Just in Time… Financial Tips for Tax Season
I recently spoke to Kimberly Palmer. She’s the senior editor and personal finance columnist for US News & World Report. And in addition to appearing on NBC’s Today show, CNBC, CNN, and local television and radio shows nationwide, she has also written for the Washington Post, The Wall Street Journal, and the Asahi Shimbun/International Herald Tribune in Tokyo as a Henry Luce scholar.
Well, with tax season upon us, I thought I’d venture a little out of the PR and marketing area. Instead, I asked Kimberly to provide some financial tips for small business owners and insights from her new book, “Generation Earn.”. Here’s what she had to say:
Why did you write your book?
I was frustrated with the lack of personal finance books written for people like me; people who are not downing in debt, but who still want solid financial advice to help take them to the next level. So many books for 20- and 30-somethings focus almost exclusively on debt issues, but I don’t think most of us are defined by our debts, as large as they might be. So I wrote Generation Earn to go beyond all the debt-talk and explore how to get ahead in today’s economy.
Why should entrepreneurs read your book?
Because almost everyone needs to act like an entrepreneur at least to some degree in the new economy, I profiled many entrepreneurs and devoted an entire chapter to the importance of being entrepreneurial.
Some people want to run their own business full-time, but others just want to start up a venture on the side, or have a second (or third) source of income to supplement a main gig.
When you’re an entrepreneur, it becomes even more important to manage your money well, because you need extra savings to cushion ebbs and flows in income, as well as plan for your own retirement, take out insurance, and anticipate taxes. I write about those unique challenges and how to successfully navigate them.
What one, main piece of advice do you have for entrepreneurs who want to leave their full-time jobs and start a business now?
The most successful entrepreneurs that I profiled in Generation Earn actually held onto their full-time jobs while they built their small businesses.
One woman worked as a paralegal while she slowly built up her yoga studio. When she finally quit, she already had a steady revenue stream from her studio and yoga clothing design business.
Another couple who started up a pet décor Web business still work their full-time jobs (as a lawyer and fundraiser) even though their Website is pulling in a steady revenue stream. Even though it means they’re getting little sleep for now, they know it’s essential for their financial security…. so my advice is to build up your business before quitting your full-time gig.
What specific tips do you have for new business owners to help them save money and control business costs?
The first step is to figure out how you can save a significant chunk of whatever income you are bringing in – I recommend saving one-quarter of your pre-tax income, which includes retirement savings.
The key to doing that, if it sounds impossible, is to start slowly and to automate. Set up your bank account so you are automatically saving two percent of your income each month. Then, slowly raise that to three, four and five percent (and higher).
As for controlling business costs, it’s important not to be overly frugal – investing in your business is key to growing it, so you might need to spend on advertising, Web design, or whatever makes sense for your company. Look for savings elsewhere: lifestyle costs, transportation, food, or housing, for example.
What advice can you give entrepreneurs to help them save on taxes?
Be super-organized! The classic mistake that so many people make is to wait until taxes are almost due before figuring out what they can deduct and where those old receipts are.
Setting up a simple filing system, or using a website that does it for you (such as myquickreceipts.com) can save you a lot of time and headache. If you know you are just not up for the challenge, then outsource the job to an accountant.
It can save you a lot of trouble and money in the long-run.
Thanks Kimberly! Those are great tips. If you’d like to learn more, or get a copy of Kimberly’s book, Generation Earn, visit www.generationearn.com.
And if you need help in saving money on your PR and marketing activities, please let me know here or at www.rembrandtwrites.com.