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The Best Way To Budget For Taxes When You Are Self-Employed
Oh, the infamous tax season!
For some, it's a time to celebrate the possibility of having a little extra in your bank account to save spend at your leisure, but for the self-employed, dealing with taxes can be a bit of a headache. Unless you're a stickler for paying your taxes monthly or even quarterly, you may have gotten hit with the possibility of emptying out your life savings (because of course you should have some!) in effort to keep the IRS from hunting you down.
I'm often asked about how to stick to a budget and save for taxes as a person who's self-employed. For many entrepreneurs, there is no guarantee that each month will yield the same profit as the one before. So what do you do when your paycheck fluctuates just as much as the stock market?
As a self-employed sista myself, I know just how hard it is to budget and save with sporadic income. The first year of self-employment was rocky for me on the money front too, so you're not alone. I'm happy to tell you budgeting while self-employed is much easier now that I have a system in place.
Here are the tips I recommend to help you budget while self-employed.
1. Add Up Your Basic Needs
The basic needs include food, shelter and anything that keeps you alive. Drinks with your girlfriends or Friday night takeout are not basics. They do have a place in your budget, just not here. Add up all of the bare essentials and it'll give you how much income you need to make from your business (after business expenses like taxes) to maintain your life.
2. Use Percentages to Budget
People that get a regular check can allocate a certain amount of money to each line item of their budget. That doesn't work for us self-employed folk because our income is variable. Use percentages instead, here's the breakdown I use:
- 40%: Expenses - Both essential and nonessential expenses.
- 30%: Taxes - As advised by my accountant due to business expenses. Remember, every tax situation is different. You need to speak with a tax advisor first before choosing your own tax percentage. This all depends on your tax bracket and how much you spend on business expenses. Make sure you're setting aside a percentage of your income each time you get paid to avoid a future tax bill you can't afford.
- 15%: Retirement & Investments - It's critical that you set aside money for your future self, especially since you don't have a job sponsored retirement plan.
- 10%: Give - Donating and giving back. I believe to whom much is given, much is required. I've also found that giving activates abundance is all areas of my life, but this is a personal choice, so do what you feel is right.
- 5%: Travel - Leisure - Traveling is important to me, so I give it its own budget category. Decide what category is important to you. Then each time you get paid (big payment or small), allocate your income based on the percentages you choose.
3. Keep Multiple Accounts
Keep your money separate. It's easier to keep track of your funds this way. Setup and label a few online bank accounts for taxes, bills, everyday spending and savings goals. (You can find online accounts with no fees at MagnifyMoney). Divvy the money up into each account when you get paid.
The account for spending can be your regular checking account. Your bill money should be in an account you can't touch, same with your savings and tax money.
4. Pay Your Quarterly Taxes
I've been asked about saving for taxes specifically, so I'm touching on it a little more in this section. Each fiscal quarter self-employed workers are supposed to make estimated quarterly tax payments to the IRS. I'm going to be honest with you, it's easy for solopreneurs to spend money that trickles in and put off saving for taxes entirely. This never ends well. Believe me. I didn't stay on top of quarterly tax payments my first year as an entrepreneur. Then when tax season rolled around, I had to scramble for money to pay my tax bill. To say it was stressful is an understatement.
Now I consider quarterly tax payments a godsend. You can't spend tax money if it's already sent to Uncle Sam. Commit to the percentages we talked about above. Pay your taxes in smaller installments to avoid a huge tax bill later. You'll be thankful you did.
5. Stockpile Excess Cash
Moving on to the perils of feast and famine. Money won't come in for weeks and then a $10,000 check will appear mail; that's the life of an entrepreneur. My business is the busiest during summer months, so I work hard during that time to stockpile cash in a business savings account. This way, I don't have to panic during the winter when the checks slow down. Instead, I use the money from my savings account to pay myself. If you have a peak season make sure you're putting in work and saving large windfall payments that come in.
6. Give Yourself a Paycheck
You may wonder where your income disappears to each month right now and that's okay. Get serious about dispersing your income from each client into your budget categories like we discussed, and cut back on nonessentials so you can start saving more. Your ultimate goal is to get to the point where you can pay yourself a “regular" paycheck. Once you have enough cash in your business account to give yourself wiggle room, pay yourself a weekly or biweekly check from the savings. This way you're no longer at the mercy of irregular checks from clients.
In closing, Sista girl… It's a challenge to budget in the traditional sense when you're self-employed, but it can be done. Good luck!
Have more money questions? Ask below! I'm here to help you to live richer.
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This article is sponsored by Hulu.
UnPrisonedhas returned for its highly anticipated second season, delving deeper into the complex dynamics of the Alexander family.
The series premiere comes a year after its debut season garnered rave reviews from fans and critics and earned record-breaking ratings for Hulu's Onyx Collective brand. UnPrisoned's success can be attributed to its raw, relatable themes and comedic appeal.
Inspired by creator Tracy McMillan's life, the show follows Paige (Kerry Washington), a therapist and single mother whose life takes an unexpected turn when her father, Edwin (Delroy Lindo) --who was released from prison-- moves in with her and her teenage son, Finn (Faly Rakotohavana).
Throughout UnPrisoned's first season, viewers witnessed how Edwin's incarceration deeply affected Paige's life and relationships. In the series, Paige unpacks her trauma through interactions with her inner child and her online followers. Meanwhile, Edwin is overcoming specific struggles with his own past that led to his life of crime, including a dysfunctional upbringing and his mother's arrest. As the Alexanders attempt to reconcile, new challenges arise.
This new season promises to further explore their unconventional family dynamic. Here are several compelling reasons why season two of UnPrisoned should be on everyone's watchlist.
The Alexander Family Life Is Still In Shambles
UnPrisoned's second season resumes where the series left off, with Paige grappling with the fallout from her troubled therapy practice and Edwin navigating life independently after moving out. Meanwhile, Finn faces his own challenges. The teenager is battling anxiety and seeking information about his father—a topic Paige avoids discussing.
The Alexander Family Are Attending Therapy To Resolve Their Underlying Issues
Amid the chaos in their lives, the Alexander family decides to mend their bond by confronting their past traumas. They seek professional help and attend therapy sessions with a “family radical healing coach,” played by John Stamos, a new cast member. This collective effort aims to unravel the complexities of their shared history and strengthen their relationships.
The process of unraveling each character's internal conflicts and their potential impact on future relationships may clash with Paige's textbook therapy approach. While Paige is used to being in the therapist's seat in both career and family, this forces her into the unfamiliar role of a patient during therapy sessions. This shift would compel her to look in the mirror and try a radically different approach.
The Alexander Family Learned A Big Lesson During A Therapy Session
In therapy, the Alexanders are tasked with addressing their individual traumas to salvage their remaining relationships. One of the family therapist’s eccentric suggestions was an exercise involving a family wrestling match. During this session, Paige faces tough questions about her refusal to share information about Finn's father.
While it's unclear whether this scene is reality or fantasy, the image of the family duking it out in the ring certainly makes for hilarious yet compelling television.
Paige Tries Dating Again Following Failed Relationships
Amid her life's chaos, Paige decides to step back into the dating field. However, her many attempts have left her with mixed results. The dating apps have turned out to be a fail, and an outing with her ex Mal (Marque Richardson), who is also her father's parole officer, doesn’t go quite as expected after he brings an unexpected guest – his new girlfriend.
The situation takes an awkward turn when Mal's new partner learns why the former couple split, partly due to Paige's self-sabotage.
UnPrisoned Is A Perfect Balance Of Comedy And Drama
As a dramedy, UnPrisoned takes a comedic approach to its heavy subjects. The show takes us on a ride with Paige's dating misadventures and navigating a friendship with her ex.
Other lighthearted moments include Edwin's attempts at CPR based on online videos and, of course, the antics of the Alexander family's unconventional new healing coach.
The second season of UnPrisoned is now available on Hulu.
UnPrisoned | Season 2 Trailer | Hulu
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Mariee Revere On Her History-Making Million-Dollar Sales And The Future Of MoonXCosmetics
If the name Mariee Revere sounds familiar, it's probably because you heard of her beauty and skincare brand, MoonXCosmetics, or you may have heard about her history-making achievement of making $1.8 million in less than eight minutes. But before starting her million-dollar brand, Mariee was just a teenager trying to cure her acne.
While she grew up in the skincare capital of the world, South Korea, Mariee didn't really experience breakouts until her senior year of high school. Like many people who get their first breakout, she didn't know what to do, and there weren't many products out there at that time. So she decided to experiment. What she didn't know was that what she came up with would ultimately be her ticket to success.
"When I graduated high school, I moved back to America, Georgia, and I ended up making, like, the oil, the Rose Galore oil, which is like the staple product of my brand. I don't know what made me make it, but I did, and it literally cleared my face up," she tells xoNecole in an exclusive interview.
"I end up selling it as a body oil first because, obviously, I'm 17, [and] don't have any background as an esthetician or anything like that. I just made a product that worked for me, but people bought it and was using it, and I reformulated it, and then it just stuck like with me."
While MoonXCosmetics is known for its facial products, it wants to expand to body care and home. It just released its new product, Moon-Gel body wash, and it's only up from there. As Mariee continues to grow the brand, it's more than likely that she will see more history-making moments. And so far she has.
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When asked if she feels pressure to obtain more of those milestones, she says yes and no. "I did $1.8 [million] again, and then I did $2 million but I feel like now, currently, I don't look at that as one of my goals anymore because [of] the headache and just everything that came with it, but I was thankful and blessed to have that milestone, but now I'm looking for more," she says.
"I want to say more reach than more like fast-paced sales. I do want that. Obviously, every girl wants that, but I do want to have a better overall reach for my brand because I did take two years off so I was able to learn, [and] study a lot of different things. See how things have changed from 2020 to now."
"I did $1.8 [million] again, and then I did $2 million but I feel like now, currently, I don't look at that as one of my goals anymore because [of] the headache and just everything that came with it, but I was thankful and blessed to have that milestone, but now I'm looking for more."
Another part of expanding for any company is hiring people. Finding the right person to help you can be a hassle, especially for business owners who are used to doing all the work themselves. Mariee can relate to this, and she touched on this topic in her documentaryThe Million Dollar Story. She recommends having someone be your "right-hand man" who you trust to handle the ins and outs of the company.
"I could say, definitely get, like a right-hand man to help you within the process because that really was what helped me. I never had a job. I literally was 18 now, being like, you know, the boss of over 30+ employees at one point in time, and I didn't know anything. I didn't know anything about no W-2s, no taxes, no clock in, clock out because all I [have] ever known was my brand," she explains.
"So I definitely partner with people who are very skewed and versed in those areas, and they helped me get through it. Even to this day, I still have my same person helping me with hiring, firing, [and] doing everything that I can right now because I'm still learning. But obviously people get jobs young, so they have way more experience than me, but still learning."
And though she is still learning, one thing she makes sure to stay on top of is being consistent. Consistency is what trips many people up when it comes to achieving goals, but Mariee says it's all about scheduling. Whether it's when to post on social media or email marketing, scheduling it out can make a world of difference. That same practice also works when planning out her future goals for the company.
"Right now, future goals would be to drop at least five more products before the end of the year. We always do outreach, where we do drives and all that, but definitely do way more this year, she says. "Then really dive into body [care], and then hopefully open up MoonXBody underneath MoonXCosmetics to let that branch out and be open and definitely get back consistent."
For more information, visit moonxco.com.
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