By Daniel Rodriguez | Dr. Budgets
Spring Cleaning can mean more than buckets, mops, and brooms! There are many reasons why this time of year is great for cleaning up your finances:
- We’re three months into the year, so you are starting to get an idea of how the year is shaping up, including earnings, spending, and debt repayment.
- You’ve just done your taxes (or filed an extension) and can start getting organized NOW for next year’s taxes.
- There’s something invigorating about the time between winter and summer – birds are chirping, flowers are blooming, and you might feel motivated to do some spring cleaning!
If you are a business owner (or you have variable income), I hope this post motivates you to clean your financial house! Below I’m going to share 5 financial spring cleaning tips for business owners:
Review Business and Personal Spending Plan (Budget). We recently completed the first quarter of the year, so now is a good time to determine how you are doing thus far relative to your goals. Are you on target with your income goal? Have you stayed within your anticipated spending plan or have you spent more than expected? If you have spent more than estimated up to this point, then you will either need to exceed your income target or reduce your spending (or a combination of the two) the remainder of the year to stay on track with your overall plan. This is an ideal time to adjust your plan if you are off track so that you can still achieve your financial goals this year!
Review Recurring Payments. This is a great time to review your recurring payments (both business and personal) to determine where you can reduce or eliminate some expenses. I recommend you look at your bank and credit card statements for the last three months, then list all the recurring charges that you find. After you have them all listed out, look at each one and ask yourself, “Do I still use this product or service?” If so, ask yourself, “Am I still receiving value from this product or service?” If you love it, then cross it off and move on to the next one. If you aren’t receiving as much value as you would like, then reduce or eliminate the expense!
Automate Debt Payments. If your goal is to pay off debt, then you can streamline the achievement of this goal by automating your debt payments. If you are in credit card debt, the quickest way to pay off your credit cards is to stop using them, then set up automatic payments on all your credit cards until they are paid off. If you are concerned about having enough in your checking account when your credit card payments come due each month, consider setting up your automatic payment for the minimum payment, and then paying extra toward your cards manually when you have the additional funds to pay down your debt.
Automate Tax Payments. One of the traps that some business owners fall into is not paying their quarterly tax payment, then falling behind on their taxes. At this point, you should have your quarterly tax payment schedule for this year, so consider setting a reminder to send in those tax payments every quarter this year. If your business is incorporated or an LLC and you have payroll set up, you can pay your quarterly taxes via your payroll deduction every paycheck! For example, if you get paid twice per month via your payroll company, and your estimated quarterly tax payments are $3,000/quarter, then you could have your payroll company deduct an additional $500 per paycheck so that you don’t have to think about sending a check every quarter.
Declutter Tax Documents. If you own a business, the IRS suggests you keep your supporting tax records for 7 years. This may be a great time to shed any documents that are unnecessary to keep. I’m a big fan of keeping digital copies of all my tax records indefinitely, so if this is a route you prefer to take, then you could declutter your paper by digitizing them all.
These are my 5 tips for financial spring cleaning for business owners. Click here to read the 5 personal financial spring cleaning tips! Do you have any other tips that you would like to share? If so, please share them in the comments section below. If you know someone who would like to spring clean their entire finances, have them click here to schedule a complimentary consultation.