Resources for tracking your income

Last week, I talked about why we each need to track our income. Today, let’s go over how we can track our income. It’s nice to have all sorts of fancy software that can roll over, sit up and track your income. It’s not absolutely necessary, though. There are plenty of simple options, that can work off of software you already have, or you can even go low tech and track it on paper.

As long as you’ve got a shoebox full of receipts somewhere*, all you really need is a system to track some very basic variables. You can use a ledger book, an Excel spreadsheet or any system of recording information you like. Personally, I advocate a spreadsheet (Excel, Open Office, Google Spreadsheets, whatever), because it’ll do all the math for you and there’s less of a chance of mistakes creeping in. The only necessity is keeping your system up to date.

Once you’ve decided what recording method suits you, set up columns and track the following:

  • Who paid you
  • How much they paid you
  • When they paid you

Personally, I like the idea of eliminating extra files, so why not add a couple of columns for when you invoiced the company in question, and how much you invoiced them for. This can help you get an idea of when you should be receiving income, and who you need to be chasing after to collect your money. But keep it simple. If it’s simple, you’re more likely to keep up with it.

*Sort your receipts, if you like your accountant and don’t want them to think of you with rage come tax season.

The importance of other writers

It may seem counter-intuitive to network with other writers — after all, they’re the competition. But you want to know plenty more than how you stack up against the competition. Your fellow writers can be one of the most important resources you have. It’s up to you to find them, though, because the average writer doesn’t show up for community networking events.

Think about it this way: who’s the first to know that a writer doesn’t have time (or the ability) to take on an assignment? The writer, of course. He or she may be willing to recommend another writer, or at least notify someone to contact a particular company. Furthermore, no market operates on simply one article — your network can lead you to new markets that match your talents. Your fellow writers can also be a good resource for checking up on  potential client, to see how they’ve treated freelancers in the past.

You may consider finding a mentor: someone who can give you advice on how you market yourself, how you operate your business and even help you tweak your writing. But you’ll want to find your mentor in the freelance writing community.

Lastly, you may just need someone to talk to that understands the issues you’re dealing with. Your family may not understand, if they’re 9-to-5-ers, but other writers will.

Three Reasons To Track Your Income

There are a number of variables in a freelancer’s business worth tracking, but the most important is income. It is relatively simple to do and requires only a basic spreadsheet.* You only have to track the actual amount of income, who it came from and when you got it, although I think it’s worth it to combine tracking your income with your invoicing system (i.e. add a column for the date you sent out the invoice).

But why are you tracking these numbers? What are you going to use them for?

First off, keeping track of your income makes the entire income tax process one step easier. Knowing who paid you what means you’ll know when you hit that magic $600 with a given company, so you’ll know when you need to fill out Form 1099 for the IRS, and you’ll keep yourself out of trouble.

Second, since you’ll know when to expect income, you’ll also know when you need to add another income source, and when you can afford to relax a little. Since you’re living off your income, you have to know that you’re making enough to survive.

Third, tracking your income can give you a sense of accomplishment. Knowing that you’ve written something that another person felt was worth payment can give you a warm fuzzy feeling.

*You can even go low-tech with a ledger and a pencil, but you’ll have to do your own math.

Recent Reading

Since I get to blather on about writing here, I feel like blathering about good writing every so often. Today, I’m going to run down some of my recent reading and whether it’s worth running out to the library, etc. for a copy. So, get in, sit down and hold on.

Gods in Alabama by Joshilyn Jackson (275 pages)

This is Jackson’s grand debut (her second, Between, Georgia came out last year and a third, The Girl Who Stopped Swimming, is due out next spring) and is absolutely classic book club material. I’m not saying that it’s not a decent book, but there are lots of little questions of perception and meaning that are ripe for discussion. To that end, there are even a couple of pages of discussion questions at the end. Brilliant decision, in my mind. If you have a book you can market to reading groups, hurray! You’re guaranteed bulk sales.

The topic is grade A book club material as well, and one of my favorites: the classic Southern revelation of family secrets. Jackson handles it well, swinging between perfect humor and unreasoning violence. There are a few “this has to be her first book” moments, but over all, it’s a pretty decent read.

The Dark is Rising (The Dark is Rising, Book 2) by Susan Cooper (244 pages)

This is the second (and main) book in a series of five. When I was growing up, it was also one of my favorites: today, kids want to live in Harry Potter’s world, but I wanted to live in Will Stanton’s. A few weeks ago, I saw the trailer for David L. Cunningham’s adaptation of the book, and was utterly horrified. I felt the need to re-read the book to affirm that it wasn’t total crap when I was a kid (unlike my expectations for the upcoming movie).

Accolades to Cooper as a businesswoman and all that. But I have to question her decision to lend her name to a project so obviously different from her novel. I’m all for making money, but a lot of fans of her books are going to be very disappointed.

The Dead Beat: Lost Souls, Lucky Stiffs, and the Perverse Pleasures of Obituaries (P.S.) by Marilyn Johnson (244 pages)

This is one of the best books about the written word I’ve read this year. Johnson’s review of the obituary writing trade turns up some real beautiful techniques, and showcases brilliant examples. I’ve always considered obituary writing to be a sort of way for a newspaper to test out a new writer (and I’m sure you have, too), but it’s obvious that obits can truly be works of art. For any freelancer working on profile writing, get a copy of this book. It’s a fabulous instruction manual.

Allow me to introduce you to Mr. Form 1099

Whether or not you do your own taxes, you should be familiar with the required forms, especially those that differ from a standard individual tax return. IRS Form 1099-MISC may be the most obvious way a freelancer’s taxes differ from the norm; if you’ve spent much time in the employment form, you’ll be used to the W-2 form, which employers use to report all sorts of things (your income, taxes withheld, Social Security, etc.). However, as an independent contractor on any given project, you’ll need a Form 1099 instead. Technically, the company paying you is responsible for filing a 1099, but you’ll need to fill out at least part of it. 

The IRS determines independent contractor status based on the following:

  • behavioral control
  • financial control
  • relationship of the parties

However, generally, if you think you are an independent contractor, you are. More information is available on the IRS website.

It is also important to note that you may not need to complete a 1099 for every business you worked for — only those that either paid you $600 or more, or made payments of $10 or more in gross royalties.* This includes contest winnings, estate settlements, court settlements and really any other time you received over $600 for anything.

There are other types of Form 1099 besides 1099-MISC, such as 1099-A and 1099-C. These are typically needed in situations such as debt cancellation and are not commonly needed.

Full instructions for Form 1099-MISC are available here (Warning: PDF!). You will also be responsible for reporting this same income on your Form 1040, Schedule C.

*You are also required to report any fishing boat proceeds on a Form 1099, for what it’s worth.

How long should you keep your files?

If you run any kind of business, you accumulate files — both electronic and hard copy — in staggering numbers. It can be overwhelming to even think about what to do with your paperwork, and there is a temptation to just pitch the whole lot. Unfortunately, you need to hold onto an awful lot of it, at least in the short term.

Any financial documents, especially those relating to your taxes, need to stick around for three years according to the IRS. Since your financial paperwork, which may include receipts, bills or tax returns, are hard copy, you’re going to want to consider a couple of factors when deciding where to keep them:

  • Is flooding a regular occurrence in your area?
  • Are there any local pests likely to nibble on your paper?
  • Are you going to be able to easily access specific paperwork without too much effort?

My recommendation for storing paperwork that you may not want in your filing cabinets are the types of plastic bins typically available at office supply stores, such as this one on Amazon.

Documents related to specific projects, such as contracts or research, need to kept at least until the client has fully accepted the project, and you have received payment in full. Personally, I recommend keeping all contracts and legal paperwork for three years, just like financial documents.

Research notes, interviews, etc. should be kept indefinitely, because that information can often be re-purposed for a new article or other project. However, to save on storage and worry, keep these files electronically — scan in notes or type them up, if need be. Electronic files are also easier to search for specific key terms.

Even if you can’t reuse your notes on a given topic, do not throw them away until it’s obvious that you will not need to refer to them for a given project. For example, if you interview a person for a specific magazine article, keep your notes for at least the length of time it takes for one additional issue of the magazine to hit the stand. If there are any corrections or disputes, you can refer to your notes.

If you keep many electronic files, take the time to back up your data regularly. It’s ideal if you can back up your material at a different location than you are currently at — but that can be as simple as burning a CD and dropping it off at a relative’s house.

3 Secrets for Easy Invoicing

If you don’t send out invoices, you can’t complain when you aren’t paid. Some freelancers, however, may be better at the writing side of business than the billing side. But there are ways to simplify the invoice process.

First, make out the invoice when you get the contract.* If you have a set rate for the project, you’re all set. If you’re working at a per hour rate, fill out everything else and simply add your hours as you work them.

Second, go over the invoice when you are ready to submit your article, project, etc. If you know who the invoice is going to, simply e-mail it or post it at the same time. If not, ask and send it as soon as you hear who it should go to — don’t put it on your list of things to do.

Third, save your computerized version of your invoice and print out a copy as well. The printed copy should get filed with your contract with the company in question. You should also add a reminder on your calendar or ‘to do’ list of when you need to follow up if they haven’t paid.

Now, these three steps will only help if you do them every time. They have to be ingrained habit.

*If you don’t have a contract with whoever you’re working with, well, you’ve got bigger problems than figuring out invoicing.

Diversify your portfolio

Diversity is the soundest investing strategy in the world, right? It’s what all the good financial planners tell you to do. It’s just as important in your personal portfolio — the one you use to get clients. 

Showing that you are capable of more than one type of job can get you get more work than you expect. Say you have the opportunity to work on a business’s newsletter. If they see examples of brochures in your portfolio, they may come back to you when they’re ready to put one together for themselves.

If your portfolio is varied, you have more options when it comes to finding your next gig. But how do you get those initial jobs, if you don’t necessarily have the experience?

I got my start on writing business materials for family — it was a reduced rate, of course, but I still got something. There are also non-profits always looking for help, and though many can’t pay, you can often donate your services and get a tax deduction — if you’re interested in grant writing, this can be ideal. Heck, you can write marketing copy for your own business.

Personally, I don’t like the idea of giving my work away for free, although many writers recommend the technique as the easiest way to build a portfolio. I’ve found, though, if you’re willing to start small, you can often still get some kind of payment.