Tuesday, January 8, 2013

Income Tracking Add-ons

I’ve been tracking my income ever since I became self-employed nearly five years ago. When I was working a regular job with a set salary, I really didn’t find it all that necessary to watch my income, as it was relatively set in stone with the exception of my retirement account and a few other minor assets. However, now that I’m my own boss and in charge of handling my own income streams as well as income and self-employment taxes, I find that tracking my income is an important aspect of my financial life. But there’s more to it than just the tax aspect.

My Setup
I don’t get overly complex when it comes to tracking my income. A relatively simple spreadsheet that I can easily add to, update, or make changes to, suffices. In a column along the left-hand side of this spreadsheet, I list out all 12 months of the year (as I break my income into monthly totals). In the columns to the right of this, I begin to list my amounts for various income streams that are noted at the tops of these columns.

Last year I had nine such columns, but the number changes from year to year as I add or delete income streams that may or may not be worthwhile. Currently, this year I’m only at six such columns. My income tracker follows not only employer paid sources of income, but interest on savings, interest on bonds, retirement account earnings (or losses), and similar such items…pretty much anything that could be considered additions to my income.

Accounts Payable
The accounts payable section to my income tracker is a more recent addition. I found that since we write checks and use a credit card, it’s nice to have a feel of how much money we owe at any given time. And since the checkbook often gets stashed safely away between uses, and the credit card is only used occasionally, we weren’t reviewing them as much as we should to stay on top of cleared checks and credit card activity.

By adding in a section to my income tracker that is devoted to outstanding checks and charges placed on our credit card, I can better ensure that I’m seeing and checking upon the payment and accuracy of the amounts owed on a regular and more frequent basis.

Taxes Owed
For those people with an employer who handles their deductions for items like state and federal taxes owed, and Medicare and social security withholdings, this may not be a necessary aspect of their income tracker. As a self-employed individual however, I find that it’s a pertinent aspect to my financial life.

By adding up my taxable income amounts from my tracker and applying an equation that factors in federal, self-employment and state tax withholding, I can better stay apprised of my current tax situation and taxes owed at all times.

At the bottom of my income tracker, I’ve recently added another new tool to help me in better staying on top of my personal finances. I’ve put in 12 monthly mini-budgets upon which I can keep running totals so that I can compare expenses (and estimated expenses) with income.

I update each budget as the month progresses, adding in actual expenses in place of estimated ones as I go. While in the past, I’ve tended to do this on an actual ledger book, this recent addition has made the process even easier and has provided me with an accurate snapshot of amounts and up-to-the-minute totals at a glance.

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