Host Donald Faison: It’s a lot easier to plan your finances when you’re getting a regular paycheck, but a lot of people choose the freelance life or they run their own businesses. And the internet has made it a lot easier to do this. But being your own boss brings with it a lot of financial responsibilities. That’s what Tim Bouchard of Buffalo is finding out.
Web Designer, Buffalo
Tim Bouchard: Coming out of school, I got the normal professional office job. I was hired by a Web design firm to take on design work, and help complete the projects. So after picking up tricks of the trade I decided to break off into my own business because I personally love having creative control and a close relationship with the clients. from start to finish. [walks into area] I set up my office in the sun room of my apartment. My company’s name is Sharp Cut Media. It offers Web design and consulting services to a lot of small business clients. So right now I’m in a building process, building my clientele, building my relationships with local business. And as those progress, my prices can progress.
Host Donald Faison: While Tim enjoys the freedom of being his own boss and the potential for a good income, he’s found that getting new business is a job all in itself.
Tim Bouchard: One of the downsides to being self employed are that work flow is not always consistent. I spend about 20 percent of my week, searching out new jobs…
Host Donald Faison: Many of Tim’s job leads come from friends and colleagues… And he is often able to return the favor by partnering with them on projects...
Mike La Duca : What I do is marketing design, illustration, brochures, small businesses that need logos, whatever business comes my way, pretty much.
Tim Bouchard: To have someone else to collaborate with, like Mike, is a great resource to have and it offers the clients more options as well.
Host Donald Faison: Another thing to consider when running your own business is how much it will cost to operate on a day to day basis.
Tim Bouchard: You can’t make money without spending money. So a lot of the things like copy paper, pens, the bare necessities, cost you money and you have to take that into consideration. Some of the more costly things of running a business are making sure that you have the latest technologies and the latest programs. You do get some tax breaks for having to spend money to make your money. And things like tax deductions for your business expenses, as far as equipment, mileage, uh, anything … Web hosting, basic necessities that you need to perform your business tasks on a daily basis
Office Supplies: $150 / year
Latest Software: $200 / year
Office Equipment: $2,000
Mileage: $50 / month
Web Hosting: $220 / year
Host Donald Faison: While you can claim tax deductions for your business expenses you also have to keep careful records for the IRS. The government expects you to pay your taxes as you earn your income. If you work for a company, your taxes are usually withheld from your paycheck. Same thing with social security and Medicare- that item called “FICA” on your pay stub. And if you have a medical plan at work—your portion of the premium is also withheld. But if you’re self-employed like Tim, you get to enjoy the freedom to make your own hours and be your own boss. But when you get paid for your work, there’s usually nothing withheld. You have to take care of that yourself.
Tim Bouchard: A lot of people think you get a check for a thousand dollars and you can run to the mall and buy whatever you want. A lot of that money should be saved for taxes; for health insurance; for business costs…And if you don’t prepare yourself for that, you might owe a few thousand dollars at the end of the year and that’s a big expense to pull out of nowhere.
Michelle Singletary: It’s a pay-as-you-go tax system, meaning the government wants their money as you earn your money. If you have not paid enough into the tax system based on your income, you are penalized for that. The IRS does not play. They will come after you, and the penalties for not paying are stiff.
Try to Save:
30% for Taxes
15% for Business Expenses and Health Insurance
Tim Bouchard: I have a 30 percent rule. I at least make sure I take 30 to 35 percent and save that specifically for taxes. Uh. I take anywhere from 15 to 20 percent to save towards business expenses and health insurance.
Host Donald Faison: While Rochelle James gets health insurance from her job, if you’re self-employed like Tim you have to do it yourself.
New York Times
Ron Lieber: If you’re on your own, if you don’t have employer-provided health insurance, one thing you can do for yourself is buy some kind of policy that takes care of you in a catastrophe. So, you’re stuck with the first $1,000 in bills, or the first $5,000 in bills, those won’t ruin you probably.
Beth Kobliner: If you don't have a job that gives you benefits, see if there's some organization you can join. If you're an actor, may be an actor’s organization, or a writer, a writer’s guild.
Host Donald Faison: Tim joined the Buffalo-Niagara Partnership…a kind of regional chamber of commerce that helps out companies and self-employed folks like him with things like health insurance and more.
VP, Buffalo-Niagara Partnership
Fred Bristol: Small employers, freelancers are, are a big part of our membership because we offer them great options in their health care, for instance. Uh. We offer them great opportunities to network with other companies; uh, to connect with job opportunities, to learn about doing business
Host Donald Faison: Most self-employed people can use regular solid financial advice. Tim is lucky because he gets personal assistance…from his dad.
Donald Bouchard is a financial planner.
Donald Bouchard: We saw how much you’re saving for your health and your dental [Tim affirms]. We’ve paid your estimated taxes. [Tim affirms] But really you should be saving ten percent of your income for retirement.
STREET FEED: Are you planning for retirement?
Samantha: I’m 19 years old. I haven’t [laughing] thought about retirement yet.
Frank: I have the 401K there, which invests in various stocks. And I also have my own personal savings account.
Alexis: In terms of retirement now, I'm putting money to the side. You know, every check, no matter if it's $20 or $15, I'm just making sure I'm putting something into my savings.
Jeff: You know what? I haven’t really thought about retiring. Um. I’m 22 years old. Um. It’s something that should be on people’s minds.
Donald Bouchard: If you work for someone, they have a pension and a 401K plan, but when you’re self employed you have to produce your own pension. [Tim affirms] No one’s giving it to you.
Host Donald Faison: He’s right, no one is giving it to you when you’re in business for yourself. But if you’re itching to do your own thing, research your options carefully and give it a try.
Tim Bouchard: For anyone that’s thinking about freelancing the number one thing is will you be able to support yourself. If you don’t have an idea of what your business plan is, you have nothing to build on. You need the cornerstone; from there you can build the rest of the business and hit the ground running.
RECAP: Devise a plan before you start your business. Keep track of your business expenses for taxes. Be prepared to take care of your own benefits.
Host Donald Faison: Whether you’re self-employed or you’re working for somebody else…everybody could take a page from Tim’s book. We all need to get a good handle on our finances before it’s too late. Remember that care of mine I told you about? Well I got my money right just in time to keep the bank from taking it back. I kept it for years and ran that bad boy into the ground. I learned from my mistakes and you can too. Even better, get good advice when you’re starting out.
D. Woods: Just be real with yourself. Don’t think that you have to like live like people in the videos or on television or even the people next door to you.
Min Lwin: Someone’s got a new I-Phone or a nice new laptop. when you see them, um, you’re like, “Well why can’t I have that?” Like, “That’s really cool, I want that.” And sometimes, you know, you, you’ve got to look at your own situation and say well, “maybe, you know, if I save up a little and you know work a little harder, then I can have that a little later.”
Michelle Singletary: You should ask yourself, is this a need or is this a want, and then weigh it against your financial future.
Host Donald Faison: Those supposed needs have led us deeper into debt than any generation before us. It’s time for us to take control of our financial life and live within our means.
Russell Simmons: No matter how rich you are you need to be able to afford your lifestyle.
Amanda McCormick: Don’t spend any money that you do not have. You never know what’s going to happen. You could get fired from your job tomorrow and what are you going to do? You’re going to be in debt. That’s what’s going to happen.
Ron Lieber: The last thing you want is a big pile of credit card debt weighing you down when you’re just starting off in life. So it’s best to save for things before you buy them, but I've got no problem with buying them once you've saved.
Host Donald Faison: Making a habit of saving is one of the most important things we can do—not only for the good times but for the times when we’re out of work or sick or finally ready to retire.
Beth Kobliner: You can't just spend your money and hope, gee, at the end of the month, maybe I'll have something left over to save. The truth is, saving small amounts every day, every week, every month can really add up, and it's very empowering.
STREET FEED: What is most important about managing your money?
Crystal: ---saving is the most important thing to do. It’s hard to save because you think you need to live check to check.
Michael: Uh, I would say, um, number one, stay away from credit cards.
Shane: Definitely leave the credit card at home.
Stephanie: You have to do your needs first, your wants second, and that’s the way life goes. Never try to live above your means.
R.J.: You don’t have to have all these really nice things to be happy. Spend your money wisely, I guess, is … would be the best advice I could give.
Send us your stories about managing your money at pbs.org
Michelle Singletary: We’re going to have times of plenty and times of famine, and your role now is to set yourself that you can ride no matter what happens. If you get on the right path now, I tell you, at the end of that road, you’ll be so prosperous.
RECAP: Separate needs from wants
Start saving now
Stay out of debt
Host Donald Faison: We’ve given you a lot to think about…because there’s a lot to take care of. But it’s really all about taking care of yourself. Nobody else can make you financially secure. Not your parents, not your boss, not the government. The bottom line is you need to manage your money…or your money is going to manage you! For more information on everything you’ve heard about in this hour, check out our website. And yes…there will be a test. It’s called life.