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Is Your Bank Account Ready for 2014?

by Sarah Bradley
featured, money & life, Uncategorized

iStock — bank accountIt’s here. Crunch time for holiday chaos and year-end housecleaning/keeping.

For the self-employed solo-preneur or creative freelancer, this is the time to look back at the year’s success — and start planning for successes to come.

To help you pad your 2013 successes and set yourself up for 2014, personal finance coach Galia Gichon sat down to discuss the most important things to do before you ring in the new year. Here are her tips for maximizing your take-home earnings and getting ready for tax season.

Get your books in order.
This is the big one. It’s long, arduous, and critical for making the most out of your 2013.

Take this time before the end of the year — especially if you know that you’re slow with the process — to gather all your receipts and get your books together, so that when January comes, you can get a running start with your taxes (and possibly a refund).

Go through your expenses and get clear on what is business and what is personal — list and categorize your business expenses, so you know exactly what you spent and can use that as a deduction.

Ideally, you should have a good bookkeeping system in place so that you aren’t doing all of 2013 in one week. Hire an accountant or be your own bookkeeper and use software like Quicken or Quickbooks. Your system could be as simple as writing out your expenses in an Excel spreadsheet. Whatever your situation, find a system that fits your business and stick to it.

“Even though you’re a freelancer, you still have to take yourself seriously as a business, so do whatever you can,” says Galia, “Don’t just show up to your accountant with a shoebox of receipts.”

One easy way to be organized is to pay all business expenses through a single business credit card or a business checking account. When it comes to doing taxes, you can just pull up your statement for the last 12 months and that should list all your expenses. This is what I use, and it’s incredibly painless because all the information I need is already there.

Lastly, if you have anything to clean out of your closet, have higher profit than you projected, or have annual donations you make to your church or a preferred charity, donate now, even if it’s just $25. It’s a tax deduction that will save you money.

Take advantage of new opportunities (like healthcare).
“The biggest thing to highlight from this year is healthcare,” Galia proclaims. Her big question for freelancers is: “Are you taking advantage of Obamacare?”

Whether you agree with the politics or not, at the end of the day, as a freelancer, health insurance is enormously expensive. It would be foolish to not take advantage of new plan options and opportunities for saving money. Depending on your situation, there’s a lot you could do with the new law, like receive tax credits from the government, save money on health insurance, or get coverage if you don’t already have it. Gala advises that the ACA is just another opportunity to get inexpensive health insurance that’s on your side, so don’t go without it.

Check your investments.
It’s been an amazing stock market this year, with the S&P market hovering around 30% in growth. Take a look your investments to make sure you’re diversified and have money where you thought you did.

Galia recounts a person who thought he had $12,000 invested when it was actually in a money market account. Unfortunately for that person, he missed out on a big market. Don’t be the person who loses out for lack of awareness or diligence. Make sure you’re investments are in good shape for next year.

Stow some away.
If you’re a freelancer who’s had a really great year, open up an Individual 401K, or as Galia calls them, a “solo-preneur 401k.”

“It’s kind of a new thing,” she says, “it hasn’t been around that long and I’m seeing a lot of freelancers taking advantage of it.”

If you’ve had a $200-300k earning year, open up an I-401k and stow 20, 30, maybe even 50k, away. For the self-employed individual, income fluctuates —maybe next year you don’t have such a high earner year — so if you are having a good year, take advantage of the income you’ve got. You don’t pay the taxes but are also saving for retirement. You have to do it soon though; the end of the year is right around the corner.

Skip the holiday hangover.
Don’t go crazy on the holidays. It’s not worth it if it’s going to get you into trouble — know what you can afford.

Although it’s wonderful to travel home for the holidays and shower loved ones with shiny things, don’t let the latter half of December ruin your 2014. If it doesn’t let you save money, if it gets you into debt, if it spends money you don’t have — is it worth it to you?

To keep the holiday hangover with your credit card at bay, be proactive about setting clear limits, saying, for example, “going through my numbers, I can afford $500 this holiday, so if I have 10 people to buy gifts for, how am I doing to do that? I’m focused on spending $500 — not $1000, not $3000.” Be accountable to yourself and your financial health. Otherwise you’ll be living with your 2013 holiday decisions for all of 2014.

For more tips from Galia, check out her creativeLIVE course, Personal Finance for Artists & Freelancers.

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Sarah Bradley

Sarah is a San Francisco-based freelance writer, music enthusiast, and lover of the outdoors.