One of my business goals for this year (because the new year should really start with the school year, don’t you think?) is to do better with managing my business finances. I already pay myself a regular salary but there are definitely areas for improvement. Specifically, I feel like I’m drowning in bank accounts, but I’m having trouble seeing how I could eliminate any of them; I’ll list my account system here and please feel free to contribute ideas about how you manage your business finances. The accounts I currently have are:
- Personal checking and savings accounts: Because I am incorporated and keep my business and personal finances completely separate, I don’t envision getting rid of these. However, I have both accounts at a bank in my neighborhood, partially because it’s convenient and partially because I’ve never taken the time to research better options. Lately my savings account has been getting an eye-popping 0.05% interest (yes, that’s five one-hundredths…) and I would like to look into options like an online savings account with a better interest rate, or possibly short-term CDs through a local credit union. Because I sometimes do translations that have to be notarized, I do find it convenient to use a local bank that offers free notary services.
- Business checking and money market accounts: Again, both of these seem necessary. The business checking account has really low fees (no service fee regardless of the balance and very low fees for incoming wire transfers, of which I receive a fair number) and I like having the money market account because I put 40% of everything I earn into it, then use that money to pay my taxes. However (here’s where it starts to get complicated), this particular bank does not accept foreign currency checks of any kind, so then we have the…
- Alternate business checking account: This is at a different bank, and I only use it to deposit checks in euros. It’s also a no-fee, no minimum balance account, so theoretically I guess I could just make it my main business account. My only barrier here is inertia; switching accounts would involve switching the auto-pays that come out of my business account (Internet service, web hosting, etc.) and providing the new information to my clients.
- PayPal account: PayPal has its issues, and the fees are especially crushing if the sender funds your payment through their credit card. However, I like the fact that I can have individual (non-corporate) clients pay in advance using PayPal, and that if I really have to chase a client for money, I can offer the option of taking the payment by credit card.
- Mutual fund brokerage account: This is the account I use for general savings, which I mostly hold in low-risk mutual funds and bond funds. I have an automatic transfer from my personal checking account every month (the old “pay yourself first and you don’t miss it” rule really works for me) and overall I am happy with this account.
- Two retirement accounts from previous jobs: Here’s another big area for improvement. In addition to my current Individual 401K (see below), I have two retirement accounts with two different companies, both from salaried jobs I had in the 1990s. I think that I should either consolidate these, or better yet (and if it’s allowable), roll them both over into my current retirement account.
- Individual 401K account: Someone in the local freelancers’ group I’m in tipped me off to this, and it’s been a great financial product for me. An Individual 401K operates like a 401K run by a big company, but is for one or two-person corporations. The advantage over traditional retirement savings plans for the self-employed (or at least this is my understanding), is that the contribution limits on an Individual 401K are very high, up to $49,000 per person per year. The only thing I don’t like about my particular account is that my fund company does not allow electronic transfers into Individual 401K accounts, so I have to send a paper check. I’m not so much against the paper check idea, but because it’s not automatic, I sometimes forget to send it in.
Does anyone else have ideas for organizing your financial life?