There are three ways I know of to keep good track of writing income and expenses:
- A money tracking program like Quicken, probably the easiest after you get the hang of it.
- A spreadsheet, probably the most difficult to set up, but you get a visual of everything right away.
- By hand, probably the easiest to set up, but more tedious to use because it won’t fill things in automatically like a tracking program and a spreadsheet will, and you have to use your head or a calculator to add everything up, whereas the programs can do that automatically for you.
The first thing to do is to make a list of categories.
List each source that can produce income, date you received money, and amount.
List expenses as they come up: postage, travel expenses, office supplies, dues, etc. Look at Schedule C on Federal Income Tax form (Google “Schedule C” Tax to find one) to see the categories you should use to designate your different expenses.
The best way to approach this is to set aside some time every day to get it all written down, either by hand or on your computer, and file your receipts and proof of income away. (This is a good practice for doing your household expenses, as well.) Do not depend on your memory. It probably won’t take more than five minutes every day you have anything to write down and file, and your future self will love you for doing it all along. This will really keep stress at bay at tax time, too.
Two of the best things about keeping track of writing income and expenses is you can see how you’re doing and what is giving you the most income every year, and what are the biggest expenses. The other big bonus is you’re completely ready for tax time, whether you prepare your taxes yourself or have someone do it for you.
It’s late in the year, but start today to get everything up-to-date, then continue through the rest of the year to keep track daily. You’ll be glad you did come April of 2013.