a million other things. But one of the first tasks you should do is choose a business entity.
Your business entity determines your business structure according to the laws in your state. You'll need to know your business entity and name before getting a business bank account, insurance, or paying taxes.
However, choosing a business entity can also be a passive decision. If you don't register your business with the state, you'll automatically be a sole proprietor. That's why many self-employed people start as sole proprietors by default. In fact, if you're doing freelance work or have a small side hustle, you may have a sole proprietorship right now and not even realize it.
The reason you may not want to remain a sole proprietor indefinitely is that there's no distinction or legal separation between you and your business.
There isn't one best entity for a given business, and it's not a binding decision. As your business needs change, it's possible to change your entity. Some common business entities include:
Most small businesses start as a sole proprietorship and then change to a corporation or LLC as they grow. The reason you may not want to remain a sole proprietor indefinitely is that there's no distinction or legal separation between you and your business.
As a sole proprietor, you're entitled to all profits, but you're also responsible for all the business's debts and liabilities. That means in addition to your business assets, your personal assets—such as your savings, vehicles, and home—could be at risk because you have unlimited personal liability for all obligations of the business.
On the other hand, separating yourself from your business by incorporating or forming an LLC protects your personal assets, but the downside is that it involves some administration and cost.
The business entity you choose comes with significant financial and legal considerations, so it's not something to take lightly. Each type has different pros and cons, including the complexity of formation and annual requirements. Your business entity affects the tax you must pay, what happens in a lawsuit, yearly paperwork, and the amount of personal exposure you risk.
Your business entity affects the tax you must pay, what happens in a lawsuit, yearly paperwork, and the amount of personal exposure you risk.
Always consult with a tax accountant or business attorney to make sure you're prepared for unexpected legal and financial bumps in the road as you begin a new venture or transition from one business entity to another.
Once you've settled on a business entity, you need to know how to file taxes. That's an area where most new entrepreneurs have a lot to learn because it can get complicated!
When you start making money as your own boss, I recommend having a qualified tax professional, such as a certified public accountant (CPA), for help preparing individual and business tax returns. These professionals must meet education and experience requirements and can represent you before the Internal Revenue Service (IRS) if you get audited.
If you're unsure where to find one, ask other business owners you know for recommendations or check out the American Institute of Certified Public Accountants (AICPA.
With most business entities, you automatically get or have the option to elect "pass-through" income for tax purposes. That means the business profit or loss goes directly to you. Then you report that income on your personal tax return. For instance, sole proprietors must file Form 1040, US Individual Income Tax Return, and Form 1040, Schedule C, Profit or Loss from Business (Sole Proprietorship).
A regular C corporation is the only entity that must pay taxes separately from the owners. They must file Form 1120, US Corporation Income Tax Return.
When you're an employee, your employer pays half of your Social Security and Medicare taxes for you. But when you create your own income, you must pay the full amount of tax.
However, if you elect to become an S corporation, you can choose pass-through income instead. S corps must file Form 1120S, US Income Tax Return for an S Corporation, and furnish copies of Form 1120S, Schedule K-1 to the shareholders. And if you're an LLC, you can elect to be taxed as a sole proprietorship (if there is just one member), a partnership, or a corporation.
Since self-employment income isn't subject to tax withholding, like when you have a W-2 paycheck, you must pay estimated taxes quarterly. You make them using Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations.
Additionally, you must also pay the self-employment (SE) tax when you have pass-through business income. It's similar to the Social Security and Medicare taxes withheld from most workers' paychecks. You pay it using Form 1040, Schedule SE.
When you're an employee, your employer pays half of your Social Security and Medicare taxes for you. But when you create your own income, you must pay the full amount of tax, which takes some new entrepreneurs by surprise. Again, working with a good accountant is essential to pay the right amount of estimated tax payments on time.
Want to get the most out of your tax refund this year? Check out Money Girl's Tips to Maximize Your Tax Refund in 2021.
Because you have to report business income and expenses on your taxes each year, it's critical to keep your business and personal transactions separate. For example, if you don't know which expenses were personal or business, you might forget to claim qualifying expenses as a business tax deduction. That would cause you to overpay taxes and lose money.
Although it's not against the law to mingle business and personal finances, it makes filing taxes, monitoring the status of your business, working with an accountant, and even selling your business much more difficult.
Although it's not against the law to mingle business and personal finances, it makes filing taxes, monitoring the status of your business, working with an accountant, and even selling your business much more difficult.
To stay organized, you could combine personal and business finances and be meticulous about categorizing them using accounting software such as QuickBooks. Or you can open a separate business bank account and run all your business income and expenses, including payments to yourself, through that account.
To open up a business checking account, you'll need documentation for your entity. For instance, with a sole proprietorship, you need a Social Security number or a tax identification number (TIN). With an LLC, you need your TIN and articles of organization.
If you're a sole proprietor and your business name doesn't match your real name, a business bank typically requires you to register a DBA (doing business as) name with your state. This process is also known as filing a fictitious name or registering a trade name.
I mentioned that tax deductions allow you to pay less tax. So, get familiar with which expenses are partially or fully deductible and claim every legit tax break possible!
In addition to paying less tax, qualifying tax deductions can give you nice perks like having a meal at a terrific restaurant with potential clients, combining a business trip and a vacation, and making a home office cost less.
Here's a list of common business expenses you might be able to claim as deductions:
The IRS allows you to deduct any ordinary and necessary expense for conducting your business to earn a profit. When in doubt, categorize a cost as deductible and then consult with your accountant about it at tax time.
While you might have heard some entrepreneurs encourage you just to quit your day job and start working from a beach or while traveling the globe, that's not a successful strategy for most. The more you can shore up your finances before starting a business, the more options you'll have.
Even if you have income from a day job, you may have substantial expenses getting your side hustle off the ground. You also may have customers who pay you more slowly than you'd like or seasonal opportunities that cause your business revenue to fluctuate.
A big part of creating healthy business and personal finances is building safety nets that protect you and help reduce stress because life and money are unpredictable.
The best financial safety net is a cash reserve. If you don't have any savings, take advantage of your day job's steady paycheck to build a cash cushion.
The best financial safety net is a cash reserve. If you don't have any savings, take advantage of your day job's steady paycheck to build a cash cushion. Having as much financial resilience as possible will allow you to leave your day job sooner or increase your business investments.
A cash reserve keeps you safe and prevents you from going into debt during a rough financial patch in your personal or business life. Having a cash reserve becomes even more critical if you plan to quit a W-2 paycheck and rely entirely on your business.
While no one can predict the future, I recommend having enough to cover your living expenses for at least three to six months. These are just the basics, such as housing, utilities, groceries, insurance, and loan payments—not a full replacement of your income. Since you don't know if you might need it next week, next year, or in three years, I recommend that you keep it in an FDIC-insured bank savings account.
How much should you have in emergency savings? Read The Right Amount of Emergency Money to Keep in Cash to find out.
Another financial safety net that's important for many self-employed people is to reduce what you owe. Having fewer debts can take the pressure off if your pay gets cut or you lose your job or business income. It can also be the key to living within your means if you tend to overspend.
In some cases, having additional income from a side hustle may be the answer to paying down debt or building a cash reserve.
For some people, owing any amount of money can be a source of stress, even if you're meeting your expenses and diligently saving for the future. In some cases, having additional income from a side hustle may be the answer to paying down debt or building a cash reserve.
If you're using credit cards and loans to finance a lifestyle that you truly can't afford, consider the consequences. You may be paying for a life that you don't genuinely want. Plus, having little or no discretionary income can hold you back from building the business and life that you do want.
One way to analyze your debt level is to calculate your debt-to-income (DTI) ratio, which is how much you're paying for debt compared to how much you earn. A healthy DTI ratio is less than about 35% to 40%.
For example, let's say the total of your mortgage payment, car loan, student loan, and minimum credit card payment is $2,500 per month or $30,000 per year. If you earn $80,000 a year, your DTI is $30,000 divided by $80,000, which is 0.38 or 38%. That puts you in the range that most lenders like to see.
You can use the DTI ratio to monitor your finances over time, so you spot trends. Pat yourself on the back when your DTI ratio goes down and your cash reserve ratio goes up!
Instead of dwelling on what's wrong with your finances, just get started today building a cash cushion and whittling down your most expensive debts first.
If you don't have any financial safety nets in place, don't beat yourself up about it. Instead of dwelling on what's wrong with your finances, just get started today building a cash cushion and whittling down your most expensive debts first.
As you can tell, there's a lot to know about the legal and financial aspects of running a business, especially as you get started or begin to scale it. Instead of running in the dark, reach out to professionals who have answers to your questions.
It's well worth your time and money to seek advice and make sure your business will be successful. And in many cases, consulting a tax or legal pro ends up saving you money in the long run.
My new book, Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers, offers much more information on building a business and your financial future. It gives step-by-step details for getting your side-hustle or full-time venture off the ground and avoiding expensive mistakes.
Not only does starting a side hustle protect your income, but it may allow you to widen your professional network and improve your career skills. If you enjoy your entrepreneurial work and find that it pairs well with your day job, the benefits and personal growth of doing both can really pay off.
It's never too late to put your skills, ambition, knowledge, and relationships into an exciting new venture.
Hanging on to your day job may give you the financial security to try out new business ideas, especially if you have a spouse, partner, or kids depending on your income. You have a lot to offer. It's never too late to put your skills, ambition, knowledge, and relationships into an exciting new venture.
What questions do you have about starting a side hustle or managing your personal finances? Leave me a voicemail by calling 302-364-0308. You can also send me an email, sign up for my weekly newsletter, or connect on social media at LauraDAdams.com.