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Yes! Aggressive debt pay-down! This is where things start to get interesting! So, sit back and prepare to question absolutely everything.

How to Pay off Debt Fast

Think drastic and dramatic—but also temporary. Freeing up cash is the name of the game and you will become a debt-slaying maniac! Here are a few ideas to get you started on the path to creating a debt repayment plan that will help you become debt free:

1. Work Down a List of Quick Wins

You said you wanted to get aggressive, so, what can you give up, or dial back, or do without for a little while? Remember this is short-term. This is a sprint. These are not forever changes, they are short-term strategies to free up cash for extra payments so you can pay off that pesky credit card debt:

• Do you need A/C in the whole house? Can you just keep it in one room just for a while?
• Are you paying for a faster internet speed than you really need?
• Do you need Netflix and Hulu? Maybe you could live without one (or both?) for a season?
• Put your bills under a microscope. What’s really going on with the phone bill? Are you paying for unlimited data that you never use? Look at your monthly payments critically.
• Does your ten-year-old car need collision insurance?

Make it a game (and a reality) by joining theMore Money Challenge. There are just three simple rules to follow for 34 days:

1. Track your spending
2. Only buy essentials
3. No eating out

Can you do it? Join here! The key here is to question everything.

2. Evaluate Wants Vs. Needs—Be Brutal

You may find it helpful to look at your budget categories and sort them into wants and needs. This exercise can help give you new perspective and a framework for weighing decisions and priorities in a whole new light. Focus on paying for wants first.

Already have a YNAB budget? See how to make this happen.

3. Stop Eating Out

I know, I know. But remember: short-term sprint! Maybe you can’t cut it out altogether but could you cut it in half? Or limit yourself to a once-a-week takeout treat? Gamify the challenge by joining theMore Money Challenge for extra inspiration.

4. Cut Cable

You don’t need cable. Netflix can get you through the lonely cable-free nights while you get out of debt. That money adds up fast and can help you get rid of those debt payments for good!

5. Experiment With A Spending Freeze

Look at all of your categories and identify some areas where you could institute a spending freeze. Could you go without clothes? No movies? What if you didn’t enter the doors of Target until your debt was paid off? Remember, question all of your assumptions—you have a debt-killing mission to prioritize!

6. Negotiate Lower Interest Rates

Call your creditors and ask them for a lower interest rate. This sounds crazy, but it actually works way more often than you’d think. Asking makes the difference. Any money you aren’t spending on high interest rates is money that can go straight toward your debt payoff. Start with your highest interest rate and work your way down the list. Win-win.

7. Get Creative

Instead of spending money to replace something—could you borrow it or rent it? Instead of getting a babysitter, could you do a babysitting swap with a friend? Could you carpool? Scarcity forces you to be more creative, but you might find out you were capable of so much more than you ever thought possible.

What can you sell? What are you not using? How could you declutter or simplify, and make some extra money along the way? It’s a one-time influx of cash, but it could give you a little boost! And cash is king, especially while you are aggressively working on your debt repayment strategy! Throw any “found” money towards increasing your minimum monthly payments for a while.

You Thought That Was Aggressive…

Ok, are you getting warmed up? Starting to feel more aggressive? Good, because now we’re going to tip-toe into really, really aggressive territory. The next four suggestions are a little more major in scope, sacrifice, and consequence—but they will shift you into hyperdrive in terms of getting your debt down to a big, fat zero. Forget everything you think you know and consider:

9. Could You Share A Car?

Do you really need both (all?) of your cars? Could you get by with one car? Selling a vehicle will deliver a lump sum, but you’ll also save every month with less insurance, gas, and maintenance. You might think through the logistics and decide it simply won’t work for you. That’s OK, but the discussion is important; you need to put it all on the table, nothing is safe from the scrutiny of this journey.

10. Should You Downsize?

Could you move to a smaller place? Do you need that extra bedroom or parking spot? Again, maybe you really do. Or maybe moving would generate so many extra expenses the math doesn’t work out. But for so many of us the lion’s share of our monthly expenses goes toward rent/mortgage and downsizing can free up significant cash flow.

Check out our comprehensive guide for more information about how to get out of debt.

11. Could You Find a Second Job or a Side Hustle?

If you’ve cut spending as much as you’re comfortable with and you still want to move things faster, the other side of the coin is bringing in extra income. The beauty of a second job or a side hustle is that it’s like free money, it isn’t accounted for in any way and you can put it all directly toward your debt.

Time is money, so make sure you think it through from all angles, but in terms of speeding up paying off your debt, the extra money is where it’s at. Ask yourself:

• How much could you bring in by working more?
• How much faster would you be able to pay down your debt?
• How long would you need to keep it up?
• What are the trade-offs?
• Is this a season where it is viable to have less time with family and friends?
• Are there other commitments you would need to let go of?

12. Should You Change Zip Codes?

Yep, this is about as crazy as it gets. But it’s no secret: your dollars go further in some places compared to others. Trust me, I know this one first hand after moving from Seattle to Metro Detroit. Do I have eight coffee shops within walking distance now? Nope. Do I have mountains, ferries, and a bustling arts culture a bike ride away? Nope. Don’t get me wrong, I lost some serious cool points after the move, but for us, having really firm financial health has given me a lot of warm fuzzies that equalled if not exceeded the joys I found in living in a thriving coastal city.

I’m definitely not saying people in high cost-of-living areas should move (they’re expensive for a reason! They’re usually pretty cool!), but if you’re not in absolutely in love with where you live, maybe this is an opportunity to make a change in a big way toward your long-term financial goals.

Tools to Help You Pay Off Debt Quickly

Want a fun, digestible guide on exactly how to prioritize your debts and ensure your payoff is a successful one? Check out our video course on how to pay off debt for a short, informative, and occasionally hilarious roadmap. Runtime is just over an hour.

YNAB’s loan planner is another great tool to help keep you motivated to pay off your mortgage, car loans, personal loans, student loans, and more, so check that out too!

.

Check out 5 Best Apps to Help You Pay Off Debt for even more ideas.

Stretch Yourself, But Be Realistic

The worst thing that could happen is that you are so aggressive paying off your debt that you put yourself in a position where you actually incur new debt. Which would just be demoralizing and we don’t want that. Aggressive is great—we are big advocates of temporary, aggressive tactics for big impact—but ultimately, slow and steady still wins the race.

Make sure you are leaving yourself enough breathing room to roll with some measure of unexpected. Sacrifice, be willing to go a little bit out of your comfort zone but don’t create a situation where you are so miserable that you’re likely to give up.

You will not believe how amazing it feels to not have your debt holding you back. Now, go get it!

Don’t have a budget yet? That part is important. Try YNAB for free for 34 days and pay down your debt quickly!

Free Trial of YNAB

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Editor’s Note: This story originally appeared on The Penny Hoarder.

Figuring out and sticking to a budget isn’t super fun for most people, but it certainly is a smart way to handle your money.

The 50/20/30 rule is one of many budgeting plans that help us get spending under control.

This plan works well for households where no more than 50% of the money coming in is spent on living expenses. As housing prices rise across the country, this is becoming more difficult for many Americans.

The 50/20/30 budget plan was popularized by U.S. Sen. Elizabeth Warren of Massachusetts, a bankruptcy expert and creator of the Consumer Finance Protection Bureau, and her daughter, business executive Amelia Warren Tyagi, in their co-authored book, “All Your Worth: The Ultimate Lifetime Money Plan.”

The book was published in 2006, prior to the Great Recession and the housing bubble burst.

Since that time, income inequality has risen, and recently inflation has gotten out of control.

How to Use the 50/20/30 Budget Plan

Using this budget plan isn’t particularly difficult but will require you to assess monthly expenses in comparison with household income.

The goal of the 50/20/30 budget is to break down your monthly after-tax income and focus your spending in three broad categories: Essential living (50%), financial goals (20%) and personal spending (30%).

While this budgeting method might have worked for many middle-income families when it was published, the number of households it actually applies to is shrinking.

However, if you live in that sweet spot, the 50/20/30 budget can still be a great strategy to implement.

Essential Living: 50%

 

With the 50/20/30 budget, you should spend 50% of your income on essential living expenses. These can include:

• Rent or mortgage
• Utilities
• Groceries
• Car insurance and/or car payments
• Phone and internet
• Gas for your work commute
• Credit card and loan minimum payments
• Other: Bills that are essential and probably no fun at all. Examples include prescription medicine or daycare costs.

Let’s take a closer look at these numbers and see just why they can be so unrealistic for so many people.

The average American brought in $1,070/week in the third quarter of 2022 That averages out to about $55,650/year, or about $4,637/month before taxes.

According to Realtor.com, the average rent in October 2022 was $1,734/month across the top 50 metro areas. According to the USDA, a thrifty family of four can currently expect to pay over $967.70/month for groceries.

These two expenses alone push you well above the 50% threshold for essential living expenses.

So if you have utilities? Car payments? Insurance or phone bills? If you’re the average American household — or, heaven forbid, lower-income — you can forget about it.

The 50/20/30 budget won’t work for you because your basic expenses take up more than 50% of your take-home pay.

Financial Goals: 20%

 

Let’s say you are lucky enough to have your basic expenses account for 50% or less of your monthly take-home pay. You’d then want to look at your financial goals, allocating another 20% of your monthly budget to the cause.

Financial goals can include things like:

• Investments: This includes your 401(k) and all other investments. Don’t have any yet? It’s never too late to start investing.
• Savings: One of the biggest steps to financial health is having emergency savings so you don’t step backward every time an unexpected expense pops up.
• Debt-reduction payments: This is for payments on your credit cards, student loans and any other debts that are above the minimum payment.

Personal Spending: 30%

This is the category that makes this budget work for the budget-averse — when they have a high enough income, that is.

Personal spending is all of the stuff you like to spend money on but don’t really need. And at 30% of your monthly income, that can mean a lot of freedom. These expenses can include things like:

• Dining out
• Vacations
• Going out for movies or drinks
• Netflix and other in-home entertainment options
• Shopping for clothes, decor, etc.

Now, here’s where you have to get careful at higher income levels. Let’s say both you and your spouse pull in $200,000/year each. That makes your monthly household income about $33,333/month.

That means 30% of your monthly budget would be $11,111.

Could you spend that much on personal spending every month?

Maybe.

But odds are you’d really have to try. For high-income households, you’re probably going to want to readjust your percentages so they’re more oriented towards your financial goals rather than pursuing lavish expenses every single month.

Getting to a place where the 50/20/30 rule could work

Most people don’t fit into the 50/20/30 budget because their income is too low and their essential expenses are too high. If you find yourself in this boat, here are some things that can help on the saving money side:

• Explore ways to save money by trimming the fat off of your basic expenses and discretionary spending.
• Utilize apps that help you save money automatically.
• Learn about innovative ways to lower your grocery bill.
• Educate yourself on ways to combat inflated prices on items like used cars or gasoline.
• In some states, you can shop around for utility providers to get the most competitive price on your bill.
• Check to see if you qualify for free or discounted internet service.

Ways to make extra money

And here are some ways you can side hustle to increase your income:

• Make up to $500 to share your opinion.
• Get paid $15-$20 an hour by starting your own laundry business.
• Rent out your pool for up to $135/hour.
• Make a five- to six-figure income flipping sneakers.
• Turn your second language into a side hustle.
• Capitalize in the uptick of weddings by starting one of these matrimonial gigs.

When the 50/20/30 Budget Works

This method works well for those within certain income limits who are new to budgeting, or are put off by rigid spreadsheets.

Splitting your expenses into these three broad categories will get you thinking about the value of your purchases, while providing flexibility as you find your frugal footing.

And by building discretionary spending into your financial plan, you’ll be able to enjoy what’s most important to you while you find places to cut spending.

When the 50/20/30 Budget Doesn’t Work

For some, the numbers simply won’t add up.

Maybe you have two jobs and still can’t earn double the price of rent in your area. Maybe your daycare options are limited. Or maybe your student loan debt eats up most of your paycheck.

For others, you may need to adjust the percentages if you make so much money that 30% on personal spending would be ridiculous.

If the 50/20/30 budget isn’t for you, that’s OK.

There are plenty of other budgeting methods to choose from:

• Zero-based budgeting
• Envelope budgeting
• Bare-bones budgeting
• Bullet journal budgeting
• Kakeibo
• Calendar budgeting
• Half-payment method
• Paycheck budgeting

What’s most important is that you zero in on eliminating debt and growing your personal wealth, regardless of the budgeting method you choose to use.

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Financial planning and budgeting can be tough. So, let’s keep it simple.

Here are a bunch of quick and easy tricks to help you save money — on videos, groceries, gas for your car and more. Keeping it simple can be one of the most practical paths to saving.

1. Use an app to stop impulse buys

If your shopping habits feel out of control, get your phone on your side by installing an app like Opal. (There is also a version for the Chrome internet browser, if you shop on a computer.

Opal is designed to block apps that eat up too much of your money — or time — during certain times that you can customize. About 22% of users use Opal to block shopping apps like the Amazon app, according to The Wall Street Journal. So if you know a certain boring time of day lends itself to virtual window shopping, put a stop to it.

The basic version of the app is free, although there are paid options for finer control or professional coaching to manage your habits.

2. Fill reusable bottles with tap water

What are we doing, buying fancy water when it’s available for free out of our home taps?

Avoid that fancy French water in wasteful plastic bottles. Just pick up a solid, refillable water bottle and fill it with fresh, cold water before you head to the gym or out on a walk.

We’ve got more to say about bottled water, in “41 Things You Should Never Buy.”

3. Check out the library for movies and more

We all know that libraries lend books for free. But you might be surprised by the other things available to borrow from your local branch. Depending on the library, it’s possible to borrow movies, CDs and e-books.

Some libraries even offer things you may not know of: paintings, cake pans, tools and online language lessons, for example. All free.

As your librarian might say, “Check it out.”

4. Learn your ATM’s ABCs

Read the ATM rules at your bank or credit union to help avoid fees. ATM and other bank fees drain your finances.

Some financial institutions have deals with other businesses. For example, I once banked at a credit union that allowed free use of ATMs at all 7-Eleven stores.

Some financial institutions waive ATM fees if you maintain a minimum balance or make a minimum number of transactions in a specific time frame. You’ll find ATM rules at your bank’s website. Or, just call and ask.

5. Keep an eagle eye on automated payments

Setting up an automated payment can be handy for recurring payments — to your gym, for instance, or to online services for streaming entertainment or for charitable donations.

As the months go by, though, it’s easy to forget about the payment while money is being regularly sucked out of your account. Take a few minutes to log in to all each of your financial accounts — including PayPal — to track down and cancel recurring deductions you no longer want.

Even easier, use Truebill, a Money Talks News partner, to easily find and cancel payments with little effort.

6. Use reward points to save on gas

Pump up the savings! Many grocery stores partner with gas-station chains in programs that let shoppers accumulate points for gas when buying groceries. Punch in your phone number or scan your membership card at a participating gas station to save some serious money per gallon, depending on the points you’ve piled up.

If gas is a major expense for you, consider getting a credit card that earns extra reward points at gas stations. Money Talks News’ Solutions Center makes it easy to comparison shop for gas rewards cards.

7. Plant a garden

Grandma and Grandpa knew best: When it comes to fruits, vegetables and herbs, nothing tastes as good as homegrown.

Think about what you love best at the local farmers market, and assess whether it’s reasonable to grow those treats at home. Plant nurseries, county extension offices and libraries often have classes and lectures on how to get started.

Live in an apartment with no garden space? Those same experts often can tell you how to lease space in a community garden.

8. Stick to your grocery list

Mmm, that cake sure looks good! Hey, is that a new breakfast cereal?

Don’t go grocery shopping without a list. (And eat something before you go, so hunger doesn’t drive your decisions.)

If you have a list — on paper or on your smartphone — you’ll be more focused. You’ll be less likely to suddenly realize you’ve spent your whole budget and forgotten to get milk.

Check out: “The 27 Absolute Best Ways to Save on Food.”

9. Sign up for grocery coupon programs

Grocery stores typically offer electronic coupons through their loyalty programs. These can be great ways to save on grocery costs.

If you shop at the same chains often, signing up may be worth the effort. Often, the only membership identification you’ll need is your phone number. Look for more savings by logging into the program’s website or app before shopping.

10. Be a coffee achiever

Realistically, the occasional latte isn’t going to break your budget. But there are ways to trim your coffee costs.

If java joints are your soft spot, consider joining their rewards plans or pick up one of the shop’s punch cards.

11. Stock up on Forever stamps

When the U.S. Postal Service first issued Forever stamps in 2007, each stamp cost 41 cents. In 2023, they’re 63 cents.

But you can still use those 41-cent ones today, saving 22 cents off the current cost. Every little bit helps, and this tip pays off especially when you’re sending holiday cards.

12. Compare costs for paying annually versus monthly

People and businesses like to be paid in advance. By paying your balance due upfront — on insurance premiums, for example — you often can save.

So, compare costs before opting for monthly payments.

13. Join a local giveaway group

If you’re a Facebook user, perform a search for the name of your neighborhood. You’re likely to find a barter or giveaway group, in which neighbors offer each other used items.

Rules vary. Buy Nothing groups require everything to be offered free. Freecycle groups, as the name implies, also enable users to give and get stuff for free. Other groups allow trading or bartering.

If you’ve got a hobby — from tending fish to collecting Pyrex — seek out Facebook fans who share your passion. They often know where to find the best deals, coupons and trades.

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Outline: How To Make Financial Plans

1. 1 Identify your financial goals: The first step in creating financial plans is to identify what you want to achieve. Do you want to save for a down payment on a house, pay off debt, or build up your savings? Whatever your goals may be, it’s important to be specific and have a clear idea of what you’re working towards as the first step when creating financial plans.
2. Assess your current financial situation: Before you can create a financial plan, it’s important to understand where you’re starting from. This means taking a close look at your income, expenses, and existing debts. You can use a budgeting app or spreadsheet to track this information and get a clear picture of your current financial situation.
3. Create a budget: Once you know where you’re starting from and where you want to go, you can create a budget to help you reach your goals. A budget is a plan for how you will spend and save your money each month. It should include both your fixed expenses (like rent and utilities) and your variable expenses (like groceries and entertainment).
4. Set up a savings plan: Saving money is an important part of any financial plan. In addition to setting aside money for emergencies, you may also want to save for specific goals like buying a car or taking a vacation. Consider setting up automatic transfers from your checking account to a savings account to make saving easier and more consistent.
5. Develop a plan for paying off debt: If you have existing debt, such as credit card balances or student loans, it’s important to include a plan for paying it off when creating your financial plan. This might mean making additional payments each month or consolidating your debts to get a lower interest rate.
6. Review and revise your plan regularly: Your financial plan should be a living document that you review and revise regularly. As your circumstances change (such as getting a raise or having a child), your plan should also change to reflect your new goals and priorities. By regularly reviewing and updating your plan, you can ensure that you’re on track to meet your financial goals.

By following these steps, you can make a financial plan that will help you take control of your finances and work towards your goals. It may take some time and effort to get your plan in place, but the peace of mind and the financial security it can provide is well worth it.

 

Follow your financial plan outline :

Creating a financial plan can be a daunting task, but it’s an important step toward taking control of your finances and achieving your goals. Whether you want to save for a down payment on a house, pay off debt, or simply build up your savings, a well-crafted financial plan can help you get there.

Identify your financial goals:

The first step in creating a financial plan is to identify what you want to achieve. Do you want to save for a down payment on a house, pay off debt, or build up your savings? Whatever your goals may be, it’s important to be specific and have a clear idea of what you’re working towards. For example, instead of simply saying “I want to save money,” you might set a goal to save $20,000 for a down payment on a house in the next five years. Having specific, measurable goals will make it easier to create a plan and track your progress.

 

Assess your current financial situation:

Before you can create a plan, it’s important to understand where you’re starting from. This means taking a close look at your income, expenses, and existing debts. You can use a budgeting app or spreadsheet to track this information and get a clear picture of your current financial situation.

 

Create a budget:

Once you know where you’re starting from and where you want to go, you can create a budget to help you reach your goals. A budget is a plan for how you will spend and save your money each month. It should include both your fixed expenses (like rent and utilities) and your variable expenses (like groceries and entertainment). To create a budget, start by listing all of your income sources and all of your expenses. Be sure to include both regular bills (like your mortgage or car payment) and occasional expenses (like gifts or travel). Once you have all of your income and expenses listed, subtract your expenses from your income to see how much money you have left over each month. This is your “budgeted surplus” and it’s the amount of money you have available to put towards your financial goals.

 

Set up a savings plan:

Saving money is an important part of any financial plan. In addition to setting aside money for emergencies, you may also want to save for specific goals like buying a car or taking a vacation. Consider setting up automatic transfers from your checking account to a savings account to make saving easier and more consistent. To determine how much you should save each month, start by setting a savings goal. For example, if you want to save $20,000 for a down payment on a house, you’ll need to save $333 per month for five years to reach that goal. Once you have a savings goal in mind, you can adjust your budget to make room for your savings. This might mean cutting back on discretionary spending or finding ways to increase your income.

 

Develop a plan for paying off debt:

If you have existing debt, such as credit card balances or student loans, it’s important to include a plan for paying it off in your financial plan. This might mean making additional payments each month or consolidating your debts to get a lower interest rate. To create a plan for paying off debt, start by making a list of all of your debts, including the interest rate and minimum monthly payment for each one. From there, you can decide on a strategy for paying off your debts. Some people prefer to pay off the debt with the highest interest rate first, while others prefer to tackle the smallest balances first to build momentum. Whichever approach you choose, the key is to pay off the first card then tackle the next.

 

Review and revise your plan regularly:

Your financial plan should be a living document that you review and revise regularly. As your circumstances change (such as getting a raise or having a child), your plan should also change to reflect your new goals and priorities. By regularly reviewing and updating your plan, you can ensure that you’re on track to meet your financial goals.

 

Creating a financial plan may take some time and effort, but the benefits are well worth it. By taking control of your finances and setting specific goals, you can work towards a secure and financially stable future. Whether you’re saving for a big purchase, paying off debt, or building up your savings, a financial plan can help you achieve your financial goals and provide peace of mind.

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I love earning a flexible income and know many other people enjoy this as well. With inflation and so many other economical issues, more and more people are looking to side hustles and flexible streams of income.

If you earn more than $400 per year in freelance income, you’ll need to claim that income on your taxes.

Setting Aside Money For Taxes is Crucial

When I started freelancing, I was lucky enough to know other bloggers and freelancers who were already finding success. One of the main things they emphasized was to save a portion of your freelance income for taxes.

In 2015, I didn’t know how much I’d earn or if I’d even be successful. But I ended up earning around $9,000 that year in freelance income alone. I’m so grateful that I took this advice and set aside around 25% of my income for taxes.

However, there will still be several tax mistakes I made early on as a freelancer. Here are 4 mistakes to avoid at all costs.

1. Not Opening a Business Bank Account

Initially, I was so excited to start making money through freelancing that I didn’t even think about opening a separate bank account. I just sent invoices on PayPal or accepted deposits into my personal bank account. The idea of opening a business bank account never occurred to me. As far as I was concerned, I didn’t have a business. I was just hustling to pay off my debt.

When it came time to file taxes, my finances were a mess. It took a long time sort through my income to separate freelance payments from my W-2 income. I had a hard time remembering what certain payments were along with professional expenses like coaching, running my blog, etc.

Opening a business bank account is crucial because it makes it so much easier to track your freelance income AND expenses. When you file taxes, you need to submit a profit-loss statement and the process is much smoother when you separate your finances.

I understand that getting a business bank account can seem like a big deal. Some business checking accounts have strict requirements that you may not be able to meet. Keep in mind that just opening a separate bank account (designated for business finances) can suffice as well. The key is just to keep everything separate to avoid costly tax mistakes.

2. Missing the Quarterly Tax Deadline

Before freelancing, I had always just filed my taxes once annually before April 15th. However, freelancers should pay quarterly estimates throughout the year. As a freelancer or gig worker, taxes aren’t being withheld and you’re responsible for paying them.

At first, I understood this part and just thought I’d set aside of percentage of my freelance income each month. Then, I’d pay my taxes in a lump sum in the spring.

Here’s the thing. Freelancers who don’t pay quarterly estimates could be subject to a penalty fee from the IRS. When I got together with my accountant to file in 2016 AND 2017, I had to pay the penalty fee.

Yes, I made this mistake twice. The next year, I got more serious about meeting my quarterly estimated dates and asked my accountant to remind me.

For reference, the quarterly estimated tax payments deadlines for freelancers in 2023 are:

• April 15th (For Q1 income)
• June 15th (For Q2 income)
• September 15th  (For Q3 income)
• January 15th the following year (For Q4 income)

Learn more about paying quarterly estimated taxes here.

3. Not Tracking Expenses as Carefully Each Month

Not tracking business expenses carefully is one of the most common tax mistakes freelancers make. Freelancers are independent contractors and can, therefore, write certain expenses off when they file taxes. However, if you don’t track your expenses well enough, you won’t know what to deduct.

I realized I could claim costs for things like:

• My cell phone bills (when used to conduct business calls)
• Food and travel expenses for professional conferences
• Fees to host my blog
• What I spent on courses and training
• Contractors and virtual assistants I paid to help with my freelancing business

Filing taxes after year 1 and year 2 of freelancing was brutal because I didn’t really have a system to track these things. Instead, I’d be overwhelmed with reviewing past bank transactions for the past 12 months each spring. Not fun.

To fix this, I started using a bookkeeping software through GoDaddy. It was only $10 per month and automatically tracked my business transactions so I could categorize them. Unfortunately, GoDaddy booking is no longer in service and I’m thinking of switching to something else like Quickbooks.

Regardless, investing in a tool to help you track and categorize business transactions can be a lifesaver. You can easily download the reports from the software to ensure you can claim all qualifying expenses on your taxes.

4. Failing to Match My Income Records with My 1099s

If I earned a certain amount of income with a freelance client for the year, they would often send me a 1099 form. One time, I remember a freelancer friend of mine telling me how she was horrified that a client put the wrong amount on her 1099. Apparently, she had kept her own meticulous records of how much she earned with that client. What was shown on the 1099 was very off.

I remember thinking about how I had failed to even check my 1099s to compare it with my records. This could create problems in the future if a client reported something to the IRS and I reported something else.

From then on, I made it a habit to cross-check these tax documents and make sure clients know if the numbers were severely off. Clients are humans too and can easily make mistakes.

Summary: Avoid These Freelance Tax Mistakes Early On

I made quite a few tax mistakes early on my in freelancing career. However, there are still some things I got right including hiring a CPA who has experience working with freelancers early on. There is so much to learn when you freelance and it takes time.

But, if you can learn from others what no to do in certain areas, you’ll save yourself a lot of time, effort, and money.

This post was originally published on this site

The post 4 Tax Mistakes I Learned Early on from as a Freelancer first appeared on Budget Financial Plan Calculators.

The other side of me was nervous knowing that this announcement also meant my husband would be out of work. He was working part-time for a school bus company while managing his coursework for trade school.

The fact that schools were closed meant he’d be out of a job and it would impact our income. A few days later, we sat down together and I laid out all our expenses as we tried to game plan what was important and how we would cover our basic needs.

We Essentially Created Our First Bare Bones Budget

I didn’t know it at the time, we were creating what’s commonly referred to as a bare-bones budget. A bare-bones budget can also be an ‘emergency budget‘ but doesn’t have to be.

I hope to never experience another global pandemic again, but I do plan to use my bare-bones budget in the future from time to time.

What Is a Bare Bones Budget?

Simply put, a bare-bones budget is a budget that only includes your bare necessities. Think expenses like housing, transportation, and food. With this budgeting method, you essentially strip down your spending to only include your basic needs.

Other costs like subscriptions, shopping, and dining out are not included. To determine what goes into your budget, it helps to know your needs vs. wants. Some things you spend money on each day, whether a latte or a hobby, probably won’t be included in your bare-bones budget.

When most people use this type of budget, frivolous spending is also one of the last things on their minds.

Benefits of Creating a Bare Bones Budget

A bare-bones budget is not particularly fun to use, but it can come in handy during a financial crisis or while you try to reach a particular goal. There are quite a few benefits to using this type of budget though.

Knowing Exactly What your Core Expenses Are

Have you ever wondered how much you truly need to get by and live comfortably each month? Most of us spend more than we truly need on extras which is totally fine. But with a bare-bones budget, you can find relief knowing that your needs are met whether the means having a place to lay your head, food in the fridge, and utilities paid so you can use the internet or turn on the heat in a cold house. Even if you don’t plan to use it now, I always recommend anyone create a bare-bones budget in advance.

Helpful During an Emergency

In the unfortunate event that you lose your source of income or cannot work for some time, a bare-bones budget will come in handy. If you find that you spend $6,000 per month but your bare-bones budget is only around $3,500, this will provide some relief. Additionally, you can plan which bills and expenses to prioritize based on this budget.

Essential When Budgeting with a Fluctuating Income

Another benefit of using a bare-bones budget is if you have a variable income. I’m self-employed and never know how much I’ll earn each month. Without a bare-bones budget, I would probably drive myself crazy wondering how much I need to be able to afford to live. Instead, I use this budget to help me determine the minimum amount to earn each month. Then, anything over that is just extra and goes toward goals or enhancing my life.

RELATED: 4 Easy Budgeting Tips For a Fluctuating Income

Key Tool in Reaching Aggressive Financial Goals

Aggressive money goals like building your emergency fund, maxing out investments, or paying off debt quickly require you to have a sizable amount of extra income. If all your money is tied up in monthly expenses, it will be nearly impossible to reach these goals.

Some people voluntarily choose to use a bare-bones budget to cut back on expenses drastically. This frees up a ton of money to be able to put toward certain goals.

RELATED: How to Align Financial Goals With Your Partner Before Marriage

Start By Determining Your Core Expenses

You’ll want to be honest and realistic about your spending and needs in order to determine your core expenses. I know bare-bones budgeting isn’t exciting, but that’s the great thing about it. It’s super basic and can help relieve you from financial stress when you need it most.

You don’t want a ton of expenses listed in your budget. But here are some common ones to consider:

• Rent/Mortgage: Obviously, you need to pay your housing costs no matter what. During the height of the COVID-19 pandemic, landlords and banks were a little lenient and offering relief, but they aren’t doing this anymore. Prioritize your rent or mortgage by planning to pay it over most other costs.
• Utilities: It’s important to keep the lights on and hot water running. List out your monthly utilities and average out how much your bills were for the past 3 months to come up with more concise figures for your budget.
• Transportation: Fuel and car maintenance are also crucial if you rely on your car to get to work, go to the store, pick up kids, etc.
• Childcare: If you have kids in daycare, this could be another cost to include. Not being able to pay for childcare could impact your ability to work.
• Groceries: Determine how much you need to spend on groceries per month and don’t include dining out since this is more or a luxury.
• Household essentials: Don’t forget to budget for things like laundry detergent, toilet paper, and soap.
• Insurance: Consider your costs for insurance such as health, auto, life insurance, and renters or homeowners insurance.
• Cell phone/internet: Sometimes these can be essential costs too. In my household, the internet is a core need since makes a living working online.

Summary: Use a Bare Bones Budget to Get Ahead

If you have some big financial goals this year, consider using a bare-bones budget to get ahead. Challenge yourself to commit to it for 30 days to see how much you can save. You may be able to make a larger debt payment or put money toward another goal.

Even if you don’t plan on using a bare-bones budget right now, I’d highly recommend creating one. It only takes about 10-15 minutes to do this. Plus, you never know when it will come in handy.

This post was originally published on this site

The post What Is a Bare Bones Budget?+How to Create One first appeared on Budget Financial Plan Calculators.

We’ve made a budget expense list of non-monthly expenses to help you transform those turbulent ups and downs into smooth sailing (and saving) instead.

How to Budget for Non-Monthly Expenses

There’s nothing worse in the budgeting world than a rogue expense popping up and derailing your carefully calculated plan—and sometimes your checking account.

But really, non-monthly expenses aren’t unexpected…it’s more that they’re just easy to forget. Incorporating them into your monthly budget helps keep your financial plan organized and adds predictability to bills that pop up on an irregular basis.

So first, grab a notebook and a pen, or a fresh Word document, and ask yourself, “What are irregular expenses?” Don’t forget annual expenses like that AAA membership or Amazon Prime subscription that’s set to renew automatically!

Looking for more advice on how to budget for variable expenses?

Variable Expenses List

Here’s a list of expenses that you may want to include as budget categories:

1. Water bill
2. Trash service
3. Gas bill
4. Transportation costs (gas, bus pass, tolls, parking)
5. Auto maintenance (oil changes, new tires)
6. Car registration (license, tab renewal)
7. Car insurance premiums
8. Home repairs or maintenance (new roof, new hot water heater, new dryer)
9. Renter/home insurance
10. Health care (dental, eye care, therapy, health insurance deductible, etc.)
11. Clothing
12. Gifts (birthdays, anniversary, graduation, wedding, baby)
13. Charitable giving (tithing, spontaneous donations, etc.)
14. Computer/phone replacement
15. Software subscriptions (Adobe, iCloud, Squarespace, gaming service, etc.)
16. Entertainment subscriptions (Netflix, Hulu, Spotify, etc.)
17. Vacation
18. Gym membership/fitness
19. Education
20. Gaming
21. Christmas
22. Other Holidays (Fourth of July fireworks, Halloween candy, Mother’s Day brunch)
23. Hosting
24. Dates
25. Beauty (hair cuts, makeup, nails, etc.)
26. Property taxes (if they’re not rolled into a mortgage)
27. Movies
28. Phone bill
29. Life insurance
30. Warehouse membership (Costco, Sam’s club, Amazon Prime, etc.)
31. Credit card fee (some cards have yearly costs)
32. House decor
33. Banking (interest owed or fees)
34. Household goods
35. Pet care
36. Child care
37. Kids’ Activities (piano lessons, summer camp, etc.)
38. Kids’ Sports (travel soccer, lessons, cleats, etc.)
39. School fees
40. Braces
41. Weddings (for yourself or others)
42. Taxes
43. Lawn care
44. Stuff I forgot to budget for (there’s always going to be something…)

Once you’ve created your list, make sure those non-monthly expense items are included in your budget categories. Then take the total cost of each irregular expense category divided by 12, and voila! Suddenly your non-monthly expenses are as steady and predictable as the rest of your monthly bills when it comes to budgeting.

Look at you—on your way to achieving your financial goals. You’ll probably be hosting a personal finance podcast before we know it.

Do you have any non-monthly expenses that we forgot about in our list? Let us know in the comments!

If you’re new to budgeting, YNAB can help! Our Four Rules act as a decision-making framework for spending and our app is the perfect tool to help you save money, eliminate pesky debt payments, and finally feel in control of your finances. There’s no credit card required to try it on for size, so sign up now!

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This post was originally published on this site

The post A Variable & Non-Monthly Budget Expense List first appeared on Budget Financial Plan Calculators.