Join Garrick Chow for an in-depth discussion in this video Tracking income and expenses, part of Starting Your Career in the On-Demand Economy.
- So, as we've previously established, when you work through an on-demand company, you do so as an independent contractor. That makes it essential that you keep track of things like your income, expenses, and also have some workflows in place to keep track of your business. Now, I can't offer you tax advice here. That's going to be between you and your accountant or your accounting software. But I do know that if you don't want to be surprised or hassled for information about your business when tax time comes around, you'll want to keep detailed records throughout the rest of the year. At the bare minimum, you should keep up-to-date documents of your income and expenses.
This could be something as simple as a word processing document where you manually enter information any time you get payed or make a business-related purchase. However, something like this becomes less and less practical as the number of items begins to grow. In a document like this, you have to manually calculate your totals, and there's no way to categorize your expenses. So it's relatively easy to create a very basic spreadsheet workbook, where you can keep track of both your expenses and your income, and where it can automatically tally up the totals for you. Having the totals easily visible becomes important when you start earning enough that you have to start paying estimated taxes.
Here in the US, the IRS requires you to make quarterly estimated tax payments for the current year if you expect to owe at least $1,000. Even if you're not expecting to owe that much, you should also be saving part of your income to pay taxes at the end of the year. Generally speaking, saving about 30% or so of each payment is a good ballpark amount to make sure you have enough at the end of the year. See IRS.gov for more information about estimated taxes. You can also create categories for your expenses so you can keep track of exactly where the money is going or coming from. We have extensive training on Microsoft Excel here at lynda.com where you can learn how to create both simple and complex worksheets.
My personal suggestion, though, is to create a spreadsheet like this in Google Docs. That way you can enter data from your phone as soon as you make a purchase, and you won't have to remember to do so at your computer later as all your information will automatically be synced online to the cloud. And speaking of your phone, I also suggest getting a scanning app so you can scan and save receipts right away instead of carrying around a wallet full of receipts for months. Genius Scan from Grizzly Labs is a good choice. It's available for both iOS and Android devices. And the paid version allows you to upload your scans to cloud-based services like Dropbox, Evernote, Google Drive, and so on, so your receipts will be backed up online.
You should still hold on to the originals, but by scanning them in you'll have saved electronic versions right away. You'll also be able to find several apps for both iOS and Android for tracking income and expenses. So if you don't want to go with the spreadsheet method, you can find an app. Just do a search for "expense tracker" to browse what's available and read reviews about different apps. Several of the apps, like this one called Expense Tracker for example, also let you scan receipts so you can keep everything within one app if you like.
But again, the bottom line is you have to stay organized and start keeping track of your income and expenses once you begin working in an on-demand business. Doing so right away is going to save you a lot of hassle and headaches at the end of the year, and it's always good to know exactly how much you're really making doing a job so you can assess the value of continuing to do so, or to help you figure out where to make changes or improvements in order to generate more income.
Garrick Chow explains the basic structures of the on-demand economy and the skills and characteristics of successful on-demanders, so you can determine if on-demand work is the right fit for you. Then learn about the time commitment and expectations around pay, what the employer provides, and what one can expect from clients. Garrick then discusses tools to keep you organized, including how to best track income and expenses.
Finally, the course offers tips and tricks and a case study based on the author's firsthand experience as an Uber driver.
- Preparing to work on demand
- Managing expectations from on-demand clients
- Tracking expenses and mileage
- Optimizing your income
- Getting support online
- Case study: Becoming an Uber driver
Skill Level Beginner
Q: This course was updated on 05/26/2017. What changed?
A: A new video was added that explains how to optimize your LinkedIn profile for on-demand work.