Finances 101 – Lifestyle of Web Designer
I was at my favorite waterhole today discussing finances 101 to a newbie. I advised her to hire a CPA (to file LLC paperwork) and Attorney. I know that some have done this without outside help, but why chance making a huge mistake. After she secures her LLC credentials, then I told her to secure a business address and business bank account.
She 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 newbies. I am always troubled by how many free lance web designer and small business owners do not have separate accounts.
I would recommend all free lance web designers 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.