by sonja thorsvik

Managing Finances Without An Accountant When You’re Self-Employed

Disclaimer, this is not financial advice. This is purely educational.

Americans in particular, think it’s inappropriate to talk about money, it’s very taboo. But I would like to break down those barriers and change the conversation, because what are we going to do when the money starts rolling in? Well, we’re going to manage it appropriately of course. I have been managing my own funds for myself, well for my whole life, but myself and my business going on 11 years now.

I’m going to walk you through how I track my income and expenses, the bank accounts that I use, and then what order I put things in. Most people don’t like talking about money, because it becomes too real and as we all know if you are partnered up money talks is one of the leading causes of divorce. So again, I can’t stress enough that it’s vital conversations to have with not only yourself but if you’re in a household with other people with them as well. I think people often feel shame about their financial mistakes I know I have in the past, or you may feel that you aren’t doing as well as other people. And that’s such a big one. If you’ve listened to any of the previous episodes, you know that the statistics of people actually hitting six figures is less than 6%. So if you think everyone’s out there making all kinds of money, that is an incorrect thought. And I say that not to dissuade you from trying. But I’m trying to persuade you to try harder because I know you’ve got it in you.

I didn’t grow up in a household where we talked about that much money conversations weren’t really had. And that’s, you know, quite frankly, we didn’t have a lot of money growing up. So those conversations were just not something that was openly talked about in my household. As I became older, I became really, really obsessed with learning about it, reading the books, watching the episodes, and listening to podcasts. I mean, I’m talking years and years of research, because I just felt like there had to be a different way. And if I was going to have to learn it on my own because it wasn’t taught in traditional school, well, then, that’s what I was going to do, I was going to learn about it as much as possible. So for me, I love the topic of money and finances. To me, it’s absolutely fascinating. I don’t think I would go as far as to say I would be an accountant in another life. But I just, I love it. Even if I don’t like numbers, I still like the money part because I view money as a tool that’s going to help me live out my dreams, and help me fulfill my goals. And obviously, let me travel and eat delicious food. Obviously, you can tell what my values are.

Separate Business And Personal Spending

Most people start off with this notion that because you are self-employed, or a freelancer, or a contractor, because it’s just you, it’s just yourself that you don’t need to separate your personal finances and your business finances, right? Because everything’s just kind of together. I definitely believe that year one of me running my marketing agency, that’s what I did. I was just like, I’m just going to start making money. And then if I do, I probably have to pay down debt or put it back into the business, right? I didn’t know the order of operation. So again, I didn’t have everything separated the first year. And that did become not really a mistake, but just something I wish I had known sooner. So the lesson here is, it is vital to have your personal expenses and your business expenses separated as much as humanly possible. And this is so that once you start to master your workflow of finances, or even if you’ve been in business for a few years, and you’re looking to revamp your own internal accounting systems, that it just keeps you a little sane and a little less stressed out when at times when it comes time to like, talk about your money and of course, manage your money.

On Taxes And Retiring

Here are a few of my golden rules, if you will, things to keep in mind about how I personally view money as a self-employed person. Taxes are a must. But there are definitely ways that you can lower them. So I’m okay, paying taxes. No, I don’t really want to pay taxes. But you know, depending on where you live, if you are driving on a nice road, or your trash comes to get picked up, or, you know, all the things that we pay taxes for sometimes, in my mind, I can justify them. I also keep in mind that is that one day, I would like to retire. I would like to be financially free. I 100% know that when you’re just starting out as a freelancer, or you just started your business, hell, even 5-10 years in, you don’t think about the fact that you have to create your own retirement plan. I’m going to deep dive into that in a different episode. But there’s plenty of research that you can do online right now. But that’s something I keep in mind. The money that I’m making a portion of that money has to go to my future self. I’m in a great spot now because I don’t have any debt. I had a ton of debt. At one point I was up to $100,000 in debt. It was back in 2008, the recession hit, I’m in debt, I have grad school debt, and I still had a little bit of undergrad debt left. And I know the feeling is crippling. So once you get out of the position where you don’t have any debt, then it’s time to start thinking about how you’re going to save for your retirement for your future self. And there are a few different ways that freelancers can do that.

Negotiation And Unsubscribing

Also, I’m always keeping in the back of my mind that anything is up for negotiation. You can always negotiate for a better deal on things that you know, that you have to have in your life, to either run your business or just live in general. And then I’m also always ruthlessly cutting out expenses and services and subscriptions that I don’t need. And this is particularly important if the money is fluctuating because as we know, sometimes our monthly income is going to fluctuate. We all know that one. Another one of my golden rules is that if it’s not making you money, don’t you dare go into debt over it. I know, I know that you’re going to read all kinds of books and they say, not all debt is bad. But I’m telling you from personal experience that particularly when you’re trying to build up a company going into more debt or debt in general for something that you might not need. Or you’re just trying to keep up with the Joneses is ridiculous.

For example, my car. I’m like Warren Buffett with my car. He drives an old pickup truck and could care less because he spends his money on other things. I drive a car that’s over 20 years old. I don’t have any payments on it, except for maintenance and upkeep. I love my car, I keep it nice and clean. On average, Americans spends over $600 a month on car payment. And for me, while I’m trying to build up my company investing money back into my company on things that are going to help my company grow. My car, for example, was not something that was going to help my company grow. So I’m not willing to go in debt over it.

Intentional Spending

Another rule is along with that is that I’m very deliberate and intentional with my spending if it’s going to make me money. For example, I talked about this in the last episode, I made the decision to buy a pretty expensive desk. Now I don’t have a desk currently because I’ve been moving all around. So I’m borrowing one right now and it’s the wrong height for me and it’s really just kind of ineffective. So I made the conscious decision to spend money on a desk because that in my mind is going to help me build this business and make money also when I decide to start doing more videos that are going to be the tool that helps me with that as well. So I think it’s a really good investment. As long as it’s quality, it’s going to last you over five years. These are just personal.

This is something that I had ingrained in my mind. Back in the day, when I used to read 17 Magazine, this is where it comes from, I remember a quote distinctly about drugstore makeup versus luxury makeup (Like I had any money to buy luxury makeup when I was 14 haha). They basically said that, if it goes down the sink, in two minutes or less, don’t spend all your money on it. But if it stays, for example, on your face, for eight hours, it’s probably worth the splurge if you can afford it. Essentially, if it’s a face wash and all you’re doing is splashing it on your face, and it goes down the sink, and you’re on a budget, don’t spend your money on something that’s been washed down the sink. But for example, if it’s a face cream, or serum, or sunscreen, that cost a little bit more than staying on you that’s doing something for your skin for a long enough time for many, many hours and if you have the money, go ahead and spend it on that. So I just keep that in mind as a fun little example, in my head when I’m trying to decide if I want to buy something or not. Here also I have a $200 policy. If an item costs less than $200 and would be helpful I’ll go ahead and buy it. If its over $200 then I think about it longer…I sleep on it.

Check In On Your Money

As self-employed people, we know that our money fluctuates every month. So it’s very, very important to everyone, you need to check your money. I don’t think that you need to check it every single day all the time and become obsessive and you know a little bit crazy about it. But you do need to check in with your money. So if this is something, if you’re at a stage in your life, and you’re listening to this, and you’re like I’m just here for some tips, fast forward. But if you’re one of the people that hasn’t checked their bank accounts, because you’re afraid of what it might say, this part is definitely for you.

Because money fluctuates, I like to think of money in percentages instead of dollar signs. This again, makes it easier for me and is way less stressful. And I also can adjust my lifestyle accordingly. So let’s say I have $5,000 in profit this month, instead of taking the $4,000, that I want to pay myself I say, you know what’s 30% of that, and then I’ll and then I pay myself – so I treat myself like an employee of my own company. And so once you have that set number in place, whether it’s 50% 30% or even, it’s probably a lot less than that when you’re just starting out because you’re trying to put money back into your company so you can grow a little faster, have the percentage set so that when the money does fluctuate, instead of being like, oh my gosh, I can only afford to give myself $500 This month, you’re still giving yourself that example 30%.

Here, I’d also like to mention a book called Profit First, what a great book. This was recommended to me by a millionaire woman. And she was like, if you do anything, read this one first. And I’ve passed this along to a lot of entrepreneurs in the past, and it’s really changed the game. Because this is something that’s really important. We’re, we own our own business now we’re making sure that we treat our business like a business. We don’t treat the income that we make out of our business, like fun money for ourselves, rather – we need to allocate those funds accordingly. And here’s how I do that.

How Much Is Everything Costing You?

I make one spreadsheet with three different tabs on the bottom. If you guys don’t like spreadsheets, you do whatever you want, but this is what I do. So I start off by knowing exactly to the cent, what my expenses are both for my personal life and my business. And within that, it’s like fixed expenses – like recurring monthly expenses. Simply take out a piece of paper, a pen, and a spreadsheet, and you go okay, Here’s all my business expenses. For example, your website, CMS, the newsletter software that you use, if you have a virtual assistant, or even staff, the graphic design software, and a portion of your mobile phone bill go on the expenses list. And then the personal ones would be rent or your mortgage. For me, it’s like small ones, like workout apps, but I love them, they enhance my life. So I’m happy to pay for those food costs, entertainment, and things like that. And so if you know how much everything costs and your business and your life then the next steps of this become a lot easier. And I mean, guys, I mean, like really, really, really take note of how much everything costs you. If you need to sit down for an entire day, give yourself the permission and the gift of knowing how much you’re spending, simply log in, look at your credit card statements, and track every single thing I can guarantee you, you’re going to be surprised about how much you spend in certain categories. And then I hope that you can also find some subscriptions in there that you can just cancel and delete, like, you know, everyone gives you those like free seven-day trials and you forget to unsubscribe, and then that’s a reoccurring expense and you just don’t need it.

Then I make another tab for money flow. That’s what I call money flow because money flows into it love it. This is where I keep all of my income that’s coming in from different clients. So all it is is just different rows of the client name. At the top across is every single month, January through December, and then the total at the end. So I’m keeping track of how much everyone is paying me. And then also really, really important on here, I keep a column with their EIN number so that at the end of the year, if for whatever reason they forget to send you your paperwork on how much they’ve paid so you can pay your taxes accordingly. I’ve had that happen to me before.

Different Bank Accounts

Moving on to bank accounts. And none of these are ads or anything, this is just what I personally use. Again, we are separating everything, our business accounts and our personal accounts. For business, and you need to open a business account, you have to have your own EIN number, and you need to be in good standing with your state. With my business account, I also have a business credit card. And I chose to do that with the Chase Ink card. And any credit card that I have is specifically because I get amazing travel points for it. Like travel reward points are my thing. And I love them. And I travel hack the crap all over the world. I then have a personal bank account which is a checking account. And then I also have two different personal credit cards. So again, this is just education that you can take with you, I have two different accounts one’s an airline points card and one is the Chase Sapphire Preferred. So all three of my credit cards can all work together, I can share points back and forth between them and really get the most out of each one for the travel hacking.

Then I have a savings account through Barclays Bank because they have a pretty high interest rate. So if I were you I would shop around for a place to park some of your money within that high-interest savings account. I have an emergency fund, which is stocked for six months. And I don’t recommend that you start investing until your emergency fund is fully stocked and your consumer debt is gone. Once those 2 are done – then focus on investing for your future. I also have in there an account for a tax holding I just call it ‘tax hold’. Then I have three other accounts. I have a travel account, of course, because traveling is a priority for me. You can have a priority account for whatever makes you happy in life. Then I have one for a big expense so if I do need to buy a car down the road I would buy a car in cash. Or if I want to buy a house or something like this, and then I have in there a rainy day fund that is for items like holiday gifts, wedding gifts, or office needs so when the time comes, I’m not stressed about buying something.

I asked you on Facebook and Instagram, what you would like to hear about, and of course, finances are at the very, very top of the list. So here we are. And then a sub-question of that was what order do you save your money in? This is the exact method I’ve been using for the past 10 years. As someone who has a service-based business, if you have a product business, this will be a little bit different. But still, I think you can have some takeaways from this too. Personally, I invoice my clients on the first of every month. And that’s it. I have a recurring fee every single month for my services in exchange for a set number of deliverables. And the agreed-upon amount is invoiced on the first of every single month. I have done this since day one. I think it creates this type of rhythm and routine and really great relationship between myself and my clients because they know that that invoice is coming. And it’s exactly the same every single time. My clients have a 15-day window to pay the invoice so I know around the 20th of the month that not only has that invoice been paid, but it’s then available in the accounts. On the 20th I manually go in and start allocating my money to various places within those accounts I just talked about.

Savings Order

My invoices get paid to my business banking account and I keep in that business banking account, how much my business will cost to operate (I know my fixed costs from my spreadsheets that we talked about earlier). And then all the software that is hooked up, to go to my business credit card, get charged, and then I pay my credit card out of the business banking account, it seems very, very logical. But for a lot of people, those extra steps, this is when people just go, oh, I’ll just keep everything in my old checking account that I opened up when I was like 13 years old because it’s just me running my business. So when I make the money, and my business makes the money, it’s really just me making the money. But again, we are going to treat our business, like a business so that when bigger clients and contracts come in, or however you’re making your money, you are set up to scale and love it. Okay, then I put 20% to 25%, into my tax-hold savings account. This is where the quarterly taxes money gets paid from. Note here: it gets emptied, every quarter and if I were you, I would check with your bank account, because some of the accounts require you to have a minimum amount in there at all times and if you don’t, then we’re going to hit you with a fee. The third one is I pay myself a salary. So I take it from my business banking account, and I transfer my salary to Sonja because I’m such a hard worker and I’m an employee of the month every single month :). I transfer that money into my personal regular checking account, based on my lifestyle expenses, which we talked about is reoccurring, like rent, mortgage, food, and things like this. And here’s where you can also do the percentage rule or the dollar sign rule, right? So you can say, it doesn’t matter how much I’m paying myself, I’m just going pay myself 30% of whatever I make. I already have a fully stocked emergency fund.

Investing For Your Future

Here comes where I put money into my investment accounts. Now, as someone who was part of the FIRE revolution, (financial independence retire early), if you haven’t heard of it, I would check it out if you have any hopes of retiring ever in your life. So here I’m pretty aggressive. And I’d say I put 30 to 40% of my profit, keyword profit, into different retirement vehicles. I have a Roth IRA account, and I put the full amount in it at the beginning of the year so that it can compound as much as possible throughout the year. Then the money goes into a Solo 401 K, and then into my regular brokerage account. If you guys ever read anything by Financial Samurai, I own his new book, I’m an avid listener to the podcast, a big supporter of his newsletter, he likes to say that if you’re going to have any chance at retiring early, you should have triple the amount in your brokerage account than you do in the accounts that you can’t touch until you’re 67 or 72 because you want to be able to access some of your money when you want it without penalty fees. So you need to diversify where your retirement money goes. So at this point, I have three different accounts. And then I also am trying out Fundrise, where I have a little bit of money on it. And that’s a codesharing real estate site. So I’m trying to diversify, seeing what’s working for me seeing what I can stomach. You know, we all took a pretty big hit last year. So we’re hoping that comes in the green this year, that’d be nice. And then any leftover is when I add to those high-interest savings accounts. I also invest in iShares if I can through the government. And if you want to do T-bills.

What Software To Use

What software do I use? To make your lives a billion times easier I use QuickBooks Self-Employed. I have used QuickBooks Self-Employed for about eight years now and I love it. They have a desktop version and an app on your phone. For the amount of time, energy and stress, and headache that it saves you, it’s worth the monthly fee of under $27 to me. Once you have it you can sync all the accounts and credit cards – and because it’s already specifically designed for self-employed people, it brings in everything that you spend that month, and then it will show you a list of every transaction and then you add it to different categories for tax time. It will basically start showing you your income, your profit, and your business expenses. Two other reasons why I love it is that you can also track your mileage here. So you can track your mileage from the beginning of the year and the end. And then you say, here’s the percentage of how much I drove for work. So you can get all that awesome tax deduction on your mileage. Then it’ll tell you how much you owe for your quarterly taxes, which is amazing. And then when you’re ready, it can import everything into TurboTax for you. And then you just kind of do the maintenance, double, triple check work.

I hope you were able to learn something from this episode and understand that there are a lot of different things that you need to look at and be aware of. And please know that the words Money and Finance and expenses do not necessarily need to be a bad thing. If you are willing to take the time to make sure you know how much your lifestyle and your business are costing you. If you’re willing to negotiate better prices for yourself, and if you’re willing to cut out everything that isn’t making you money. Ah, I hope you have a great day, and good luck with this year’s tax season.




I started my own entrepreneurial career in 2012 scaling up from $0 a year to over $100,000 each and every year. I firmly and wholeheartedly believe there are ways for all of us self-employed entrepreneurs to reach six-figures and beyond and I'm unapologetically here to show you how I do it so you can make your next best move. Let's go.

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