Financial Health

Tips and Lessons on Income Tracking and Management

As a 1099 worker, your money can come from different income streams–Shipt, Postmates, Amazon– and may be paid via different methods than traditional banking such as PayPal or Venmo. This can be difficult to organize and keep track of so financial planners Diana Avery, CFP of Avery Financial and Wa’Shara Wallace, Corporate Staff Accountant for Kaplan and MyEcon Financial Planner, offer insights on practices that can help keep track of, budget and organize your finances for gig workers, especially for tax time prep.

1. What degree of difficulty is present when tracking money coming from various sources?

Diana Avery (DA): I believe in the adage, “Keep it Simple, Stupid” (KISS). I would recommend using one main account to run all your revenue through, such as a single checking account. This will help with keeping up with your finances and record keeping and really helps at tax time. Tracking down or maybe even missing payments from a source you don’t have an account with can be time-consuming. This can be very costly to you if you have to amend tax returns, for instance.

Wa’Shara Wallace (WW): If you don’t have the right software it can become overwhelming, so I would suggest some type of software system to keep everything organized. I would use QuickBooks, and then maybe to focus on my personal finances I will use MyEcon for that as they also have a cash flow manager.

2. What are some good routines to develop to help keep track of your money?

DA: Do your financial reporting at set times. For example weekly or monthly or on Sundays at 7 p.m. As a self-employed worker, you have the freedom to choose a day or time that works for you, but it should be recorded on your calendar, just like any other appointment to insure it gets done. I would suggest, after doing your bookkeeping on the last week prior to a new month, looking at where you are and determining what, if any, adjustments need to be done.

WW: Organization– get as organized as possible, having all your receipts, your invoices, your schedule, everything. Organization is very important when it comes to managing your finances especially if you have multiple income streams. Budgeting is another important area. You have to create a budget and try to stick to it.

3. How do you suggest budgeting your money on a monthly basis?

DA: First, you must always have an emergency account of three to six months’ expenses. Know where you are, budgeting and record keeping on a regular basis to reduce the unexpected. Project your budget to fit what’s coming up. I also believe in business forecasting at the end of the year, or first week in January. Nothing fancy, just on an Excel spreadsheet. You know what recurring expenses you have and how much you need each month, therefore you can know what months you may be able to pay for things that aren’t recurring. After quarterly reviewing this budget, if you are way off base, I would consider making some changes. Also, always look for ways to take advantage of using other sources of income, as you are currently doing. Most of all, make sure you have a written budget.

WW: Ok so if it’s personal finances, they have this thing called the 50-30-20 rule and what that means is 50% should go toward your necessities such as your rent, utility bills, food, gas, all of those expenses.The 30% could go towards your luxuries, a cable or cell phone bill; and 20% go toward savings. Take your whole monthly income and divide it amongst those things– that’s what I would say is an excellent start.

4. If you have poor money management habits, what are suggestions for getting out of those?

DA: First, realize your strengths and weaknesses. If a person knows they have poor money management habits, understand it’s never too late to change. Remember, you must have order to see where you are and what needs to be done to get ahead, so work to get there. It’s not an impossible task but starts with a will. Another thing that can be done is to work with someone who is good at handling finances, let them do it, but be engaged. Meaning, know what they are doing and review the financials. Do not close your eyes to this and let someone totally take over.  I don’t care who that person is, even a spouse.  You should always know the state of your finances and have regularly scheduled financial meetings.

WW: With that I would say, discipline. To track your money and to control your spending, both under discipline. Also, you want to work on your credit as well. The reason I say credit management is important is because if you have poor finances and poor spending habits you  more than likely have bad credit. If you have bad credit, it’s going to cost you more in interest alone, so definitely work on that as well.

5. What is a traditional way to help track of your spending, saving, earnings?

DA: I am a traditional person and still like Excel spreadsheets. I also use one business credit card that gives me a summary of what has been charged and will categorize it for me. This has been very helpful to me and saves me a lot of time. I do not put a lot of stock in software. For me, it is trendy and could also lead to security breaches. If those who are more technically savvy like budgeting software, I don’t rule this out. It is the future and works for those who have grown up using technology more than myself.

WW: A traditional way would be maybe creating an envelope budget system and try not to use your credit card so much. Whenever you get paid, take whatever you’ve budgeted for spending out of your checking/banking account as cash. Try not to use your credit card because sometimes if you don’t see the money being spent, or you don’t know how much you have on hand, you can lose track of your finances.

6. What are the benefits and disadvantages of non-traditional or technology-driven methods of tracking receiving and spending money?

DA: I would say the benefit of technology is the convenience, but there is also the benefit of getting more sales or a better outcome. I do believe you have to stay up-to-date to capitalize on ways to grow your business practices, however, I do not believe you should have too many sources. I believe in identifying your target market and scaling down the technology choices to best suit your needs. I find sometimes people do not do as well because they are out of date with technology. For example, my auto mechanic doesn’t use Cash App, so you may lose sales where people want convenience. Also, by being better and more organized with your finances, you get the best transaction rate.The disadvantages are a higher propensity for fraud and mistakes; which are timely and costly.

WW: The benefits are that it stores everything in one place and it does the calculations and formulas for you. A disadvantage is if technology goes down and there is some type of issue, and it’s not saved to a cloud itself, you will lose track of everything. Because we are so dependent on technology doing all the thinking for us, it slows down our whole thought process, our productivity and without it, we’re lost in many cases.

7. If you use apps like Paypal, Venmo or Cash App what are some ways to keep up with your finances since it isn’t a traditional bank?

DA: I would regularly check their reporting and even pay for the upgraded security. I think security and privacy have to be paramount. If my business is getting so big on these avenues, look at ways of ensuring your accounts and privacy issues. Don’t rely on these until they are proven more secure, like PayPal. It’s difficult staying on top of cybersecurity, so protect yourself, for example create an LLC, or have a lawyer on retainer. Legal Shield services are good and they are not costly.

WW: Because you can go back and there is still a paper trail, you can track everything and look at dates to see the transactions on PayPal and Cash App. You could manage it in an Excel Spreadsheet to help keep track.

8. Are there any apps or software programs you would suggest to utilize to help you track your finance activity?

DA: I’ve said I was going to start utilizing more technology for my finances, but really haven’t.  But I have checked into and do like MileIQ to keep up with mileage and QuickBooks for finances.

WW: Yes I would use QuickBooks for a small business or if I’m self-employed. Also, I work for a finance success company called MyEcon, and they teach you how to manage your finances and build your credit. There’s an app called Mvelopes that creates an envelope budget system for you, also beneficial with the 50-30-20 rule. Mint app also keeps track of all bank activity, even if you have companies like PayPal and Venmo transfer the money to your bank account. The app also helps you manage and gives breakdowns on how much was deposited from those entities daily, weekly and or monthly. And, once again you can use Excel spreadsheets.