3. Everyone has bad money pitfalls!
Outdated money ideas
from your parents or
friends
The “shoulds”/keeping
up with the Joneses
Spending too much
Not keeping a budget
Lack of savings
Not owning your value
Spending too little
Carrying credit card
balances
Not charging what
you're worth
Forgetting to bill clients
and not following up on
unpaid invoices
4. If you're not careful, your bad personal habits
WILL become your bad business habits!
5. You (personally) NEED a budget!
Freelancers' overall finances are closely tied to their
professional income.
You need to know what your monthly expenses are to
know what professional income will help your business
thrive.
If you can't balance a personal budget, tracking
professional expenses will be much more stressful.
Having a personal budget helps you plan for the future –
including unplanned emergencies!
6. What to track?
Put simply, everything you might spend money on in a
month. You can break down your personal budget to be
as complex or as simple as you want. And be sure to
keep an eye out for “hidden” expenses – it's easy to
forget about a sneaky chocolate bar here or a beer there.
Examples of monthly expenses include: rent or mortgage
payments, groceries, hydro, phone and internet, public
transit costs, home/life/auto insurance, property taxes (if
you own property), credit card payments, medical
expenses, car payments, gasoline, car maintenance,
savings, student loan payments, gym fees, and any
social/recreational pastimes.
7. Set it and (don't) forget it!
There are lots of great tools for managing a personal
budget, many of them free or affordable. These
include:
Mint.com
MoneyStrands
BudgetPulse
Tracking in Excel/OpenOffice
Because freelancers often have multiple sources of
income, knowing what's coming in/out is key!
8. Business Bookeeping 101
At the very least, you need to be able to track:
what money comes in
what you spend money on
Most clients will expect an invoice. All invoices should have:
your name and address
the date(s) of service
name, address, and contact info of the person paying you
a brief description of what you are being paid for
the amount you are going to be paid
the terms of payment
9. Business Bookeeping 101
There are many ways to do your bookkeeping. Consider:
how tech-savvy you are, what functions you need, and
what can you afford
The best way to accurately track your expenses is to save
every receipt.
Good bookkeeping habits include updating at least
monthly. Not only do details stay fresher in your memory
of what you spent or what you're getting paid for, being
consistent also means you will spend less time stressing
and sorting out papers.
10. Getting It Together
Have a central location to save and sort receipts. (ie file
folder from Dollarama)
Schedule a set time for yourself to work on bookkeeping
Make use of free/affordable bookkeeping software to help:
− Quickbooks
− Freshbooks
− WaveApps
− Excel/Openoffice spreadsheets
11. Business Expenses
Advertising (business cards, websites,
etc)
Meals and Entertainment - you can claim
up to half total of what you spend
Bad Debts (ie if someone hasn't paid you
for work you've done)
Business insurance
Interest you've had to pay for business-
related debts
Subscriptions or membership dues
(online sites, business licenses, etc)
Office supplies (paper, printer ink, pens,
software, etc)
General supplies
Management and administrative fees
(what you would pay your agent, bank
fees, etc)
Rental fees and/or property taxes on any
spaces you use just for business
Maintenance/repair costs on facilities
Subcontractor fees if you are paying
anyone else to work with you
Travel costs (taxis or public transit in
town, any out of town travel)
Phone/internet/utilities not accounted for
at home
12. Business Expenses
Shipping and postage
Professional fees (lawyers, accountants,
other certified professionals)
Professional Development (workshops,
seminars, etc) – record these in the
“other” line on your statement of business
income
Field-specific expenses, such as
magazine or podcast subscriptions,
theatre tickets, etc that you would qualify
as professional research rather than a
personal expense – record these in the
“other” line on your statement of business
income
In short... if you spend
money on it for
business purposes,
you should be
tracking it and
writing it off!
13. Business Expenses
Home Expenses:
Rent, heat, landline, internet, electricity, renter's insurance, etc – anything you spend to
live personally, you can write off a percentage of your costs for your business if you
work at home.
You can calculate either by square footage or by number of rooms. For example, if the
place you rent has 4 main rooms, and you use one of them as your office, you would
track and total up what you spent for the year, then write off 25% of the total cost. (As
long as it's reasonable, the government isn't likely to question it!)
Car Expenses:
Gas, maintenance, insurance, licensing costs, parking, etc – just like your home, anything
you spend on a car to get around for business, you can write off.
Ideally, you should keep a log of kilometres you drive for business, as well as recording
the total kilometres driven in the year. Keep a log book in your car and get into the
habit of recording every business trip after it happens.
14. Business Expenses
Capital Costs:
Any major purchase, such as a new computer, a new business vehicle, furniture,
film equipment, a musical instrument – basically, anything that is not intended
just for use in a single year and has a value of at least several hundred
dollars should be classified as a capital cost.
This means that you cannot write off the whole value on income tax in a single
year, but are allowed to write off a percentage of it each year as the item
depreciates. This is called a depreciation expense.
For more on capital costs see:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-
236/229/cca-dpa/menu-eng.html
15. Sales Tax
If your freelancing business has made close to $25 000
before the end of your fiscal year, you should register for
GST/HST.
Create a separate savings account to put aside the GST/HST
you have collected, as you will need to pay this in
installments throughout the year.
For more on GST/HST, see:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html
16. Stick it to the (G)Man!
Doing your own taxes is NOT as scary as you
may think, especially if you've never done
them before! AND it's a great way to take
control of your finances.
How much you get back from the government will
depend on factors such as: how much income tax you
paid throughout the year, your overall net income, and
what other expenses you have incurred personally.
17. Tax Hints
If you are formally employed elsewhere (ie they make
deductions), you will receive a tax slip from your employer.
If you worked multiple jobs, you should be getting a tax slip
from each place you worked.
If your freelance business has a negative net income (ie if
you spend more than you made), then you can subtract
that negative number from how much you made at your
place of employment, thereby lowering your overall
income. Even if you don't make money – as long as you
INTEND to make money you are a legitimate business!
18. Tax Hints
Commonly missed personal tax deductions include:
medical expenses you've paid out of pocket
any leftover tuition credits from school
what you paid for rent
monthly transit passes
moving expenses (if you've moved over 50 km in the
last year)
donations to registered charities
dependants' credits (including children's activities)
19. No Sweat Tax Prep
Research what credits and deductions you personally may be
entitled to. Everyone's situation is different!
Gather ALL personal documents, including tax slips,
RRSP/investment info, any stock gains/losses, expenses and
deductions, info for tax credits, etc
Gather ALL freelance documents, namely info on your income
and expenses. Using bookkeeping software will speed this up
Use intuitive online sites or computer software such as
TaxChopper* to fill in your return.
(*With TaxChopper, if your net income is under $25 000 you can E-file for free AND this
gives you a chance to see what you can be writing off!)
20. No Sweat Tax Prep
There will be two “parts” to your return:
Federal and provincial tax forms that all citizens fill out
Your statement of professional income (Form T2125). This is
automatically generated using tax software, but if you're curious
you can check out the whole form at:
http://www.cra-arc.gc.ca/E/pbg/tf/t2125/t2125-14e.pdf
This is the only step that makes your tax return different from the
personal tax return you'd have to file anyway.
21. No Sweat Tax Prep
If this is your first year filing taxes as a freelancer (or someone else
did them previously), you will need to know your industry code.
You can check out the list of codes at:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/ndstry/menu-
eng.html
22. Getting Money Awesome!
Thinking back to your personal money pitfalls, what habits
would you like to improve?
Spend time each day checking in with your money
What are your personal and professional financial goals
for the next month? Three months? Six months? A year?
How much do you need saved up “just in case”?
Know your value and charge what you are worth!
23. Q + A Time!
You've got Q's! I've got A's (or will help you
find them.)
Want to find me after the workshop?
http://laughingcat.ca
@EmilySchooley – personal Twitter
booking@laughingcat.ca for inquiries
