How To Gauge Services You Should Be Paying For
I’ve been self employed for almost 17 years. In the course of time, I’ve tried doing it all. It’s something that all of us naturally start off doing, but if you’re still doing it after a couple of years it either means you don’t have a lot to do or you haven’t taken time to consider what you can get off your plate so you can concentrate on your business and other things.
There’s a process one should go through when making a determination as to whether or not you should keep doing what you do that’s not part of your career. Below are categories and things to think about that might help relieve you of some of your workload… even if it might cost you a bit of money.
I write a financial blog because I’m good with numbers and not bad in finance overall. The first few years of being in business I did my own taxes using software, and ended up paying a lot of money to the federal government. Still, I was able to keep up with my expenses and such, and all was right with the world.
That is, until I got two very large contracts in a row that paid me a lot of money. Even though I still paid a lot of taxes, what I didn’t know is that once you reach a certain threshold you have to pay a lot more than I’d been paying. Thus, I got hit with a $27,000 recoupment from the IRS; ouch!
It was at that point that I realized I didn’t know enough about tax law to take care of it on my own so I hired an accountant. She helped me find allowances that could be written off that I didn’t know about while I set up a payment plan with the Feds to take care of my outstanding balance. Turns out if I’d hired an accountant when I got the first contract I’d have not only paid enough taxes up front but saved a lot of money on the back end to pay for the car I bought with the money I ended up owing the IRS.
Time vs Earning Time
I have a nice sized plot of land that’s close to an acre. There are many people with larger yards I’m sure but I have the largest in my neighborhood. It’s large enough that cutting it was taking me close to 2 hours to do, and that’s just the cutting part. It turned out that I was allergic to cut grass, so it took 15 minutes to bundle myself up in winter clothing, even though it was summer, to try to protect my skin and be able to breathe while I was doing it.
Eventually I started putting together the numbers as it pertained to what time was costing me when compared to the hourly rate that I charged my clients. Once I realized that one hour would pay to have my lawn cut for an entire month, I immediately hired a service to take care of it. This way I not only didn’t have to worry about my allergies anymore (as long as I keep the windows closed at least 30 minutes after it’s cut) but I can concentrate more on my business.
Saving money vs losing it
I live in an area that usually gets a lot of snow; we average 66 days a year of accumulated snow. Sometimes I contract with a service to plow my driveway; sometimes I don’t.
The main factor is whether I feel we’re going to have a rough winter or not. Based on patterns, it seems that every 6 years or so we have what’s considered a mild winter for us. I’ll do some research to see what the weather experts are predicting, and make a decision based off that.
Last year we only had 68″ of snow, which was our lowest total since 2001-02. I’d read that a mild winter was predicted because of El Nino, so I decided not to pay $325 for a season of plowing. We ended up having only one day where plowing would have been necessary, since they only come out when we reach 3″, which means I’d have lost a lot of money on the deal.
That’s much different than this year, where we’re already over 120″ and it’s only March, which means we legitimately still have 2 months where we could get significant amounts of snow. The day I’m writing this article they’ve already been here 3 times to clear out the driveway. I base my predictions on whether the plow service will come to the house at least 12 times to see if I’ve saved or wasted money; this year I’ve easily come out on top.
This is probably the diciest decision you have to make regarding anything you do, because you could always be wrong one way or the other. In a way, you need to be ready to look at it like playing poker at a casino where, to be successful, you have to think of your poker chips as chips and not as money. That’s not always easy, so it might be more expedient to play on the side of caution and pay the money just in case. If you’re willing to deal with the circumstances, then save the money and take your chances.
Gauge how much to spend when you have to spend
As I’m writing this we still have the ACA law in effect, which means we either have health insurance or pay a government penalty. This is one of those times when you’re going to spend money one way or another, so you need to figure out what’s best for your finances as well as your health.
Because I’m in health care finance, I’m big on telling people that they should find a way to pay for health insurance. How much insurance depends on how much money you make, how healthy you are, or whether you’re having money taken out of your check by your employer.
Since the 2017 figures are a bit dicey, let’s look at the 2016 numbers as a guide. For tax year 2016, the penalty was $695 per adult and $347.50 per child, to a maximum of $2,085. Lucky for all of us, that counts as income, not a direct payment, but it’s still a nice chunk of change being added to your income.
If your income is low, you may qualify for subsidies to help you pay for insurance in your state. If you’re making less than $30,000 a year you definitely need to check it out; if it’s for a family and less than $45,000 do the same. Any offsets will be good for your bottom line, and you’re not penalized for any assistance the government gives you.
When it comes to the deductible, many people quibble over the amount you have to reach before your services are beginning to be paid for by insurance. It’s not what most people are used to from insurance plans, so your criteria needs to be different because what you choose can either cost you way more money than you need to spend or save you a lot… and that’s without the government subsidy.
If you’re pretty healthy, it’s best to select a plan with the highest deductible. You’re probably never going to get close to using all of it, and the true reason for health insurance from the exchanges is to protect you from astronomical inpatient bills. It’s better owing $10,000 than it is owing $20,000 or more by not having insurance. No matter what plan you have, you’ll still get the medical discount your insurance company has brokered with your provider. All that and you still get one free physical a year, along with not having to deal with pre-existing condition limits; that’s big!
These are just a few ways of looking at things in a way that will help you determine how much further your money can go and what your time is worth versus what you feel free in doing yourself. Hopefully it’ll help you make better and easier decisions as time goes on.