DH started a business and has some business debt as a result. While, he is trying to move everything to the business name, some of it is in his name and not the business name.
How do you budget in personal finances with that? Because to me, I'm like well we have debt, so I guess we can't spend anything, and that isn't really true and we still need to spend for household regular stuff anyway. But I don't know what to do with that on the balance sheet because it is in his personal name. The business debt will be paid off by the business, but it may take a couple of years.
Also, what would you budget for 2 kids and a SO for Christmas presents? I get 3 paychecks this month, so I could potentially budget first paycheck for Christmas presents (not the entire paycheck but just the general idea), 2nd paycheck for mortgage, and 3rd paycheck for other household expenses.
I keep my business expenses and income completely seperate. I have a personal credit card that I only use for business. I do not charge any personal expenses on it. While it is in my name, it is not part of our personal budget, only the business. My dh has no idea what is on that credit card or the bills I get for the business(inventory). My bank account is also a business account with no personal connection.
What kind of debt does he have?
As far as Christmas, I would budget maybe $200 per person max for Christmas. $100 is probably fine too. I guess it depends on how much you make!
Post by wanderingback on Nov 28, 2022 17:09:27 GMT -5
1) No I wouldn’t include business debt or expenses in your personal budget. My partner is self-employed and I don’t look at those expenses or income until he transfers his income to the account we use for shared bills.
2) Budgeting for gifts is so personal. I think you need to decide how much gift giving is important to you and what you can personally afford. I budget $0 for Christmas gifts for my partner and going forward with our child we plan to either do trips for Christmas or experience stuff. There’s no way I would spend 1 paycheck of mine on just gifts, but for others, spending that much is the norm, and that’s fine. So budgeting will vary.
Thanks all. I will look for ways to not include the business debt. He already has it in his business books so I guess it doesn’t need to be duplicated again in personal books.
As far as the paycheck not planning to budget the entire paycheck but since I get paid this week it was kind of like for the timing I should buy presents this weekend. I had been holding off.
Also meant to post in money matters but oh well oops.
The simplest way for me to keep everything organized was to have separate accounts. My husband's paychecks go in his personal checking account and he has to pay x, y, z fixed family expenses each month. He pays for family debts like the mortgage and the car. I pay for a, b, c fixed family expenses that are not linked to debt like the cable bill and cell phone bills. When I tried to mix our finances, he couldn't understand the ups and downs of business income and it was a mess since I couldn't assign a fixed amount each month out of the business for just personal income. He's the kind of person where money burns a hole in his pocket so separate has now worked for 10+ years.
I had only business checking accounts/credit cards for years and used it for business and personal expenses. I have business debt as well and it is paid from the business checking account. My quarterly taxes get paid from the business account too even though it's technically a personal expense. My accountant and his bookkeeper separate out the personal vs business spending. Like a $200 transaction on my credit card at Carter's will get categorized as personal (unless I tell them otherwise) whereas a transaction to buy gas gets categorized into the business.
To budget, I give my husband guidelines on what I can afford for variable expenses like vacations or home repairs. For example, right now I'm having to be super tight with my spending so I'm holding off on buying DD new furniture since her old stuff is perfectly functional, just not our style anymore. We can go on vacation, but right now I'm not spending cash on the fancy hotels he wants when I have points to stay at perfectly fine hotels and my kids will be thrilled because they don't know the difference. I know I need to buy holiday gifts, so I have to prioritize on paying for those first before the furniture and fancy hotels. If he wants to buy DD the furniture or pay for fancy hotels he can but he likely won't, he will likely use his extra money from his paycheck each month to pay down some debt from past home projects.
I was forced to open a personal checking account a few years ago only to be able to accept a particular monthly payment that I wanted to keep separate from my business. I use the funds from that account to pay for daycare and to withdraw cash to buy my kids stuff like ice cream.
We have joint everything and the business is new (6 months or so), so we are still working out the kinks. He has a business bank account but hasn’t been able to put everything in the business name yet.
It would have been easier if our finances were separate I think. But we merged them 15 years ago and it had been working well until the business.
We have joint everything and the business is new (6 months or so), so we are still working out the kinks. He has a business bank account but hasn’t been able to put everything in the business name yet.
It would have been easier if our finances were separate I think. But we merged them 15 years ago and it had been working well until the business.
Does he have another job with regular income or is the business his only job?
If the business is his only job, you will have to think about the business budget too since there likely won't be as much money in the beginning for him to automatically transfer money into the joint account.
In my case, I've been doing this for 10+ years and I am still trying to pay myself a steady monthly salary. Every year in April, my tax returns show that I made $X profit from the business last year, but if I was to divide that profit by 12 and pay myself the same amount monthly, I couldn't do it because of the way my business bills come due. Part of that is because I've mixed the personal and business to a degree like paying for $200 of clothes at Carter's on a business CC rather than transfer that $200 to the personal account and then buying the clothes.
Depending on the industry and how complex his expenses will be, he may need an accountant. I've had mine for 12 years. For example for something like gas, I pay for all the gas we use for both cars. When my taxes are done, the accountants use a formula to apply the amount of gas I bought over the year as a business expense. Don't quote me, but I think the said they use 80%. So if I spent $10,000 in gas last year, $8K of that was a business expense and $2K of that is personal and is represented in that $X profit in the tax return in April. If my husband is going out to fill the tank (he barely drives anyways), he always takes one of my business cards. I tried to give him one of those employee cards from my business credit card but that was also a mess, see above about money burning a hole in his pocket. I'm sure that won't be an issue for you since you were going to post this on MM anyways LOL. When my husband bought a car in 2019, I had to do some paperwork to show that I actually bought the car in order to take the section 179 aka "Hummer deduction" on it. If he were amenable to making business decisions together with me, we might have decided together on which new car to buy for the family and see if it fit one of the section 179 vehicles. Since making financial decisions like that with him that causes too much confusion and friction, I didn't care what car he bought and left him alone. But when he did buy the car, I saw it qualified for section 179 and asked my accountant what to do. A lot of my "home" expenses are actually business ones like our cell phones etc. etc.
Post by ellipses84 on Nov 28, 2022 23:34:58 GMT -5
I keep my business and personal accounts completely separate. Does he have a good accountant? That’s my best recommendation regardless of how small the business is. Mainly for taxes and to make sure he’s taking advantage of all the benefits, but they may be able to advice how to separate things and start paying back your personal finances. Like, it may be better to take out a business loan and pay yourself back m or setup a payment plan of a couple hundred per month back to yourself.
For holiday budgeting, I’d use the extra paycheck.
He does have a primary job. This is a side business. He hired a book keeper as kind of a one off contractor type thing and I mentioned accountant for taxes and he hasn’t done that yet but I’ll keep pushing because I believe they have to file quarterly? He doesn’t believe he owes any taxes yet anyway but I think he does need an accountant because even though he took accounting I don’t think there was much on taxes in the class.
He does have a primary job. This is a side business. He hired a book keeper as kind of a one off contractor type thing and I mentioned accountant for taxes and he hasn’t done that yet but I’ll keep pushing because I believe they have to file quarterly? He doesn’t believe he owes any taxes yet anyway but I think he does need an accountant because even though he took accounting I don’t think there was much on taxes in the class.
What structure is his business? Sole proprietor? LLC? Sub s corp? It will vary on how you file taxes. I am a Sub S corp and have to file a seperate return then I get a K1. If it is a sole proprietor, you file with your personal taxes Schedule C (I think). I defnintely recommend an accountant or tax attorney (mine is both a CPA and tax attorney) if it is going to be a decent side gig.
You need to keep the business and personal expenses completely separate. You should be concerned about personal liability from business operations if you have comingled payments and funds. A lot of people argue that the LLC doesn't do much anyway, but if you blatantly pierce the corporate veil the LLC will definitely not protect you.
The business should make the monthly payments on the debt as part of the operations of the business; then the remainder at the end of the month is available for your husband's draw. He shouldn't take the draw and then pay the debt personally with that money. That may mean that his "salary" is less than expected especially during the start up phase. If the business doesn't have the money to make the payments, he should still make a contribution to the business account and then pay debts from the business; do not pay personally.
He does have a primary job. This is a side business. He hired a book keeper as kind of a one off contractor type thing and I mentioned accountant for taxes and he hasn’t done that yet but I’ll keep pushing because I believe they have to file quarterly? He doesn’t believe he owes any taxes yet anyway but I think he does need an accountant because even though he took accounting I don’t think there was much on taxes in the class.
I think you don't have to start filing quarterly until the second year. They always look at the previous year to come up with the quarterly amounts.
I’m in the process of holding back a month’s earnings. I’m letting money accumulate in the business account, and I’ll transfer over a regular amount every month. This will mean minimal fluctuation for lost wages due to illness, or a slow month. Boom months I’ll save the extra to go towards slow months. I’m lucky to be able to do this all at once, but you can also do it by slowly saving up a month’s salary. It’s the same idea as YNAB. Be a month ahead.
Business debts would be paid off monthly in money I earned before I transferred to personal accounts, since that’s a tax free expense. I would not pull the family into emergency mode for a planned business debt, as long as all was going according to plan.
We spend $500/kid which is more than many I know and less than many I know.