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?
Could you ask your clients who send you checks to use bank transfer instead? It should be easy for them if they are from Europe.
You are doing so well! Here are my two cents.
1) it is nice to have paypal, provided you never leave any money there: their security is not good, it is attacked by hackers continuously, your money is not FDIC protected. Your euro account also should always be emptied immediately too, so these two empty accounts would not really bother you. Remark: Each bank takes a cut for international transfers: you should call around and see what is reasonable (for instance Bank of America takes 15 dollars per transfer, after the French bank takes a big cut too).
2) ING which works purely on internet has not been doing well during the crisis (so do not buy shares) but your money in savings there would be FDIC insured. They got now an interest of 1.40% which is not much, but better than your bank. Plus you can transfer back any amount to your regular bank account within 2 days. Very practical.
3) Bank transfers from Europe are full of horror stories: I know, that is where my pension has been coming from for years. I got a regular 10 per cent error(they forget me, it goes to the wrong account, it is lost, etc). I do not recommend it at all, I just have no choice. Most of the time, these wire transfer take as long as if they were coming by boat. I don’t understand it and I think I tried all there is.
4) rollover is a great idea. Might take some time and a good adviser to check that out.
Best of luck
claude
The key for me is to use some sort of software (Quicken, Money, online solution, whatever you choose…) that gives me an overall picture of my finances. That makes it easier to move funds around as needed.
Hey Corinne!
This post made me feel so much better. I have been in IRA/401k hell lately. Two pensions, two 401ks, one errant IRA, and a new 401k! Trying to get all this money together and out of the market has been fraying my last nerve. I keep thinking that I’m forgetting some big chunk somewhere.
The whole thing is a racket, I’m convinced. The phone calls with different information each time… ugh! I was starting to feel like I just didn’t know what I was doing because nobody else had all these accounts. It’s ridiculous!
The one upside is that I’m in a credit union … but 1.5% is still 1.5%. It’s not 0.05%, but it’s still 1.5%. 🙂
Also, you reminded me that PayPal owes me money. My account was hacked by a company that was honestly as bewildered as I was. They refunded the money immediately and I still haven’t seen it. 🙂
I use XETrade (http://www.xe.com/fx/) to transfer money from my German account to my U.S. account. They charge a fairly reasonable exchange rate (I believe they take a small percentage by exchanging at a slightly lower rate, but it is negligible), and it doesn’t cost anything to transfer the money (I almost wired it, but they listed the fee in the overview and I decided to choose the ACH option, which was free).