What’s on the iPod: Unfaithful by Rihanna
Wow. I’d forgotten what it was like to have a little free time. Yesterday I revised one document, edited another, and then had time to do whatever I wanted. I looked for more work (glutton for punishment), attended my online course (if you’ve not checked out the free courses at Coursera, you’re missing out), and edited a newsletter article. The afternoon? That was mine. I cut out early and enjoyed a book as the rain came down outside.
I received a sizable payment the other day, so I was dividing it among the various places it must go. I have a system that’s simple and works pretty well for me in the year I’ve been using it. There are just certain things we have to account for as freelancers that regular employees don’t. They include:
Taxes. Oh, those nasty taxes! It’s up to us to pay the piper ourselves since our checks come without any deductions. However, my problem has always been the timing – the bill is never due when there’s money in my account. So now that I pay electronically, I take 15 percent off the top of each check that comes in. I pay as I go. So far, the IRS hasn’t fussed (as long as they’re getting their money, right?). I’d check with them before adopting my method (why should we all be in trouble?), but I’ve not paid late fees nor penalties by paying this way. Honestly, I don’t think they care as long as you’re paying on time or early.
Retirement. We’ll never get the matching funds our 9-to-5 counterparts do, but we can still sock away money on our own. Here I take another percentage of each check and deposit directly into my IRA fund.
Savings. Thanks to my system, I finally have a savings again. The same amount I put into my IRA also goes into my savings. That helps with things like late-paying clients, car repairs, vacations, you name it. If it’s going off the top of each check, I never miss it. I bet you won’t, either.
I’ve also decided to allot about $25 a month to a separate fund for software or equipment upgrades, continuing education, or any conferences that can help further my business goals. It’s only $300, but it’s a start in the right direction, for it gets me thinking of improvements to the equipment and my own skills.
How do you divvy up the funds? What’s your method and how has it worked for you? Do you pay your taxes quarterly or as the checks arrive?