Recently over lunch and some very good small batch cider, a colleague asked me, How on earth do people rack up these big loans when there’s a limit on federal
According to dear daughter I’m a world class know-it-all, but every once in a while it’s brought home to me that I don’t actually know everything. So this is another
We’ve all heard that we’re moving to a gig economy. I think this used to be known as being a freelancer, but there are some important new wrinkles. If you’re
It’s taken me a while to realize that not everyone loves financial planning. I mean, when I first started this I assumed all my clients would be deliriously happy
According to dear daughter I’m a world class know-it-all, but every once in a while it’s brought home to me that I don’t actually know everything. So this is another chapter in the ongoing saga entitled, I Make All the Mistakes So You Don’t Have To. Herewith we have a cautionary tale about online banking.
Despite my advocacy for keeping on top of your finances, I must admit that I’m somewhat lazy about balancing my check book. Downloading statements has really nudged me up a notch on this, even though my bank has a somewhat cumbersome process on this—sometimes the magic works and sometimes it doesn’t. By that I mean sometimes Quicken will auto-download, and sometimes I need to go to the bank’s website and do it manually. I do manage to get to this, um, almost every month.
I have found, however, that occasionally there are transactions missing and I’ve been lulled into complacency since most of them tend to appear in the next month. But ugh, I’ve just had a major glitch.
Usually, I use mobile deposit for the checks clients write to me. These are occasionally rejected, because either I’ve tried to deposit too much money or I’ve exceeded the check limit for the time periods. It’s a nice problem to have, and a good excuse to walk the dog over to the bank, which she thinks is the biscuit store.
On those rare occasions when I actually get to the health club, I’ve used the drive-up window. One time a very large check did not appear in my account after the drive-up, and I noticed it immediately and it was found (it had been mis-deposited into someone else’s account!).
However, the computerized reconcile that I use for the business books had been carrying 4 relatively smaller deposits from month to month. The reconciling does get a bit off from time to time (double entered, missed a withdrawal, etc.) and I pretty much just ignored it until I started worrying about getting ahead of the end-of-year tiding up. So, I finally decided to compare these with the paper statement.
I still get the paper statements (although I’ll probably switch to the PDFs next year), because that’s where I’ve been able to identify the few transactions each year that don’t download. To my shock, these four deposits, all made on the same day, have never showed up. In re-contacting all the people who wrote the original checks, each reported that the checks were never cashed, and have graciously re-issued them. But I can’t take it up with the bank, because I don’t usually keep deposit receipts in a feeble effort to maintain a clean car.
What I’ve learned:
- Keep your deposit receipts until you get your monthly statement, or at least until the deposit shows up online in your account.
- If you use computer download/reconcile (does anyone still do it by hand?) be sure you double check anything that is still carrying over after you check deposits and payments. Anything that doesn’t check off should be verified with the bank.
- Within a day or two after in-person, automatic, or mobile deposits, make sure they show in your online statement. Even robots make mistakes. Eyeball your paper or PDF statements that everything is there as it should be.
So, even though I embrace online banking, I’m still a little reluctant to eliminate paper statements. I find it’s much easier to ignore online and electronic information. True, the paper piles up into a mound near my desk, but at some point I can’t ignore it, and it does provide a follow-up trail. Make sure you have back-stops and double-checks in place before you go 100% virtual.
We’ve all heard that we’re moving to a gig economy. I think this used to be known as being a freelancer, but there are some important new wrinkles. If you’re thinking of accepting or have been offered this type of job, you need to get out your calculator and run some numbers to see what you should actually charge, and what’s a fair offer. BTW, this has come to my attention based on an offer made to my job hunting child—hourly or salary, with the hourly rate being slightly more. The employer making the offer was genuinely surprised when dear daughter turned it down; she said most people prefer the hourly because the rate was higher. No it wasn’t—at least not enough.
Let’s set up a case study for Sally Onherown. Ms. Onherown would expect to make $70,000 in a salaried position. That position would also include health insurance, short term disability insurance, an opportunity to buy into a group policy for long term disability insurance, paid vacation time of 10 days, 7 paid federal holidays, 3 paid sick days, and a 401k to which the employer contributes 3% of salary (provided the employee also contributes 3%). In 2018 there are 261 working days, so Ms. Onherown is making $268.20/day or $33.53 per hour (I’m using 8 hours, though a 9-5 job with a lunch hour is only 7 hours).
Let’s see what Ms. Onherown’s benefits are worth:
|Paid federal holidays||
|Paid sick days||
|Employer’s 401k contribution||
|Value of health insurance (based on $424.26/month through ACA for a 20 something)||
|Short term disability (usually 1-3% of income)||
|Long term disability (let’s say you’d pay half of 3%)||
|Total value of benefits||
So, in order for a freelance gig to pay as much as a salary, Ms. Onherown would need to be paid at least 20.4% more: $84,305.12, or $40.38 per hour.
But wait, that’s not all. If Ms. Onherown is working out of her own home or apartment, she could deduct some portion of the housing as a home office, and any time she uses her car to travel to a site, the mileage would be deductible. But if all that hourly work is performed at the employer’s site, she loses that. If she has to use her car, she may get a gas allowance, but often these don’t take into account the wear and tear on the car, the cost of purchasing (and financing) a vehicle, the increased cost for car insurance when used for a job, and the inevitably increased maintenance on a heavily used car. And, does Ms. Onherown need to provide any of her own supplies? Depending on the profession, this can really rack up some costs.
While Ms. Onherown could certainly contribute to an IRA, without a match, the amount she could contribute (and the potential reduction of her taxable income) is far lower than the amount she might contribute to an employer 401k. While a single making $70K probably doesn’t have enough to contribute the full $18,500, these jobs are often pitched to married people (as “flexible”)—and if spousal income is sufficient, the couple is losing an important tax saving opportunity.
We’re probably wading into the weeds here, but are those hours guaranteed? Because if the client isn’t available, or there’s not sufficient business, or some time might be taken up with non-billable activities like staff meetings, the hourly person working directly for an organization might end up with far less than 40 billable hours. In fact, many true freelancers are lucky to be able to bill 20 hours per week. If it’s the kind of freelance job where you also need to join professional organizations, pay for professional insurance, do marketing, and supply your own technology (and technology repair and replacement), the costs are much, much higher than my list above.
Many years ago, when I worked at writing grant applications, the Feds used to allow us to include a “reasonable” indirect rate of 31-33% on any proposal to cover just these sorts of costs for personnel. I think that’s a good starting point—add about 1/3 to any salary, and you’ll have a pretty good estimate of what a minimum freelance hourly rate should be.
NOTE: An earlier version of this post used 216 working days instead of 261–an inadvertent transposition. The calculations have been corrected. I regret the error.