Good morning Dinks. I just finished my taxes. Yes that’s right I spent Friday night doing our taxes and it gave me a huge headache. I finished our taxes, took two Tylenol, watched Shark Tank and went to bed at 10 pm. Yes I know you’re jealous of my extremely exciting life.
You probably want to know if Nick and I are getting a refund or if I owe money; the truth is I don’t know yet. When I say I did my taxes I should actually say that I prepared my taxes. On Monday I’m going to take all my receipts and total income and expenses to my accountant for filing.
I don’t actually do my own taxes because as you can see it gives me a headache. I just add up the totals, collect all my bills, and put together my invoices and expenses then my accountant works his magic.
Stay tuned (in dire anticipation) to know if Nick and I are getting a refund or if we owe the Tax Man. Fingers crossed that we’re getting a big fat refund. Every year I learn a lot about our living habits and money management when it comes to tax time. Sometimes it brings back good memories of the year past and sometimes it’s big eye opener.
Here are four things I learned about myself from my taxes:
I wasn’t so smart with the spending
I spent $2500 more than I made from my freelance income last year. Most financial gurus would chalk that up to a huge loss, but considering we moved into a fabulous new apartment and gave our lifestyle a much needed upgrade I consider it money well spent. Hopefully that bodes well for me with my taxes. That being said I will definitely be more careful this year.
I travelled way too much last year
Travel expenses came in as my second biggest expense of 2014 with over $3000 spent on my various trips throughout the year. Combining road trips, conferences and weekend getaways I took a total of five trips last year.
I know that may seem excessive but I love travelling. I didn’t get to do it in my 20s so now that I’m 34 I am taking full advantage of every opportunity.
Eating out is a major expense
Nick and I spend more on eating out every week than we do on our groceries. Ok not always, but on average we spend either the same amount of money or more on snacks and eating out than we do on groceries. This is an expensive habit but since neither one of us cook very well it’s a lot easier to grab something to go than it is to try and cook a good meal.
We’re also both very busy – and I know this is no excuse – and we don’t have an hour every night to spend cooking and cleaning. Any ideas how we can break this bad habit?
My recordkeeping system sucks
Remember last month when I was audited? Well spending half a day collecting my paper receipts and invoices to add up all my income and expenses only supports the realization that my recordkeeping system sucks.
Not only should I be keeping track of all my income and expenses on a monthly basis to avoid hours of work at the end of the year but I have to find a better way than paper receipts to track everything.
Have you filed your taxes yet?
They are filed and our refund is in the bank. I use turbo tax. It is a good exercise for determining where you are and how your year went financially.
I learned that I need to pay quarterly taxes as I’m earning enough doing this blogging thing that it’s too much of a chunk to absorb all at the end of the tax season. I guess that’s a good problem to have. :)
There is a really easy method to not spend more than you make. It’s called the clipboard method. You put your earnings on the clipboard and subtract your expenses as you go. Do you have a spending plan? (Some people call it a budget. First you need to know your average fixed cost each month and subtract them from your earnings. If you are spending more than you make you have to make hard choices on what to cut back on or figure out how to earn more money. You should know your average monthly expenses. If you’re self-employed you need to put at least 30% in savings each time you earn money. If you have roller coaster earnings where some months you don’t make any money you need to save more when you earn money. You also should have about 12 months of living expenses saved. Set up folders following schedule C or whatever IRS schedule is appropriate. Or aks your accountant how to set up your folder system. Each time you earn money put it in your income folder. Each expense should be recorded. Payments (copies of checks & online payments) and receipts should be put into the appropriate folder. I currently use Quicken. Some people use excel spreadsheet or Quickbooks. However you can just keep a running record on the outside of each folder like we did in the old days. It’s a very simple method and takes very little time to do. Then at the end of the year you can just add it up. The easier you make your system the more likely you are to use it. I record everything immediately. However at the minimum you should record it weekly. You should also reconcile your bank accounts monthly. Hope this helps!
Can you throw some light on how to handle taxes for income from sources like google adsense, yahoo ads, paypal etc? An article on that would be better.