I haven’t even done my 2010 taxes, but I am determined to start working on my 2011 taxes. Every year I dread January and February. Those are the months when I sit down and try to make sense of my mess of financial statements. I have to locate or print my credit card statements. Then I search them for deductible business expenses. Then I go through my PayPal account and do the same. Then I have to go to each bank and search there for any business expenses. Then I have to collect the tax forms from each various income source, including my employer, my numerous online sources, my interest from banks, and my brokerage account. After that, I have to go through my records and determine my income from other sources that didn’t come on 1099s. All in all, it’s a complete mess. It really puts strain on me during the winter months. All of this is unnecessary stress, and I’m committed to getting rid of it. I’m pretty sure that I’ve started each of the past two years with a financial binder. This is the binder I”m supposedly going to keep everything for the year in. I usually go strong for a few months and then it dies off. This year will be different. 2010 was the last year I’m going to let happen to me financially. I’ve taken my personal finances by the horns, and it’s time to do the same for my taxes. I am no longer going to wait until January of the following year to calculate what happened during the year.
How awesome would it be to not dread tax time? Knowing all year long what you’re going to owe and being able to integrate that into your financial plan would be terrific. I challenge you to join me in being a good bookkeeper this year, so that next year we can enjoy this time of the year and not worry. Below is a list of things I’ve come up with that both you and I can do to be better bookkeepers.
1. Create an Ideal Financial List
First, we need to start by creating a list of ideal financial tasks. If we had all the time in the world and we wanted to maximize our knowledge about our finances and be fully prepared to file our taxes next year, what would we need? For our personal finances, we’d want a balance sheet, income statement, and maybe a quarterly investment report. For tax purposes, we’d want to make sure we’re keeping track of all deductible expenses. Whenever you do your taxes, you’ll likely discover things you wish you’d kept track of all year. Add these to the list of improvements to make.
2. Develop a financial calendar
So, I’ve already started to do this with my personal finances somewhat. I’ve been creating personal balance sheets at the end of each money. Creating a financial calender is really about budgeting in the time to do the things you need to do. Whether you need to balance the checkbook, categorize your mint transactions, create an income statement or log business expenses, we need to make sure that we have a schedule for these tasks and stick to them. It’s too easy during the year to just give up on these tasks and push them back.
3. Keep Organized Records
It’s easy to file papers. I have a desk and floor filled with “filed” papers. Right now, “organized” for me is having all the papers in one big pile and not having to search all over the place. That definitely needs to change. I’m making binders for different categories and purposes. Pay slips and other income need a place. Receipts need a place. Anything that doesn’t have a place to go is just going to get thrown in a pile. So, theoretically, if everything has a place, there won’t be any piles…We’ll see how that goes. I think the secret here is going to be filing receipts and other paperwork as they happen. Each day I need to be filing these things. I can’t pile them and try to do them all at once each month or I’ll just keep pushing it off.
Well, that’s my complete list. It doesn’t seem like too many things to do because it’s only three items. However, each item itself is entailing a lot. It’s going to take effort to make this happen, but it’s worth it. Once I’ve made my binders and been working on this a while I’ll let you know how it’s going. I’m definitely looking forward to reducing my stress by being more organized.