5 Good Financial Habits to Build in 2022

If you’re looking for the key to financial success, then we have the answer: financial habits ? good financial habits to be exact. Financial habits are the values, standards, routine practices, and rules people rely on to handle their day-to-day financial lives. They help you manage your money properly and respond quickly to financial decisions or issues.

If you want to know how to manage your finances more wisely, read on to find five good financial habits to build in 2022. 

1. Review and update a financial plan regularly

The first thing to consider when building good financial habits is a financial plan. It’s a document that contains information on an individual’s present financial situation, long-term monetary goals, as well as strategies to achieve those goals.

Your financial plan helps you assess, plan, and improve your present and future financial situations. It provides a snapshot of your present finance and your goals to develop an action plan that you can use to navigate financial decisions with ease.

Creating a financial plan, though, isn’t enough. It’s fairly important, if not more important, to evaluate and update your plan on a regular basis. 

A regular check at least once a month is a must to make the most out of your plan and enhance the chances of reaching your goals. It’s also recommended to update any important information at least every three to six months. It’s also important to update your plan when a major life event occurs, such as buying a new house, getting married, or finding a new job.

2. Set financial goals 

The most crucial step toward financial success is to set goals. You will not be able to measure your progress unless you have goals. When forming goals, it’s recommended to follow the “S.M.A.R.T” goals strategy: specific, measurable, achievable, relevant, and time-bound.

Here are a few examples of SMART financial goals: 

  • Pay off $20,000 of debt in 6 months 
  • Create a $15,000 saving account this year
  • Buy a $100,000 property in 7 years 

As you can see, these examples closely follow SMART principles, with each goal being measurable and time-bound. As a result, you can easily keep track of your progress and be able to reach your goals within the expected time. The SMART principle is specifically useful for making a goal as it points out any relevant factors associated with your goals. For example, a SMART goal “Pay off $20,000 of debt in 6 months” is definitely more powerful than a vague goal such as “pay off debt soon.”

3. Create a budget

Making a budget is another good financial habit to build because it ensures you’ll be spending money efficiently and not spending more than you can afford. A personal budget lets you know how much money is going in and coming out of your account every month. Without it, you may be spending more than you make — leading to a paycheck-to-paycheck lifestyle. 

When making your budget, keep in mind to include the amount of money you bring in every month from your paycheck, the money you typically spend on “needs” such as living expenses and groceries, and the expenses you allocate for “wants” like eating out, travel and shopping.

If you’re not sure where to start, consider these budgeting tips to help you get started.

4. Utilize an expense tracking app

A budget lets you know how much money you’ll get and spend each month. An expense tracking app, on the other hand, allows you to compare if the amount of money you expected to use is lower, higher or equal to what you actually spend.

Expense tracking apps are becoming more popular and are likely to completely replace manual expense tracking. It’s because by using an expense tracking app, you can improve productivity and reduce paper waste. Moreover, with expense tracking apps, you can scan and store your receipts on the cloud, which is more secure than keeping them in the physical form.

If this sounds like just what you need, start using an expense tracking app now! Shoeboxed is an expense tracking app that lets you turn your receipts into data and then organize, make reports and analyze your current financial position at any time and anywhere. It’s an ideal tool for individuals and businesses. Check out Shoeboxed and start your free trial today!

5. Build an emergency fund

In contrast to fixed expenses that recur every month with an amount you can anticipate and set aside, there are also unexpected expenses. This type of expense sometimes is impossible to foresee. For example, a leaking roof, a broken dishwasher, or even a surgery for your pet are situations when you have to let your money come out of your pocket without planning for it.

That’s why you have to build an emergency fund. An emergency fund is a safety net that ensures you don’t have to delve into other cash set aside for everyday needs. If you don’t have one, chances are you’ll have to “touch” the money set aside for credit cards or other bills to cover the emergency expense. 

Experts recommend creating an emergency fund that covers three to six months of living expenses. This is especially true if you only have one source of income. 

If you haven’t started working towards this financial habit, start putting money aside for emergencies, even if it’s just a tiny amount from each paycheck. You’ll be grateful in the long run!

The bottom line

There are many good financial habits you can start adopting this year. Some can be easy — like reviewing and updating your financial plan regularly while others are more demanding. And if you’re new to working towards these habits, it can be a little time-consuming and laborious. But it’ll pay off in the long run. 

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a cloud-based software that helps individuals and businesses turn their massive paper receipts into digital data. With Shoeboxed, you can accomplish a variety of tasks: scan, store and organize receipts, manage expenses, store business cards and even track mileage for business travelers. It’s simple to install and easy to use. Try Shoeboxed today!

8 Simple Practices For Small Businesses To Organize Receipts Efficiently

Keeping a record of your business transactions is considered a top priority for a self-employed or small business owner. Keeping your records properly saves you from being audited by the IRS. Plus, staying organized will save you time during tax season. 

However, we understand that keeping track of all your receipts and records can be tedious and time-consuming. That’s why in this article, we’ve outlined eight best practices to help you organize receipts and records efficiently. 

1. Use a business account and credit card instead of cash

As the IRS will continue to enforce its audit rules, keeping a better set of bookkeeping and receipts for all of your expenses will help you save time and hustle. This simple yet important tip can help you cope with it. Avoid using cash — it’s easy to spend, hard to track, and nearly impossible to match up cash spent with receipts. 

On the other hand, a credit card or debit card will provide you with monthly statements, enabling you to cross-check details with your paper receipts. It’s also a good idea to have a separate business account and credit card, so you don’t mix business expenses with your personal spending. 

2. Save your receipts

Don’t just rely on bank statements, credit card statements, or canceled checks! The IRS won’t accept your bank or credit card statements to justify deductible expenses. You will need an itemized receipt that corresponds with the transaction. 

Hang on those itemized receipts, which are also called “source documents,” for at least six years after your last Notice of Assessment since the IRS will ask to see them in the event of an audit. You can keep a physical or digital version of receipts. 

3. Choose email receipts instead of paper receipts

Nowadays, many merchants offer this service to their customers. You can choose to receive your receipts via emails, label and categorize them in a specific order. Email receipts are convenient and friendly to the environment as they go straight to your inbox and clear your desk and drawers from piles of paper receipts. You can always find them easily, create expense reports, and do so much more. 

4. Review your receipts once a month

Spending some time reviewing, categorizing, and organizing receipts for 30 minutes every month can make a huge difference! It keeps things manageable as the year progresses and helps you keep track of your spending so that you won’t miss out on any tax deductions. 

You can purchase an accordion folder every year to store all business receipts and make sure each folder contains all receipts for the year. These folders are inexpensive and easy to obtain. They allow you to organize receipts by category and year, making it easier than ever to find any receipt even years later. 

5. Make notes on the back of receipts

This is an especially great idea to keep track of dining and entertainment expenses. It’s easy to recall why you bought a printer, but it can be difficult to suddenly remember who you went to dinner with and what the business purpose was in 2015. By starting this simple habit, you will rest assured that you will not miss any dining and entertainment expense deductions for business purposes.

6. Create a spreadsheet for work-from-home expenses

Whether you have always been working from home, or you are working remotely due to the Covid-19 pandemic, there will always be some noticeably deductible business expenses. These expenses include a portion of cleaning materials, utilities, home insurances, office supplies, along with part of your property taxes, mortgage interest, and capital cost allowance.

To claim these expenses, you need to calculate the percentage of your home used for business and apply that percentage to the tax deduction. Create a spreadsheet including your receipts for home office expenses throughout the year. By making it a habit to update the spreadsheet once a month, you’ll save yourself the headache of scrambling to input and tally up all your work-from-home expenses at the end of the tax year.

7. Back up your receipts

Since paper receipts tend to fade with time, keeping a digital copy of each receipt can save you from getting in trouble with the IRS. The simplest practice is to snap a picture of each receipt on your phone, then upload it to a central location later and keep it for at least six years. The IRS allows digitally stored receipts, however, don’t forget to back up stored receipts (on the cloud or a memory device) in case your hard drive crashes and deletes all your important information by accident. 

8. Scan and store your receipts digitally

Storing receipts digitally has been proven to improve business efficiency. It provides several benefits including time and cost-saving, easy to store and access, tax-ready, reduces clutter,  lessens the risk of data loss, increases security, and so much more. 

There are plenty of receipt scanning apps that you can use to scan and store your receipt digitally. Each offers special features for particular purposes, so anyone can choose the most suitable one and benefit from it. 

Shoeboxed is a painless receipt scanning and organizing solution for freelancers and small businesses owners. This versatile app serves many purposes: scan, store and organize receipts, manage business expenses, store business cards and even track mileage for business travelers. 

Shoeboxed’s OCR engine and human data verification features ensure that your receipts are legibly scanned, clearly categorized, and accepted by both the Internal Revenue Service and the Canada Revenue Service in the event of an audit. What’s more, Shoeboxed enables you to create clear and comprehensive expense reports that include images of your receipts. You can then export, share or print all of the information you need for easy tax preparation or reimbursement… within a few clicks. 

Shoeboxed is now available on iOS and Android. Get your free trial before choosing the perfect plan

Conclusion

Organizing your receipts can keep you proactive and productive, which saves you lots of time, stress, and even money in the long run. Going digital helps you organize receipts and keep track of your expenses easier than ever. As everything is digitally stored and accessible through a cloud-based system, you will be able to work with them anytime, from anywhere, with any device, within a few clicks. 

Achieve your goals now with Shoeboxed
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Business Owners: Are You Forgetting This Sneaky Tax Due Date?

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Did the title freak you out a little? Sorry about that, but we thought ripping the band-aid off would be the way to go. After all, it’s the truth – if you own your own business, freelance or generally work for yourself, quarterly estimated taxes are due to the IRS and, likely, to your state’s taxing authority right around the corner.

Did you forget about them, or have never dealt with them before? Don’t worry, we’re here to help. We’ll go over what QETs are, why you have to deal with them, and some of the basics of the process to get you started.

The Basics of Quarterly Estimated Taxes

Remember back when you had a 9 to 5 or even when you worked at that fast food joint downtown while you were in high school? At the end of the pay period your boss took out a certain percentage from every paycheck to pay taxes to the government. Afterwards you got to take home what was left.

Now that you own your own business, you don’t have a boss to do this for you. This means you have to do it yourself. However, it doesn’t quite work the same as it did back then. You don’t submit your taxes every two weeks or even every month.

If you own an (for example) online coffee cup shop, every time you sell a coffee cup you might think you need to submit taxes. But that would get even more complicated than it already is, which is why the QET system was set up.

Every quarter you send in a payment to the government to take care of your tax responsibilities. January, April, June and September become your “buckle down and take care of business” months from now on.

How QETs Work

So if you don’t remit tax payments every time you make a sale, how do QETs work? If it’s your first time ever doing them it can be extremely confusing, but once you get the hang of it everything will fall into place.

The biggest thing to remember is the word “estimated.” This is precisely what these payments are – estimations, as in you’ll hardly ever run into a payment that’s 100% accurate the first time. This is because you basically take your profit from the year (that’s income minus business expenses), figure out what you would owe on taxes on those sales, and then divide by four to get your quarterly estimated tax payment.

You can probably see how this would cause unbalance. You may make most of your profits in the 4th quarter, or you may shut your business down over the summer. Therefore, this “estimate” may be a little off.

Fortunately, there’s the “Safe Harbor Rule” the IRS has put into place. As long as you submit the same amount in taxes as you owed the the year before, you won’t be charged any fees or penalties. As an example, if you accumulated a $5,000 tax bill last year, but business boomed and you owe $10,000 this year, you’ll be fine as long as you pay at least $5,000 over the year in quarterly estimated tax payments. However, you’ll have to pay up the remaining $5,000 when all is said and done and you file your annual taxes on April 15th.

The good thing about this mess, though, is that it can help you get your finances in order as well as prepare you for tax season. When the time rolls around, you’ll be so used to figuring out this kind of stuff that it’ll be a breeze.

Here’s a calendar to keep you up to date:

Q1 – April  15, 2014 (you should have already paid this one on income made from January 1 -March 31, 2014!)

Q2 – June 16, 2014 (pay on income made between April 1, 2014 and May 30, 2014; this due date falls on the 16th because the 15th is on a Sunday)

Q3 – September 15, 2014 (pay on income made between June 1 and August 31, 2014)

Q4 – January 15, 2015 (pay on income made between September 1, 2014 and December 31, 2014)

What questions do you have about QETs?