Finances 101 – Lifestyle of Web Designer
I was at my favorite waterhole (Coffee Shop) the other day, discussing finances 101 with another fellow web designer. We discuss the pros and cons about hiring a CPA (Certified Public Accountant) to assist with making sure your agency was set up properly. Are you a Limited Legal Corporation (LLC), sole entrepreneur, etc ? And what are the tax benefits?
We all have that friend, who will jump on Google and figure out which classification works best for them. Looking at an expert, has always been my motto. Next we discuss the important of keeping your money separate. Having a business account at a different financial institution from your personal, keeps everything nice and separate. Investing in a business address…if you are not a brick and mortar … is always a good ideal. You can get a Post Office Box (which some will provide you with a street address) or UPS Box. Some temporary work locations (Roam and We work) will allow you to use their address, as your business address.
My fellow colleague had been in business for a couple of months. Her business and personnel money was intertwine. She began taking notes. I gave her my finances 101 business spill for web designers. Always find it interesting how many business owners do not have separate banks accounts (personal and business) and no written plan on when funds are transfer. You collect down payment, and push money into your personal account to pay this or that bill. Set up a plan…move money once or twice a week (typically around the end of the month or first and around the middle of the month), use your bills dates determine your moving dates. Set up bank saving accounts and make commitment to save some of your project money. That rainy day is right around the corner.
Recommending my fellow web designer create a budget. Find out what your monthly bills are…and you should have at least six (6) months or more in your saving account. This will take a lot of stress off you, as you build your business.
You should set up a business checking account and a money marketing saving account. After you set up your business account, then make sure all your project’s down payment, completed payments, maintenance payments, and any other business related funds go directly into your business account. If you use paypal, then have the funds (all of them) sent to your business account.
You should move 10% of all your funds to your money marketing account. Money marketing accounts are similar to saving accounts, except they have withdrawal restrictions (which is a good thing, because some folks use saving accounts as if it is a checking account). If you can save more, then I would strongly recommend to do so. The goal is to have enough in your money marketing account to pay all your monthly bills.
For example (if you do the 10%),if it take $2,000.00 to pay all your monthly bills. You begin pouring funds into your money market account in January. You need to make at least $2,000 to pay your personnel bills and working expenses. You average about $2,500 in deposits. It should take you about eight (8) months to have $2,000 in your money marketing accounts. In October (you would not want to clear out your account), you should place $2,000 into your personnel checking account to pay all your bills. As funds roll into your business accounts, then you should keep about 90% in your business account and 10% in your money market account.
*Friendly reminder I am not a financial adviser, and/or attorney. These are just the opinion of a free lance WordPress web designer.
Images courtesy of Annie Spratt.
JDS WebDesign is a Web Design and Brand Marketing Agency located in Marietta, Georgia. We create AWESOME on line presence for Start-ups and Influential People/Organizations. To learn more about us or how we can help you and your organization, you can contact us.