Money Management

I don’t have an employer to withhold money from my paycheck and send it to the IRS. Keep reading to learn the steps I take to pay my taxes. 

If you are an employee in a traditional work relationship, the company that you work for withholds money from each paycheck. This is sent to the IRS to satisfy your tax obligations. If you overpay, as many people do, then you end up getting a refund. If you underpay, you may owe a small amount when you submit your tax returns.

I’m a freelancer, though, so things work differently for me. I don’t have money withdrawn from what I’m paid. Instead, I have to pay my own taxes four times a year, submitting something called “quarterly estimated taxes.” And, like most people, if I underpay, I also need to submit the rest of the funds out of my bank account when I send in my returns. But since my income is irregular, there’s a greater chance this will happen to me.

I don’t want to get hit with a big surprise tax bill and not be able to pay it. To make sure that doesn’t happen, here’s how I budget to cover my obligations to the IRS.

I estimate the taxes that will be due and add a little extra

In order to make sure I have the money I need to pay my taxes, I estimate the amount I will owe each month based on my year-to-date earnings and how much I expect I will be earning in the future.

When you are required to pay quarterly estimated taxes, you can avoid being hit with a penalty for underpaying the IRS if you pay at least 90% of the taxes owed for the current year or you pay either 100% or 110% of the taxes you paid in the prior year (with higher earners having to pay 110%).

I pay the amount required to avoid a penalty with each estimated tax payment, but I also want to make sure I’m saving extra in case I will owe at the tax filing deadline in April because my income has gone up. As a result, I actually calculate monthly what my likely tax bill would be based on the amount I’ve earned so far and expect to earn going forward. This is necessary for me because my income can change a lot from month to month.

Fortunately, there are plenty of calculators online that quickly and easily calculate estimated federal taxes (I don’t owe state taxes because I live in Florida). If you have an irregular income and you want to be sure you’re saving the right amount for your taxes each month, you may want to use one of them — as I do — to get a good idea of what you’ll owe at year’s end.

I transfer the money into a high-yield savings account each month

Once I know how much my tax bill is likely to be based on my current earnings, I simply transfer an appropriate amount into my savings account each month so I can stay on track to pay my taxes.

The money in my savings account is there for me when estimated payments must be made, and also when I file my April returns. By paying 1/12 of my estimated tax bill each month into my savings account, I’m never caught off guard by a big bill to the IRS. The money is essentially taken out of my checks (by me) as I earn it, just like it would be from a typical employee. And I don’t end up scrambling to find the cash when a payment comes due.

If you’re a freelancer and have irregular income, you may want to do the same so you don’t get hit with surprise bills. Figure out how income fluctuations affect what you’ll owe, then be sure to save the right amount as you earn the money so you aren’t caught off guard in the end.

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I’m purchasing a home that was not listed for sale because there was nothing on the market for me. Read on to learn why thinking outside the box makes sense sometimes. 

I’m going to be buying a house very soon. This is something I’ve done many times before, and something that people do often (although, less often now during this time of high mortgage rates).

The difference in this particular situation is that the home I’m buying was not actually for sale. Even though it wasn’t listed on the Multiple Listing Service and the owners were not actually looking for a buyer, I’m due to close any day now.

Here’s why I took this approach — and how I made it happen.

Here’s why I purchased a house that wasn’t for sale

I opted to purchase a house that was not actually for sale for one very simple reason. There simply were no houses for sale that I wanted to buy.

The inventory of homes for sale is around 45.1% lower now than before the COVID-19 pandemic. And things are only getting worse. In September, the number of homes actively for sale fell for the fifth consecutive month, decreasing by 4% compared to the prior year at a time when there were already many fewer houses for sale.

This isn’t great for any buyer, but it made things especially difficult for me because I really wanted to be in a specific neighborhood and I did not want rear neighbors and there aren’t many homes for sale in the area that don’t have houses on all sides of them.

Faced with the fact that there was absolutely no choice of houses I wanted, I had to take a different approach rather than just looking at home listings and contacting a mortgage lender.

Here’s how I made it happen

To find a home that I wanted, I visited my desired neighborhood and made a list of properties I was interested in. I searched them online, found one for rent, and had my real estate agent call and see if the owner would be interested in selling. After quite a lot of back-and-forth negotiations, they agreed they would be willing to allow us to buy the property. I also made a fair offer based on my research into what similar homes in the neighborhood had sold for.

The house I ended up with was the second one I had my real estate agent reach out about. The first was neither listed for rent nor for sale, and they weren’t willing to consider an offer. But it can be worth asking even if a house isn’t on the market in any capacity — although you’ll likely have a better chance of success with this approach if you can find one for rent.

There are other ways you can try to find a house that’s not listed, including putting the word out that you are looking and working with an agent familiar with the area who might know people who are planning to sell soon. Also, consider visiting open houses to talk with any neighbors who potentially come by and let them know you’d be interested in looking at their homes if they ever decide to sell.

With the market the way it is right now, trying out some of these creative approaches could be essential if you want to find the home of your dreams and it’s not listed for sale. At least it’s worth the effort to try, as you wait for the right place to come onto the MLS.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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You can complete your holiday shopping without racking up an expensive shopping bill. Find out how to buy great holiday gifts without going into debt. 

The holiday season will be here before you know it. Now is an excellent time to start handling your holiday shopping affairs so you’re well prepared before life gets extra busy. If you’re working to reach your financial goals, you may feel stressed about the upcoming gifting season. But I have some good news. Buying gifts your friends and family will love without going into debt is possible. The following tips can help you stay in the black as you shop.

Set a holiday shopping budget

Before you do any of your holiday shopping, take some time to review your finances. By doing this before you shop, you can consider your current financial obligations and debts and determine how much money you can comfortably afford to spend on presents. Next, set a holiday shopping budget. Having a spending limit in mind can ensure you stay on track as you shop. Only spend what you can afford to avoid racking up credit card debt.

Don’t wait to shop

Getting some of your shopping done earlier in the season can be a win for your wallet. Waiting until the last moment to shop can cause added stress and result in an expensive credit card bill. By purchasing some gifts early in the season, you can spread out your holiday shopping expenses, so you’re not stuck paying for all your purchases at the same time.

Remember, paying your entire credit card bill every month is the best strategy. You’ll be charged credit card interest if you only pay the minimum amount due listed on your bill. Spreading out the cost of your gifts can make your credit card payments more manageable.

Get creative

Many people buy their family and friends gifts like clothing and electronics. But those aren’t the only gift ideas. Instead of picking up gifts at your favorite online retailer, consider other ways to show your loved ones you care. Don’t be afraid to get creative. A homemade painting for a family member who recently bought a home is one example of an affordable gift with meaning. Your creativity can help you keep more money in your bank account.

Put your unused gift cards to use

Perhaps you have a collection of gift cards you still have not used from the previous holiday season. Now is the perfect time to put those gift cards to use. Using gift cards to purchase gifts can help you keep your holiday spending to a minimum. Plus, it ensures your gift cards don’t go to waste. Gift cards are valuable, so don’t shove them in a drawer and forget about them.

Remember that it’s the thought that counts

It’s the thought that counts. While this may be a clichéd saying, it’s true. As you do your shopping, make sure you focus on choosing thoughtful gifts. Your loved ones will appreciate that you went out of your way to do something nice. Don’t be tempted to buy something because it looks impressive or is expensive. Instead, stick to your budget and choose meaningful gifts.

Don’t overthink it

If you still have not started your holiday shopping, there is plenty of time. Consider your finances as you decide who to shop for and what gifts to buy this holiday season. But don’t get too obsessed with trying to find the perfect gift. You can purchase fantastic gifts without ignoring your financial goals. When buying gifts consider paying with a rewards credit card to earn valuable rewards. For more money-saving tips, check out our personal finance resources.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Do you have little money left after paying your bills? You’re not alone. Check out a few reasons why many Americans are stuck living paycheck to paycheck. 

If you’re currently living paycheck to paycheck, please know that you’re not alone. Many Americans are struggling to afford everyday living costs. A 2023 study by SecureSave found 74% of Ameridans are now living paycheck to paycheck. It can be challenging to reach your financial goals when you have little money left over after paying all your bills.

Keep reading to find out some of the reasons why Americans can’t stop living paycheck to paycheck.

1. Rising living costs

One reason many Americans struggle financially is due to rising living costs. When everyday costs increase, it can have a significant impact on your personal finances.

For many people, housing is their priciest expense. While rental costs have cooled recently, median rental prices nationwide remain high. According to data from Zumper, the national median price for a one-bedroom rental is $1,505, and it’s $1,862 for a two-bedroom rental.

Average mortgage rates have pushed well above 7%, resulting in high housing costs for more recent home buyers. Rising rent and mortgage loan costs can make it difficult to escape the paycheck-to-paycheck lifestyle, especially for those in high-cost-of-living areas.

2. Household debt continues to climb

Another reason Americans continue to live paycheck to paycheck is due to debt. Research from The Ascent found that total household debt in the U.S. continued to climb in 2023. Data from the Federal Reserve Bank of New York shows that household debt reached a record high of $17.1 trillion in the second quarter of 2023.

Credit card debt is a costly debt that many Americans have. The above study also found that Americans had $1 trillion in credit card debt in the second quarter of 2023, up from $986 billion in the first quarter of the year. Credit card interest is expensive and can quickly get out of control. The more your credit card bills climb, the harder it is to get out of debt.

3. Salaries aren’t keeping up with inflation

Many Americans have seen little to no change in their income despite rising living costs. A recent poll from the Associated Press-NORC Center for Public Affairs Research discovered that two-thirds of U.S. adults have experienced rising household expenses over the last year, yet only one in four have seen their income increase.

When you have no choice but to pay more for necessary costs like food, housing, and utilities, it can be challenging to get ahead financially — especially if your income stays the same. Many people continue to fall deeper into debt, which makes their financial situation worsen.

For Americans struggling with rising living costs and salaries that aren’t keeping up with inflation, it may be worthwhile to consider applying for new jobs that offer more pay and better benefits. Another option is to negotiate a salary raise with a current employer. Finally, getting a part-time job or side hustle could allow you to boost your checking account balance.

Small changes can make a big difference

If you feel discouraged about your finances, don’t give up. While you may be struggling now, you can make improvements. Making small changes can make a big difference in the long run.

It’s never too late to make small improvements. Getting a higher-paying job, paying off debt, and reworking your budget are ways to improve your financial situation.

Setting a budget could allow you to reduce your spending to free up extra cash. If you need help budgeting, check out our list of the best budgeting apps. Many of these apps are free to use.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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It’s not too early to begin thinking about your 2024 business financial goals. Here are some year-end steps you may want to take as a small business owner. 

Running a small business takes a lot of effort, but being a small business owner can be rewarding. As we get closer to the year’s end, now is an excellent time to consider what you can do to set your small business up for success in the new year.

You can feel more confident about the upcoming year by doing some extra planning before Jan. 1. Ready to prepare for the year ahead? Below are a few things small business owners should do before the end of the year.

1. Get your financial matters organized

As a small business owner, keeping your financial matters organized throughout the year is recommended. If you do this, it will be easier to make financial decisions quickly because you’ll have the data you need to make an informed choice. But another reason to do this is to save time and minimize stress during the upcoming tax season.

As we approach Dec. 31, now is an ideal time to get your finances in order. Review documents like your bank statements, business credit card statements, payroll reports, and balance sheet, and make sure you know where everything is. If you struggle with keeping your business finances organized, small business accounting software can be helpful.

2. Make necessary end-of-year business purchases

Now is an excellent time to consider what purchases, like additional software or technology, could benefit your company in the upcoming year. If you intend to make business purchases soon, you may want to do so before the tax year ends.

Buying necessary items before the end of 2023 could allow you to get a tax deduction on qualified business expenses when you prepare and file your 2023 taxes next spring. Don’t forget to keep track of your business expenses so you don’t miss out on valuable small business tax deductions.

3. Talk with your accountant

The end of the year is an excellent time to chat with your accountant. You can get a head start on the upcoming tax season and discuss your year-end financial goals. Your accountant can also advise you of potential end-of-year tax planning strategies to reduce your tax liability for the tax year. Get an appointment in their calendar before the busy holiday season sets in.

4. Set new financial goals

Whether you own a business or not, setting goals for the new year is not unusual. It’s not too early to begin thinking about what financial goals you want to set for your business in 2024. By outlining your goals now, you’ll have more time to develop a plan to make your goals happen. Plus, it can motivate you to start the new year strong. Whether you want to increase your customer base or reach a new revenue goal, it’s possible, and having a plan can be helpful.

5. Prepare for your hiring and outsourcing needs

If you’ve considered hiring additional staff or outsourcing some of your everyday tasks, now is the time to prepare for those costs. Hiring extra help could allow you to reach your business goals sooner. But preparing for additional business expenses before the new year begins is essential. This will give you time to rework your budget and ensure you have enough cash in your business checking account to afford any additional upcoming expenses.

Don’t wait to plan for the upcoming year

It may feel like 2024 is far away, but the start of another year will be here before you know it. You can help your business thrive by taking care of important year-end financial matters now. For additional small business financial tips, check out our small business resources.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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