This isn't investment advice because I am not an investment advisor; it's to be used for educational purposes only.
Should I invest my emergency fund? This is one of the most common questions I hear. Folks who do all the hard work of saving six months (or more!) of their expenses into an emergency fund are often offended at how little interest they earn to amass a small fortune.
I understand the feeling and the urge to invest your emergency fund money. The long-held wisdom has been that one should never invest their emergency fund. The reasoning behind this is that you're opting for liquidity (having your cash available when you need it) over any returns you'd get investing.
Read MoreThe stock market can be intimidating for anyone just starting to invest. One of the most common fears new investors have is how to choose investments. Choosing a company to buy stock from opens the door to a myriad of frightening possibilities. What if that company isnโt disclosing their finances properly? What if Iโm not doing enough due diligence before purchasing shares? Buying individual stocks also leaves you at risk of not diversifying your portfolio enough.
Read MoreDo you know how much it costs your business to earn each dollar it makes? Unlike traditional employees, when you're a self-employed service provider, every dollar you earn has a cost beyond your time and energy. How much do you need to pay for employee payroll, taxes, operating costs like marketing and insurance, profit, and personal pay?
Even if youโre a one-person freelance practice, understanding how much it costs you to earn each dollar in your company is a valuable shift in perspective that can help you build a sustainable, efficient business.
Read MoreThe sequence of events is consequential when we cook a meal, tell a story or travel to a destination. Instructions and directions are ordered, stories have sequential acts and arcs that depend on events. Itโs the way things are, we accept this.
The same thing is true in the world of saving and investing. The chronology for both how you save (and invest) and where you save (and invest) matters.
Read MoreParadoxes are fancy literary devices that can teach us lessons through the use of logical contradictions. Examining them allows us to practice our ability to hold opposing ideas in our minds at the same time.
Read MoreWhat makes tax season so stressful for most small business owners and freelancers? I think it can be chalked up to a few things. First, if you havenโt kept up with your bookkeeping, then youโre facing a yearโs worth of accounting homework with a fast-approaching due date. If you donโt know how much youโve made, you canโt know how much youโll owe in taxes - youโre flying blind and thatโs scary.
Read MoreIt's easy to complicate things; it's hard to simplify them.
"Earn money. Spend less than you earn. Save and invest the difference. Rinse and repeat."
This is the advice an old boss would give when asked to distill financial planning into its simplest parts. It's excellent advice. When I first heard him deploy the words that would become a well-worn mantra in my mind, it was the moment I realized how easy it is to complicate things and how hard it is to simplify them.
Read MoreEven if you have all the right practical, rational information, when you're in a state of fear, anxiety, or stress, it is impossible to make sound, rational decisions. These states are innately emotional states where cognition is bypassed. When you're afraid, a part of your brain (amygdala) releases hormones that prepare your body for a "fight or flight" response. Humans struggle with having control when we're in these states because the amygdala has few connections to the rational parts of our brain, like our cortex.
Read MoreBy Pamela Rosario. Three ways legalizing your business will save you money in the long run.
Read MoreDaniel J. Siegel, MD is a contemporary psychiatrist and writer who specializes in interpersonal neurobiology. He is credited with creating the concept of the window of tolerance.
The window of tolerance is used to understand and describe normal brain/body reactions, especially following adversity or trauma. The concept states that we each have an optimal zone of arousal, called a window of tolerance. When a person is within the window of tolerance, they can regulate their nervous system in order to deal with the natural ups and downs of being a human being on earth. In the window of tolerance, one can reflect, think rationally and calmly make decisions without withdrawing or feeling overwhelmed.
Read MoreHere are six things I've learned since deciding to start a business six years ago. A lot has changed since then. One glaring change is that I don't even offer the service I originally offered. And as of late, I mostly feel like I'm a writer, but maybe that's the season my business and I are in or the fact that I've spent the last six months writing a book.
Read MoreHere's what I've learned about pricing over the years of running my own business and being the kind of person who thinks an awful lot about money.Sell value, not time.When you can sell the value you are creating for your customers; you can charge a lot more than if you could charge on time alone. Should an expert cobbler who has 45 years of shoe-repair experience charge less because he can fix your shoes faster and better than a rookie? Hell no. What is the value of continuing to use that pair of shoes you bought for $299 and plan to keep for the rest of your life?
Read MoreA cash flow projection, or cash flow forecast, is a way to illustrate how much cash you expect to receive and spend in your business. It's like a budget, but it does more than project expenses. It estimates how money flows in and out of your business.
Let's say you have a giant bathtub with some of goldfishes swimming around. Water is flowing in through multiple faucets, but it's also flowing out through numerous drains. Your goal is to make sure there is enough water in the bathtub for the fishes to survive. In this analogy, making sure the fishes have enough water is akin to making sure your business has enough cash to keep running. The water coming through the faucets is your business' income, and the water going out the drains are your business expenses.
It's essential to understand how cash flows in and out of your business for the understandable reason that your business needs cash to run. Goldfishes need water, and your business needs cash. Sure, some startups raise money in the form of investments and then lose cash and operate at a loss for years. But these companies must still eventually generate enough money to keep the business alive.
Read MoreOver the years, I've used my fair share of finance apps and tools, both for myself and clients. I tend to like specialized tools because that means they have to be really good at the thing they do. I look for great design when it comes to form, function, and keeping the end-user in mind. And every valuable tool has to be pretty easy to use. The tool should let you focus on your finances, not on trying to use the tool.
Here are the tools that meet all the criteria above and that I use to manage my money.
Read MoreWhat is lumpy cash flow? Lumpy cash flow is a way to describe how income and expenses can fluctuate each month. All companies will have some fluctuations, but in general, project-based or seasonal businesses tend to have the lumpiest cash flow.
There are a variety of different things you can do to smooth out lumpy cash flow. In this article, I'll walk you through some of them.
Let's go.
Read MoreIn a personal attempt to understand and process what the fuck is going on right now, here are some things I'm learning, questions I'm asking, and stuff I'm thinking about during this unique time in history.
Read More"We can tell our values by looking at our checkbook stubs."โ Gloria Steinem
My therapist told me that the emotion I was most challenged and uncomfortable with is the feeling of powerlessness. So when I began to understand myself through this lens, I could see how I've built a life around trying to reckon with that feeling - from my career choice, money is power after all, to my militantly structured daily routines. Maybe other people don't feel this struggle as acutely as I do. Maybe some people have always had a sense that they had power or access to power in the world. Maybe other people are afraid of their power. Afraid to acknowledge it and wield it because when you don't allow yourself to admit that you have power, you can be exempt from using it to help others.
Read MoreI'm struggling to recall a time I've felt this much uncertainty about the future. Over the last several weeks, I've fluctuated between crowding out the outside world and frantically googling answers to the questions that no one can answer.
It's one thing to have to sit with the uncertainty concerning life's big questions. But it's entirely frustrating to have to this uncertainty when it comes to questions that should have clear answers. Questions like: can individual Americans expect additional support from the government, or is that solely reserved for corporations? And, what are the rules for loan forgiveness under the Paycheck Protection Program? And, will these rules change in a few days or a few weeks?
Read MoreFriday night, May 15, 2020, the SBA issued it's Loan Forgiveness Application for businesses who received a Paycheck Protection Program Loan (PPP Loan), and I'm going to give it to you straight: it's ugly. Maybe I was naive to think it wouldn't be. When I looked at the guidelines, it made me feel like I was in math class, and I forgot that there would be an exam, and here it was sitting on my desk.
It made me feel that way because of how unsettling it is to know that a lot of these details were not published and available to businesses and borrowers on the outset. There is that feeling of not being prepared to do these calculations because we didn't have all the formulas. The other reason is because of the nuances of calculations.
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