Today, we take a look at three leading tax software programs—TurboTax, H&R Block at Home, and TaxAct—to help you better decide how to file.

TurboTax, H&R Block at Home and TaxCut Compared

Explaining the Differences

Over the years, I’ve used each of these programs to file my taxes. (This year I hired a CPA to help with the increasing complexity of running a business.) But in years past these tax software programs handled made preparing my tax returns relatively easy if not entirely painless; after all they’re still taxes.

In comparing the best tax software programs, all three guarantee the accuracy of their calculations. The big differences among tax software programs lie in their:

• Intuitiveness/usability
• Pricing
• Support options

INTUITIVENESS

For the most part, all three programs are easy to use and provide intuitive navigation. I think TurboTax stands out in a bit when it comes to entering W-2s and walking you through questions for complicated credits and deductions. TaxAct, by contrast, does a fine job for simple returns but begins to get cumbersome when tackling advanced topics.

PRICING

Tax software prices can be misleading. TurboTax and TaxAct advertise that you can file your simple, federal tax return for free. And in many cases this is true. But with TurboTax, if you want to access certain features (detailed questions to guide you through deductions, for example), you’ll have to upgrade. And in every case, you will have to pay to file your state tax return with the software or if you tax situation ends up being more complex than you imagined. That’s why it’s a good idea to figure out exactly what you’ll need and how much you’ll pay before starting your return.

In most situations, TurboTax ends up being the priciest of the three packages. But after combing over 250+ online user reviews, most think that the quality of the software and the online help (user forums etc.) make the price worth it, especially for more involved returns. TaxAct, by contrast, is much less expensive: you can file a basic federal return and a state return for only $14.95…the least expensive way to file everything. But if you want phone support, it’s an extra $7.95 (phone support is included with TaxAct Federal Deluxe, so you can file federal, state, and get phone support for $17.95).

H&R Block at Home’s pricing falls in between. They don’t offer free filing of your basic federal return. If you purchase their Deluxe, Premium, or Business package, one state return is included (meaning you can prepare it, print it, and file by mail) but they’ll charge you $19.95 to e-file the state return.

Note: With the links in this article, you can save 15% off the listed prices of H&R Block at Home. *H&R Block, TurboTax, and TaxAct are affiliates, meaning if you decide to use them we get a little bit in our online tip jar. If you choose to support us in this way, thanks!

SUPPORT

I’m a figure-it-out-myself kind of guy, so I turn to online FAQs and forums before calling an 800 number; I can say both TurboTax’s and H&R Block’s knowledge bases are very good. From the 250+ online user reviews I read, most agree that their phone support is good, too. Reviews note that TaxAct’s phone support falls short with limited phone hours and less-helpful-than-desired responses. Again, TaxAct is a good choice for straightforward returns, but spending a bit more might be warranted for anything more complex.

H&R Block has the advantage of local offices around the country and offers a “best of both” program. For $79.95 you can begin your return online and have a professional sign your return as a professional preparer.

Both TurboTax and H&R Block include audit support in the event your return they prepared is audited. This support includes a professional to communicate with the IRS for you and explain the audit process, but may fall short of everything you might need to handle the audit (such as legal advice in some situations).

Recap

Due to the way different companies bundle and price their software, the best value for my return may not be the best for yours. TurboTax and H&R Block at Home both offer complete solutions, usable software, and full-featured support, but come at a cost. TaxAct provides an affordable option for simple returns.

What about you? Had good/bad experiences with these or other tax software programs? Let us know in a comment.

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• You can go old school and break out the pencil and paper.
• You can buy tax software to handle the heavy math for you.
• Or you can pay a professional to do it all.

It’s time to ask yourself a couple of important questions:

• Do you know a bit about tax laws?
• Is your tax situation fairly simple?
• Are you detail oriented and good at simple math?

If so, you can probably save some money and file by hand. Otherwise, tax prep software may help you avoid the math and researching tax laws.

• Do you have a new or complicated tax situation (like inheritance, capital gains, a new business, etc.)?
• Does the possibility of getting something wrong on your taxes keep you up at night?

If you answer “yes” to these questions, it might be a good idea to get in line at a local tax return preparation office—preferably sooner rather than waiting until April when every accountant in town is swamped.

Let’s take a closer look and compare your tax prep options:

FILING YOUR TAXES BY HAND

Advantages:

• It’s FREE.
• You learn about the tax code.

Disadvantages:

• May take more time.
• Higher chance of errors/miscalculations/typos.
• Longer wait for a refund.

I’ve been preparing my taxes by hand for more than 10 years. I think I’m in the minority with all the new tax prep software out there, but I much prefer this method over anything else. I tried to use tax software a couple of times and was always frustrated that I wasn’t in total control of my tax return. I like having it all out in front of me so I can see the whole picture.

Ten years ago, my taxes were simple. I was working one part-time job, so I just had one W-2 to worry about and could file the 1040 EZ form. If your taxes are simple—for example, you have one or two W-2 forms, claim the standard deduction instead of itemizing, and claim zero or few adjustments or credits—you, too, could probably file your taxes by hand.

Like I mentioned last week, each form walks you through the process step-by-step. If your tax return will be simple, start with the 1040 form that fits your situation and follow the directions from there. Simple forms can be completed in under an hour once you get the hang of it.

Of course, some tax returns are too complicated to do by yourself…and some of you may simply think that filing a return by hand is bananas. I get that. Fortunately, you have some other options.

TAX SOFTWARE

Advantages:

• It’s relatively inexpensive ($50 or less).
• It does a lot of the work for you.
• You can deduct the cost if you itemize.

Disadvantages:

• It takes time to learn how to use.
• You don’t get the “big picture” and you may still miss out on deductions or credits if you don’t understand the software’s questions.

Tax software’s popularity continues to grow. The biggest advantage is that it’s inexpensive when compared to hiring a tax professional and it still involves you in the tax process without all the stress and confusion of doing it on your own.

In years past Money Under 30 has recommended TurboTax, but in a couple of weeks, we’ll break down the pros and cons of the most popular tax programs. Although they’re similar, some may be better suited for certain individual needs and price ranges.

HIRING A TAX PROFESSIONAL

Advantages:

• You don’t do any work.
• It takes the stress out of tax return preparation.
• You can deduct the fees if you itemize.

Disadvantages:

• It’s the most expensive option.
• You (probably) won’t understand your tax return or how taxes work.

The biggest disadvantage with hiring a tax professional is that you’ll have to pay them to do your taxes for you and you’re not very involved in the process (of course, some of you may prefer this).

With some large tax prep companies, you could get away with paying $100 or less (some companies are even advertising free tax return preparation for very simple taxes); however, if your finances are more complicated or if you have a lot of investments, property, and/or business information to include in your tax formula, you’ll be looking at paying several hundred dollars or more.

Still, choosing a respected Certified Public Accountant (CPA) is worth the peace of mind even if you have to shell out a bit more cash. You’ll know that an expert is working to find all the tax breaks for you they can and that your return is probably error-free.

Tax preparation may be stressful, but if you’re prepared and understand your particular situation, you can make the best decision on how to prepare your tax return. Just remember that if you want to enlist the help of a professional, don’t wait until April!

What about you? How will you prepare your taxes this year? What do you like about your chosen method? Let us know in a comment!

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The key is to put your money on autopilot.

Why does something so simple matter so much?

THE BEHAVIOR GAP

Because we’re human, and we do stupid things. In his blog and new book by the same name, doodling financial planner Carl Richards coins this “The Behavior Gap“.

Looking at the long-term returns of investments like the S&P 500 compared to the returns of individual investors, Richards found that the investors consistently did worse than the investments. He explains the difference, The Behavior Gap, as humans’ tendency to let emotions influence decisions (for example, to sell off stocks during scary economic times or buy a particular stock based on a tip in the financial media).

Emotions can lead us to make a lot of terrible financial decisions like:

• Making a big purchase you can’t yet afford—perhaps an engagement ring or a wedding dress—on a 19% APR credit card.
• Taking on too big a mortgage because it’s “your dream house”.
• Cashing out your 401(k) because you’ll “feel more secure” with cash in hand.

Putting your money on autopilot can’t stop us from all of the stupid things we do, but it goes a long way in protecting ourselves from two of the most common:

• Ceding to temptation.
• Being lazy.

TEMPTATION

Emotional decision-making is part of the problem; pure temptation is another. If you have ever tried to resist a temptation—to turn down an extra drink, to surf YouTube instead of working, to buy something you shouldn’t—and failed, you know what I mean.

Psychologists have shows that although it is possible to stretch and strengthen our willpower like a muscle, our ability to self-regulate is a consumable resource that depletes. What this means is:

• The more we exercise self-control, the better we become at it in the long-run.
• BUT, the more we use self-control in the short-run, the harder it becomes in the short-run (Muraven and Baumeister, 2000).

So if you focus on not procrastinating every day for a month, you may find it easier to diet next month. But if you’ve had a particularly exhausting, stressful day at the office and you’ve been fighting off distractions to get stuff done, resisting the candy bars in the checkout aisle (or going out to dinner even though you don’t have the money) may be all but impossible.

Although we can work to improve our self-control in the long run, as humans we’ll always be susceptible to moments of weakness when our self-control is depleted. To prepare for this inevitability, we can alter our environments to remove or reduce temptations.

An obvious example is that cliché advice that debtors should cut up their credit cards or put them in a block of ice. The next time your willpower is depleted and you want to charge the Forever Lazy you saw on a late-night infomercial, you may have second thoughts by the time your Visa defrosts.

LAZINESS

Sometime we do stupid stuff because we are emotional or tempted. And sometimes we’re just lazy.

If you currently pay for a monthly subscription that you don’t use—a gym, a magazine, $12 a month for DVR service on cable—and don’t do anything about it, whose fault is it? The recurring-subscription business model that gyms, cable companies, and Netflix use is one of the most stable and profitable in existence. And guess what? It is built on the simple fact that people are lazy. When we stop using something, most people will pay $20 or more each month for many months before making a 10 minute phone call to cancel.

Laziness hurts our wallets in all sorts of ways.

Overspending on credit cards or paying for unused subscriptions are just a couple of ways our behavior sabotages our finances. Other examples include:

• Forgetting to pay bills, incurring late fees and credit penalties
• Depleting savings by comingling them with everyday spending money
• Failing to invest enough for retirement
• Failing to invest in regular intervals

There may be different reasons for making these mistakes, but don’t discount laziness. If you’ve ever thought of cancelling something you don’t use or opening a Roth IRA or increasing your 401(k) contributions and said “I should look into that” but haven’t done it yet, your laziness has already cost you money.

WHY AUTOMATION IS THE ANSWER

Think about your daily habits.

Most likely, you brush your teeth every day and don’t even think about. It doesn’t take willpower to brush your teeth. It’s automatic.

Now think about something you’d like to do but are struggling with; perhaps it is to quit smoking, lose weight, or spend less.

These things are difficult to do. They take conscious effort—active self-regulation—to achieve. Meanwhile, the corresponding bad habits (smoking, overeating, spending money) have become automatic.

But talk to somebody who has successfully changed a habit—for example, a daily exerciser—and you’ll hear that  it’s the good habit that is now automatic. Getting out of bed to jog becomes as routine as brushing your teeth.

Your brain has an autopilot!

When your can teach your brain to include a habit on autopilot, maintaining it takes much less effort, if any at all. Better yet, seemingly tiny habits can have big ripple effects.

In the book Willpower: Rediscovering the Greatest Human Strength, the authors explain how even small automatic behaviors can trigger better decisions. For example, have you have ever felt like when you’re well dressed, you work harder? There’s something to that.

Studies show that little habits like shaving, dressing neatly, and keeping an organized home correlate to more self-control in other areas of life. People who exhibit these behaviors are more likely to exercise, eat less, moderate alcohol, even use condoms more often.

So the more good habits you can put on autopilot, the more success you may have regulating other areas of your life.

And when it comes to putting your money on autopilot, your brain has an ally in technology. Twenty years ago, automated personal finances were impossible. Having your paycheck directly deposited was still cutting edge, and paying bills meant cutting a check every single month. Today, it’s not only possible to have an entirely electronic checking account, it’s becoming the norm to do away with paper checks altogether. And these new financial technologies make it possible to put your money entirely on autopilot.

A SIMPLE APPROACH TO PUTTING YOUR MONEY ON AUTOPILOT

As you get older, your finances will get more complicated whether you want them to or not. So the simpler you can keep your financial system, the better. Two primary accounts—one checking and one savings—should suffice unless you own a business or are married with separate finances.

The Three Steps to Automatic Finances

1. Put your savings on autopilot
2. Put your bills on autopilot
3. Put your investments on autopilot

Here’s what somebody’s basic financial autopilot looks like.

Today we’ll cover setting up your savings and bills, next time we’ll talk about investments.

Put your savings on autopilot.

The first step in putting your money on autopilot is to pay yourself first. This means directing a portion of the money you earn into a savings account as soon as you earn it.

• If you’re still working on your emergency fund, put this money towards that.
• If you’re in high-interest consumer debt, put this money in an account that automatically makes extra payments on your debt each month.
• If you’ve funded your emergency fund, then put this money towards your next life savings goal (e.g., a house, a car, a wedding, or a vacation).
• If you’re set on cash, skip this step and focus on investments instead.

There are two ways to pay yourself first:

1. Split your direct deposit between your checking account and savings account (ask your HR manager for the form).
2. Set up an automatic transfer between your checking account and savings account on the day after you are paid. Any online savings account will make this easy.

Put your bills on autopilot.

In part one of this series, I talked about your “nut”, the fixed monthly expenses like rent, insurance, and student loan payments, that you pay every month in the same amount. Once you have a comfortable bank account buffer in place, the next step in putting your money on autopilot is to setup automatic bill payments to each of these bills. There are different ways to do this, and I rank them in order of my preference.

1. Pay with a rewards credit card.
2. Pay with your banks online billpay.
3. Pay through an automatic bank draft (ACH).

Let’s talk about the options:

Credit Cards. Some billers like insurance, cable, and cell phones let you pay with a credit card. As long as they don’t charge a convenience fee to do so, this is your best bet. For one, you can earn your one or two percent of the bill back in rewards and two, you have a third party in between you and the biller. (Remember one of the best things about paying with a credit card—not cash check or debit card—is your right to dispute the payment with the credit card company and not pay a dime until that dispute is resolved).

Online Billpay. The next best option is setting up a recurring payment through your bank’s online billpay service. I like this option because you have control over multiple bills in one place (your bank’s online login). You can stop or change payments to more than one bill instantly in one place.

Autodraft/ACH. Traditionally, if you wanted to pay a recurring bill automatically, you have to sign up with the biller, give them your checking account and routing number, and let them automatically withdraw the bill amount from your checking account each month. This is fine, but there are some concerns:

• Redundant Maintenance. You must maintain your autopay with each biller individually. If you change banks, for example, you have to remember to change the accounts at each biller.
• Less Control. Let’s say you accidentally rack up $3,000 of data roaming charges on your phone while travelling abroad. Since you’re travelling, you forget to check your bill before the autodraft goes through. Your cell provider withdraws the $3k from your checking account and overdraws the account. Not only are you out that money and responsible for overdraft fees, you may lose your ability to negotiate the charges down (after all, the cell company already has your money).
• Returned Payments. If you have your checking account to reject overdrafts, your auto payment will be returned if you don’t have enough money in the bank at the time it’s processed. This may trigger a returned payment fee in addition to late fees from the biller. (Also, be sure to enter your checking account numbers correctly when you enroll at the biller’s Website. You payment will be returned if you make a typo, too.)

Put your investments on autopilot.

Once you have your savings and bills on autopilot, the last (but I would argue most important) step is to set up automatic investing. We will cover this in detail in part four of this series.

RECAP

We humans are emotional, easily tempted, and lazy. We do stupid stuff with money. Therefore, it’s my opinion that the single most important thing you can do for your finances is to put your money on autopilot. Start by transferring a percentage of your income to a savings account as soon as you get paid. Then, setup all of your bills to be paid automatically by their due date either by credit card, bank bill pay, or ACH autodraft. Next time, we’ll talk about the final piece of the puzzle, establishing automatic investments.

ACTION ITEMS

1. Pay yourself first. If you haven’t already, open a separate high-yield savings account and set up an automatic transfer or split direct deposit to correspond with every payday. Do this even if you can only afford to save $20 a paycheck. You can increase the amount later. Having the system in place is what matters.
2. Ensure you have a bank account buffer. Do not proceed to action item three until you have this in place.
3. Put your bills on autopilot. With a bank account buffer in place, put all of your monthly bills on autopay. Set aside an hour to set this up tonight and you’ll easily save an hour a month for the rest of your life.

Join The Discussion: How do you put your money on autopilot? What’s your system? Let us know in a comment.

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So whether taxes simply fail to excite you or flat out freak you out, we’re going to try to make this tax season a bit more bearable. With the help of our staff CPA/tax superwoman, Amber, we will be publishing Money Under 30′s “No-Stress Guide to Filing Your Taxes”, a six-article series, over the next month or so. We’ll cover:

1. Your tax document checklist: A guide to get you started
2. Choosing the best method to file your return
3. Tax software: When to use and how to choose
4. Advanced forms (itemizing, capital gains, business income, etc.)
5. Don’t miss…a credit and deduction checklist
6. Special situations (audit avoidance, extentions, payment plans, and estimated payments)

I hope the series is helpful. To kick it all off, here’s Amber with a checklist of how to get organized before you begin your return—perfect to grab in late January as documents like W2s start filling your mailbox. (You can download the PDF version of the checklist shown above to print out and place with your documents.

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Taxes seem scary.

But for those of us who are just starting out, filing your taxes is usually a pretty simple task.

Shelling out a couple hundred dollars (or more) each year to get your taxes done by someone else may seem like an easy choice, but it’s not always necessary. If you’re young, single, and not yet a homeowner, doing your taxes on your own is easy. And for almost everybody else, tax software like TurboTax can walk you through your taxes step by step. And, if your taxes are simple, filing a federal return with TurboTax is even free.

We’ll help you decide how to file your taxes next time. Today we’re going to look at what forms you’ll need to collect. Before we get started, let me share a couple basics tips to get you started (and, hopefully, ease your mind):

1. Each form and every single line on every form comes with step-by-step instructions.
2. These instructions are in one of two places: on the form itself or in a separate document called “XX Form Instructions”.
3. Learn to love the IRS website. It contains answer to every question you could ever have, so you’re never alone.  They also have hotline numbers, online chat, and e-mail available. They even have a tool called the Interactive Tax Assistant that learns about your tax situation and helps you find answers to your questions.

TAX FORM CHECKLIST

Every tax situation requires different forms. But if you’re just starting out (e.g. you’re working your first job, don’t own a home, and have minimal investments), the number of forms you need is minimal.

Here’s a quick guide to which IRS forms and/or personal documentation you’ll need for the most common income situations:

If you have one or more employers…

If you work for someone else—meaning, employment and income taxes are deducted from your paychecks—you will need at least these two forms:

• W-2. Your employer(s) will mail these forms to your house no later than January 31st.
• 1040*. Depending on the complexity of your taxes, there are three 1040 forms to choose from: 1040-EZ, 1040A, or the original 1040. The different types of 1040 forms are explained below.

If you earn any money on your own (from freelancing/self-employment)…

If you worked for yourself at all (full-time or on the side), you will need a few more forms to fill out:

• 1099. You should receive one 1099 from every company or person you earned income from during the year, if it’s greater than $600.  (Even if it’s not greater than $600, you still have to report the income.) Generally, this will be a 1099-MISC. These will be included as income earned on your Schedule C form.
• Schedule C*. This is the form where you’ll determine whether you and/or your business earned a profit or suffered a loss during the year. No matter if you earned a profit or suffered a loss, this will be added or subtracted from your overall income on your 1040 form. If you earned a profit, you’ll need to pay employment taxes (like FICA, MediCare, Social Security, etc.) because an employer was not deducting those taxes from your paychecks…you were your own employer.
• Schedule SE*. If you earned a profit, this form will determine the amount of self-employment taxes you’ll need to pay. In general, you can deduct half of this amount from your total income (line 27 on your 1040 form).
• 1040 Form*.

If you were unemployed …

• 1099G.  Unemployment compensation is included in your taxable income, so you must include it in your tax return. You’ll generally receive a 1099G form from the state that paid you unemployment compensation.
• 1040 Form*.

If you paid student loan or mortgage interest …

• 1098. Your student loan or mortgage lender(s) will mail you 1098 forms showing how much interest you paid on your loans in the tax year. This interest could potentially be tax deductible.

If you earned interest from bank accounts or investments …

• 1099-INT. Your bank or investment company will send you these forms for any interest paid to you in cash. Interest income must be reported on your return.

*You only need these forms if you plan on doing your own taxes without software. Other documents you need either way.

EXPLANATION OF THE DIFFERENT 1040 FORMS

Now that you know how to report the income you earned throughout the year, you’ll need to decide which 1040 form to use. Remember, there are three to choose from, the most simple being the 1040EZ (catchy name, huh?) and the most complex being the original 1040 form. The 1040A is right in between both in terms of complexity.

Here’s how to decide which form to use:

1040EZ Form

I was able to file this form during all the years I was in school (through college) because the only income I needed to report to the IRS was simple income I received from various part-time employers. If you’re just starting out, try to use this form if you can. It makes filing your taxes very simple. Here are the requirements:

• Taxable income less than $100,000
• No dependants
• Less than 65 years of age
• Single or Married Filing Jointly status
• Interest income less than $1,500

1040A Form

This becomes a popular form for many recent college graduates because this form allows you to deduct student loan interest. If your taxes are still fairly simple but you need to deduct student loan interest (or education expenses, IRA contributions, or higher education expenses), you might be able to use this form.

Additionally, if you own a home, you probably will not be able to use this form since you cannot itemize (e.g. deduct mortgage interest expenses) when using this form.

• Taxable income less than $100,000
• You take the standard deduction (do not itemize)
• Only certain tax credits are allowed

1040 Form

If all else fails, you’ll need to file a 1040 Form. The older you get, the more likely you are to file a 1040 Form instead of the A or EZ versions.

Even if you qualify for the A or EZ versions of the form, you can still use the regular 1040 if that’s what you feel comfortable with.

Remember, no matter which 1040 form you decide to use, every taxpayer must submit a 1040 form to file their tax return. It is the head honcho of tax return documents, so make sure you get familiar with how it works.

Questions? What questions do you have about which forms you’ll need to file your tax return? Let us know in a comment!

(Disclaimer: The tax situations here are all explained at a high level. If your situation is more complex, you may need to file additional forms or seek professional guidance to begin. Tax software like TurboTax and their available help lines may be a place to start for less than hiring an accountant. )

Want to print it? Download the PDF checklist here.

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1. Mint.com
	A long-time leader in personal finance management, Mint.com provides efficient and user-friendly budgeting tools. This mobile version, which securely connects to your bank accounts to track and categorize expenditures, optimizes the budgeting program. The mobile software allows you to manually enter pending and cash transactions on-the-go, meaning that your accounts are always up-to-date. Mint’s app will let you quickly check how much you have remaining in, say, your food budget, so you can smartly decide to grab a can of beans or splurge on a nice cut of meat while standing in the grocery-store aisle. Free from iTunes but you’ll need a free Mint.com account first.
2. Balance
	While automatically updating apps are nice, manually entering your purchases can make you feel more accountable for what you spend. Balance is a basic app to help you manage the balances on all of your accounts. Whenever you make a purchase, pay a bill, or deposit a check, you simply enter the transaction into the app. It then recalculates your new balances. The app also supports recurring transactions—like that monthly gym membership—and enters them automatically. Just the exercise of writing down all of your purchases might make you spend less. With this app, you’ll really learn how quickly those three-dollar lattes add up. Plus, you’ll avoid overdraft fees by always knowing how much is in your accounts. Free from iTunes.
3. BillTracker
	With this handy app, you’ll never pay a bill late again. BillTracker tracks due dates, amounts owed, and confirmation numbers for payments. You can set up reminders so that your phone will alert you when a payment is due soon or overdue. It also lets you set up recurring bills and view bill history to confirm when you sent a payment. Use the app for all of your payments, from water and electric fees to cell phone bills and insurance expenses. The company also makes a free, lite version, but it does not handle recurring bills. $1.99 from iTunes.
4. Debt Minder
	If you’re struggling to pay credit card debt and student loans, Debt Minder will help put you on the debt-free track. The app tracks debts for big purchases—like cars, houses, credit cards, and student loans—and monitors how you pay them off. It even creates personalized plans, including highest interest and smallest balance, to help you pay off debts when and how you want. With color-coded graphics and charts, the app lets you visualize where your money is going and how you are handling your overall debts. $0.99 from iTunes.
5. freecreditscore.com
	Your credit score can make the difference in many of life’s biggest moments, from buying a house to getting a new job. This app tracks your score in real-time so that you can be in charge of your financial future. To use the app, you must be a member of freecreditscore.com—which costs $14.95/month—but the immediate updates and alerts provided by the app may pay for themselves in terms of your peace of mind. The app provides detailed information about what’s hurting and helping your score. If you pay a credit card bill late, for instance, the app will track how your credit score responds. It also includes a Score Estimator to help to make smart financial choices. Free from iTunes.
6. Mortgage Calculator Free
	iTunes contains a handful of mortgage calculators, but this one is the most popular because of its ease of use and simplicity. The app provides multiple mortgage options to figure out whether you can afford to buy your dream house. You can also use the app to configure monthly and yearly fees, including private mortgage insurance and home insurance. It will calculate property taxes using a variety of settings, including how frequently taxes are paid. Whether you’re in the market for a new house or just interested in learning whether you could afford that condo down the street, this is the app for you. Free from iTunes.
7. Expensify
	While compiling expense reports is typically an annoying and unorganized process, this versatile app makes it a breeze. Expensify syncs with your various credit cards and bank accounts to track business-related purchases. It also collects digital receipts from merchants and lets you send copies of paper receipts using your phone’s camera. Simplifying organization, the app sorts expenses by customized categories like meals, mileage, and company. When you’re ready to send in an expense report, Expensify will compile all necessary purchases and email a PDF to the appropriate contact. You can even be directly reimbursed to an online checking account. Free from iTunes.
8. Gas Cubby
	If you own an automobile, car maintenance and gas expenses are probably taking their toll on your wallet. Download this app to save money and keep your car in tip-top shape. The app uses your phone’s GPS to chart car mileage and how much gas you’re using. It also tracks gas prices at different locations so that you can get the best local deals. In addition to recording gas usage and mileage, the tool has customizable service updates. Use it to get reminders about when to change your car’s oil and other maintenance needs. By keeping up with basic automobile upkeep, you’ll save money on larger expenses and your car will run for years to come. Free from iTunes.
9. iTrade
	If you want to learn more about the stock market without putting your finances at risk, look no further than iTrade. The app lets you manage a virtual stock portfolio, compete with information from other members, and research stocks with news and history graphs. Although just a game—at the end of the month, the app calculates top players—iTrade looks and feels like a real trading platform. It only operates during actual trading hours and even includes virtual broker fees. Practicing on the app will prepare you for the real stock market while eliminating risks—even the app is free. Free from iTunes.
10. Real-Time Stocks
	If you already have investments in the stock market or are looking to join in, check out Real-Time Stocks. While there are many stock-tracking apps for the iPhone, Real-Time Stocks is probably the most basic and easiest to use. The app displays real-time quotes and charts for most U.S. stocks. It even lets you monitor multiple stocks at once. Using the app, you can create a watch list for stocks most important to you and track global indices. It also allows you to manually enter stocks in non-U.S. exchanges. Even if you don’t have a stock portfolio, the app is an excellent way to track the market and learn more about its ups and downs. Free from iTunes.
11. Wikinvest Portfolio
	Wikinvest Portfolio Image: Wikinvest.jpg If you have one or several stock portfolios, Wikinvest Portfolio, which monitors all of your investment accounts in one place, is the app for you. The secure interface automatically imports your holdings from over 60 common brokerages, including Merrill Lynch, Fidelity, Etrade, Moran Stanley Smith Barney, Schwab, and more. The app lets you compare your portfolios’ performance to major indices and view real-time quotes and news for all of your investments. You can also research future investments with the app by viewing company charts, community analysis, and news. Free from iTunes.
12. iSlick
	iTunes contains tons of apps for sales, freebies, and group-based coupons, but iSlick combines all of these categories into one smooth interface. The app lets you track sales from shopping and deal websites, like Amazon.com and Groupon, to get the best prices on everything from electronics and household products to spa services. It also lets you choose from specific deal-types—such as freebies—and enter keywords. On the hunt for a new laptop? Use the app for up-to-date deals on the best machines. Free from iTunes.
13. Ask Dave Ramsey
	With this app, Dave Ramsey’s popular financial radio show is at your fingertips anytime, anywhere. The app has a database of hundreds of popular calls made to the show with real-life money questions and answers. You can read a short summary of the question or listen to the actual radio clip. Financial concerns are sorted into categories, like taxes, insurance, and budgeting. You can also choose to listen to a random clip to deepen your knowledge about all things money. Want to learn more about how to save when unemployed or how much you should budget for pet emergencies? Grab this app for answers to these and many more money predicaments. Free from iTunes.
14. PayPal
	PayPal’s app is one of the most popular financial apps available for the iPhone, and for good reason. The app lets you send money to people as gifts, collect funds for a group gift, and receive payments. You can also use it to create and manage fundraising campaigns. The app’s “split bill” feature is particularly convenient when dining out with friends—it even has a tip calculator. Download this straightforward app to save time writing checks and trekking to the ATM. Free from iTunes.
15. Your Financial Institution’s App
	Mobile banking makes it easy to check balances, transfer funds, and pay bills from anywhere. Almost all major banks now offer banking apps that make managing your money simple and convenient. Some of these apps, like the one from Chase, even let you take deposit funds by taking pictures of checks with your iPhone’s camera. You can also use your bank’s ATM-finding tool to locate the nearest cash machine, saving you extra dollars in fees. Here are a few of the major banks with apps in the iTunes store: Bank of America, Capital One, Chase, Citibank, ING, SunTrust, Wells Fargo.

Rebecca Kutzer-Rice is a freelance technology writer living in Brooklyn.

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Last week, we talked about how budgets are a pain in the ass to maintain and how they can actually hold you back from getting your money in order. I offered a way to minimize budgeting, doing just enough to know your expenses while eliminating the need to worry about how much is left in the coffee budget this month.

Today, we’ll cover an important prerequesite to putting your finances on autopilot:

The bank account buffer.

A bank account buffer is my name for what other people may call a cash cushion, mini emergency fund, or back-up savings. And it’s simply this: some extra cash in your checking account.

When you have a bank account buffer in place, you don’t have to worry that a mistimed latte on your debit card will overdraw your account and trigger a $35 overdraft fee. More importantly, you’re free to start putting bills and investments on autopilot. And as we’ll discuss in the upcoming posts, when things are on autopilot you will worry less, spend less time managing your money, and keep yourself from meddling with your savings and investments.

WHY BUFFERS MATTER: AN ANALOGY

Modern aircraft can basically fly themselves. Although your pilots will likely land the plane by hand, they will definitely punch on the autopilot for much of a long flight across the Atlantic.

Two factors make autopilot safe to use during cruise flight:

• A predictable set of circumstances. The pilots can, for example, set the plane to fly a certain altitude and heading for several hundreds of miles while air traffic controllers help ensure they won’t run into other planes.
• Altitude. At 35,000 feet above the Earth, there is a plenty of time to react if things go wrong.

Planes fly at certain altitudes for many reasons—in part, fuel efficiency—but the higher they go, the more time pilots have to recover and land should things go wrong.

You can think of your money the same way. 

When you’re living paycheck to paycheck, you’re flying close to the ground. One bad bump and you can crash: wracking up overdraft fees or going into debt.

You wouldn’t dare put your money on autopilot in this situation. How can you set your rent to pay automatically on the first of the month if you’re not sure there will be enough in the account each month to cover it?

But imagine if you had an extra $1,000 in your checking account that serves as a buffer between you and an overdraft fee. You don’t spend it, but it’s there to protect you in case your bank debits your rent payment a couple days before you get paid. It’s like an aircraft having an extra 20,000 feet of altitude.

So a bank account buffer is a good thing. But how is different from an emergency fund? And how much do you need?

BANK ACCOUNT BUFFERS VS. EMERGENCY FUNDS

An emergency fund—that separate savings account stuffed with six months expenses or more—is a vital part of financial stability. But it comes later.

A bank account buffer is a starting point. A bank account buffer:

• Protects against minor cash flow fluctuations, like paying rent a few days before your paycheck deposits.
• Is equal to 25% – 50% of one month’s expenses.
• Stays in your checking account.

An emergency fund:

• Protects against big expenses and loss of income.
• Is equal to at least six months of expenses.
• Should be kept in a separate, interest-bearing savings account.

HOW BIG A BUFFER DO YOU NEED?

In the past, I’ve recommended $500-$800 for a bank account buffer. For most people, this is enough. But your bank buffer should be whatever makes you comfortable.

If you have predictable income and expenses and track your spending to the penny, you don’t need much of a buffer. If, however, your expenses or income vary from month to month or you simply don’t want to worry about your bank balance very often, a larger buffer is in order.

Once you know your average monthly expenses, you can build a buffer of between 25% and 50% of your monthly expenses. So if you typically spend $2,500 a month, start with a buffer of $625. If you want more than that, gradually work up to a $1,250.

There is a sweet spot. You don’t want to build your cash cushion too big because that money could be at work for you in some other way. Although interest rates are dreary now, one percent in a high yield savings account is better that zero percent in a checking account. (As an alternative, you can look into interest-bearing checking accounts.)

And yes, you should have a bank buffer even if you’re in credit card debt. But keep the buffer no bigger than necessary. Then, funnel all extra money to paying down your credit card balances.

RECAP

Keeping $500-$1,000 of extra cash in your checking account (a “bank account buffer”) helps protect against overdraft fees and serves as a mini emergency fund when small, unexpected expenses pop up. Building this buffer will enable you to begin putting your money on autopilot, reducing stress and making it easier to reach financial goals.

YOUR ACTION ITEM

If you don’t already have one, build your bank account buffer in the next 30 days.

Putting an end to the paycheck-to-paycheck lifestyle is the best thing you can do for your finances. And it will feel frigging phenomenal.

With some hard work, you can get there 30 days or less. Sell some stuff you don’t use. Cut back on luxuries, if only for a month. If you’re paying extra toward debt or making investment contributions, skip a month; the buffer comes first.

Your Thoughts

If you already have a bank account buffer, how do you structure it? How much of a cash cushion do you keep?

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It’s not because I don’t like pie charts and spreadsheets. (I do.) I don’t like budgets because I hate telling you to write them when I know myself how boring, pointless, and difficult it is.

It’s like the doctor finishing up a physical saying: “You’re healthy. Just lose 20 pounds”. (Happened to me yesterday.) I already knew that, thanks, but dropping a few pounds is easier said then done. Do you know how many freaking books there are on losing weight?

And do you know how many people try to lose weight (AGAIN) every January 1st?

Millions.

Having the right information is useless if you’re not going to do anything with it. And it is doing something that is so hard.

Budgeting is the same.

WHY BUDGETS FAIL

Old-school personal finance books tell you that if you just create a budget and stick to it, then—POOF!—all your money problems will be solved.

But anybody who has ever tried budgeting knows that it’s complete crap.

You know you should budget, but you also know you’re not really going to do it. Learning how to budget isn’t the problem. You can visit any one of hundreds of personal finance blogs to read about budgeting techniques. You can download free spreadsheets here and on countless other sites. You can pick up one of dozens of books. You can use any one of dozens of budgeting apps— many free.

But even if you write down every dollar you spend for 30 days (which, done manually, is a complete pain in the ass), you are still human.

As a human, you are intelligent enough to know that on Jan 1st, you can afford to spend $200 on food and drinks out this month. Unfortunately, as a human, you are quite susceptible to temptation. This means that on Friday, January 20th, after having already spent $190 on going out in the preceding weeks, your willpower will be tested. While you are out with friends, three quarters of a vodka tonic sloshing in your gut, will you:

• A. Say: “I have to go home, this drink puts me overbudget?”
• B. Order one—maybe two more drinks—and then do dinner? After all, it’s Friday, you’ve worked hard, you deserve it, budget be damned.
• C. Completely forget you had set a $200 budget in the first place, and have no idea you’ve already spent $190 on going out.

Over the past five plus years, I’ve experimented a lot with budgets. I’ve set monthly budgets, annual budgets, and weekly budgets. I’ve tracked my spending using paper and pencil, spreadsheets, and apps like Mint.com. And I’ve learned two things:

Tracking spending manually is pointless. I never keep up. And I’m a financial blogger…a total nerd about this stuff. If I can’t do it, I don’t expect you to.

Monthly budgets are fairly useless because we underestimate our monthly expenses. Think about it. Although there are some things you pay for every month: housing, transportation, utilities, food, and debt payments, there are lots of things you pay for less than every month: car repairs, home improvements, trips and vacations, holiday presents, and insurance payments, to name a few.

For some people, these less predictable expenses may only be 10% or so of your total spending, but for me, especially after becoming a homeowner, they’ve crept up to more like 30% (home repairs aren’t cheap).

What this means, of course, is that if I take my annual take-home pay, divide it by 12, and proceed to spend that amount every month, I’m going to be in trouble when that unexpected car repair comes up, or it’s December and I have to do my holiday shopping.

We need to fix the following problems:

• Our human tendency to cave in the face of temptation.
• The futility of tracking every dollar ourselves.
• The difficulty of getting an accurate sum of monthly expenses.

How do we do it? And how do we make it simple?

For one, we stop budgeting.

THE ANTI-BUDGET

I’ve been outlining this post for a week or so. Then, yesterday, a funny thing happened. I was in the doctor’s office waiting for my physical and I picked up the Nov. 2011 issue of Money Magazine and randomly turned to a page that actually recommended the same thing: stop budgeting!

As a way to reduce financial stress, the piece recommended to ease off budgeting, saying:

“Money (or its lack) is the nation’s most common source of stress, reports the American Psychological Association. Making a detailed budget — a widely advised fix — only makes things worse, says Cleveland financial planner Kenneth Robinson, based on a decade of work with clients; the problem is that people hate to think about where they’ll need to cut back.”

In other words, when money is tight, focusing on that shitty fact day in and day out doesn’t do us much good.

Money’s fix for the problem is the same as mine:

• Put your money on autopilot.
• After the big things are take care of, you’ll only need to track “what’s left to spend”…on whatever you want.

This idea isn’t new.

THE IMPORTANCE OF AUTOMATION

I first read about automatic finances over 10 years ago in The Automatic Millionaire by David Bach. The entire book is devoted to setting up automated systems to manage and invest your money. This does two glorious things:

• It eliminates worry. You stop wasting time thinking about stupid things like “did I pay the electric bill this month?”
• It protects you from yourself. Automated finances make it harder for you to sabotage your money. No more late credit card payments and the associated fees and damage to your credit score. No more skipped IRA contributions. And on and on.

Another writer who has taken the idea of automated finances to the next level is behavioral finance guru Ramit Sethi. He lays out simple plans for automating your personal finances on both his blog, I Will Teach You To Be Rich, and in his book by the same name. He’s a vocal advocate of what so many other financial “experts” for some reason refuse to acknowledge: Our generation does not want people our parents’ age telling us to just “set up a budget” and “cut back on lattes”…the latter a direct jab at Bach, who trademarked the term “Latte Factor” to describe how daily coffee habit can eat into long-term wealth.

A few years ago when I wrote about automated finances, Ramit made a kerfuffle because he felt the post was too similar to his own material. To be collegial, I took that post down—obviously, I never want to hear the faintest whisper that I’m trying to rip off another blogger’s material; I’m not. I’m a student of Sethi’s methods myself; he’s a brilliant psychologist, blogger, and marketer. In this case, one of his favorite concepts—automated finances—is too important not to address on a blog that aims to provide a complete resource for your finances.

So check out Bach’s book, Sethi’s blog and book, or what I’m going to cover in the next few days. But when you finish reading, my only hope is that you’ll actually do what it takes to put your finances on autopilot.

Your wallet will be better off.

AUTOPILOT SPEND TRACKING

Forget about manually tracking every beer and burger. The goal is to set up a system that keeps track of all of your spending electronically without any additional work from you so that you can access it if an when you need to.

The Single Card Method

One of the best ways technology can help our wallets, I think, is by eliminating the need to use cash, and therefore, eliminating the need to keep track of our cash expenses.

Now this is counterintuitive to what a lot of old-school financial gurus say:

• “Cash is king!”
• “You spend less with cash!”
• “You can’t overspend with cash! When it’s gone it’s gone.”

That’s all true, but the fact is cash also can get lost and stolen. And, more importantly, cash is on the way out. Electronic payments are here, like it or not, and the times you need cash (for anything) over a debit or credit card are fewer and fewer.

But the best thing, in my opinion, about using a credit or debit card, is that you automatically have a record of all of your spending. You don’t have to do a damned thing.

Credit vs. debit

Credit cards are slightly better than debit cards because most give you ways to sort and even tag your transactions, although some banks are starting to offer this for debit cards, too. With most cards, you can also export your transactions to spreadsheet…which, for the nerds like me, is where the fun begins.

Using Personal Finance Managers

As an alternative to the Single Card Method, there’s Mint.com* or similar personal finance management (PFM) tools. These applications link to your credit and debit cards, aggregate your transactions, and can even categorize them automatically. You set spending limits, and they can send an email or text when you hit them. *Full disclosure, Mint is an affiliate of Money Under 30.

These apps are powerful and effective…if, of course, you remember to login occasionally and make sure the categories are right and view your tallies. But even if you don’t, that’s OK. The important thing is that data is there if you need it (for example, you want to know if you can afford to move to a bigger apartment and need to analyze your past spending).

YOUR MONTHLY NUT

Setting up Mint or downloading all of your credit card transactions is great for historical analysis of where all of your money goes. Looking forward, however, this data is less important. What you need to know are your fixed monthly expenses. Things like:

• Your rent or mortgage
• Utilities and insurance
• Loan payments (student, auto, etc.)
• Minimum credit card payments
• Desired savings, investments, or additional debt payments*

That last one is important. It’s vital that you calculate how much you want to save, invest, or use to pay down debt first. (What we usually do is look at how much we want to spend, and then take whatever’s left and save it. Problem is, there’s not usually much left.) To find what’s left:

• Total your fixed monthly expenses (your Nut).
• Figure out your net (take-home) pay, per month.
• Subtract your Nut from your take-home pay.

This is what’s left to spend. On whatever. Food, gas, beer, travel. Of course, if something big happens, you may need to spend money on that and have less for fun stuff. That sucks, but it’s also why you should have a buffer, which we’ll talk about in another post very soon.

Download my simple “Anti-Budget” Worksheet here.

If There’s Nothing Left…

“But wait!”, you say. “After my nut, I don’t have anything left!”

OK. Deep breath.

If money is tight, it’s likely there won’t be much (or any) left to spend after you’ve laid out your necessary monthly expenses and what you hope to save.

In the short-term, you can reduce–but not eliminate–your savings goals while at the same time trimming spending. Do what you must to get these in check so you’re not going into debt.

At the same time, this is time to look at making the kinds of big changes that can impact your overall financial picture. Forget about trying to trim your food budget by $25. Look at big places you can save. Can you get a roommate? Can you refinance your mortgage? Or, can you earn more money?

Cutting little things gets a little bit of money. Making big changes gets you a lot of money.

YOUR SPENDING ALLOWANCE

The amount of money that you have left after your Nut (fixed monthly expenses and savings) is what I call your Spending Allowance. It’s how much you can spend this month without worrying. On whatever you want.

Using whatever method you’ve setup for Autopilot Spend Tracking, you can keep a simple eye on how much your Spending Allowance you’ve used month-do-date. For example, by setting up a goal in Mint or by using the Single Card Method for all of your day-to-day spending. (This is what I do. If my family’s Spending Allowance is $2,500 in a month, I can eye our credit card balance throughout the month. If it reaches $2,000 too far before the end of the month, for example, I know it’s time to ramp down the spending a bit.)

You can use the Anti-Budget Worksheet to figure your Spending Allowance. Get it here. 

RECAP

This is a lot to digest. But here’s what’s important:

• Budgets are overrated. They create stress and we don’t stick with them.
• All you need is a Spending Allowance. Instead of tracking dozens of categories of spending, know how much you can spend per month—your Spending Allowance—after you’ve covered big expenses and savings.
• Forget manual spend tracking. Keep an eye on how much of your Spending Allowance you’ve spent with Mint or by simply using one credit card for everything you buy. Cash is dead.

YOUR ACTION ITEMS

Read all you want, but this information won’t help you unless you put it to work in your life. This week:

• Determine your Nut and Spending Allowance using this worksheet.
• Decide how you will track your spending going forward, with a service like Mint or using the Single Card Method.
• Leave a comment letting me know:

1. What you hate about budgeting. Be specific.
2. Your biggest worry or stress about managing your money day to day.

I’ll try to answer your questions in the upcoming series. In a couple days we’ll talk in detail about building your Bank Account Buffer. This is tiny emergency fund of $500-$1,000 that can cushion you from unexpected expenses like car repairs so when they happen they don’t eat up your entire Spending Allowance for the month. Then we’ll move on to discuss ways to put your bills and savings on autopilot.

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And as we’ve established, often the most straightforward way to do that is to start freelancing in addition to your nine-to-five. Ideally, you can even make that work something you already enjoy—like teaching a fitness class or creating designs—so it feels less like work. In other words, become a part-time freelancer in your chosen field.

There’s only one problem. Freelancing requires one precious resource that everyone seems to be lacking these days…

…time!

Even full-time freelancers have a hard time with time management. But if you’re already working a full-time job, have other activities you enjoy, need time to take care of yourself, and especially if you have a family, finding time to work on a freelance business can seem impossible.

It doesn’t have to be.

I asked a number of successful freelancers how they make time for their work. Read about the strategies and systems they use below, and you can be more productive and earning more money in the coming year. 

FINDING TIME

Unlike money, we can’t make more time, we can only free up the time we have. To find more time, you have two options:

• Identify blocks of uncommitted time in your existing schedule.
• Change your schedule to create blocks of uncommitted time.

I’m a newbie freelancer myself, and I’ve found that using pockets of empty time during the day has been critical to my ability to get everything done.

Identifying uncommitted time.

I know what you’re all saying:  “But I don’t have any free time!”

Exactly. None of us do. We’re all busy. Most of us have a 9-5 that we have to report to five days a week. However, this is why you need to use your time wisely by utilizing uncommitted chunks of time scattered throughout your day, instead of, say, surfing YouTube or watching another Family Guy marathon (I’m guilty of both).

For example, I’m a full-time accountant who works five eight-hour days per week, and here are some of the pockets of free time I can identify in my schedule:

• My lunch-hour (Here’s a great article for maximizing your lunch hour.)
• Waiting for meetings/teleconferences/training to start
• While I’m making dinner (I do this often!  I prop my laptop on a counter or breakfast bar.)
• Waiting at the doctor/bank/car shop/in line/etc.
• After dinner, on nights I don’t have plans.

Of course, I don’t have children, but I do have other activities that require my attention in addition my full-time job.

As you can see, my “free” time are usually short periods of time—just five to 30 minutes here or there. The key is using these times instead of wasting them. Rather than mindlessly browsing Facebook; use these times to e-mail a pitch, build on an idea you jotted down earlier that day, or finish a project. You have to stay focused.

Want to help other readers out? Think about uncommitted chunks of time in your day that you could use more productively and share them in a comment.

Creating free time.

What if you can’t think of even one time slot where you could spare a minute for freelance work? It’s time to sacrifice something else.

“I find that I can either stay up late or set my alarm at an ungodly hour to get things done.  If I alternate nights of sleep, no-sleep, sleep, no-sleep, I can get by.”  – Phil Villarreal, author and freelance writer for The Consumerist

Phil’s quote nails it—as a full-timer and a dad, he is seriously crunched for time. He had to create time slots to make freelance work fit into his life. He wakes early or stays up late. Everybody can do this. At some point, you simply need to decide which is more important: sleep or work.

This takes sacrifice. That’s the question that you have to ask yourself before you embark on your freelancing journey: Are you willing to sacrifice time or other things you enjoy to do work that you love?

If you’re not willing to give-up some shut-eye, here are some other possibilities:

• Outsource chores or other work (hire someone, recruit family members, or swap tasks with others)
• Get organized so your days become more efficient (see below)
• Say “No”; drop activities, groups, and recurring social events that don’t add value to your life
• Clear time sucks from your day like browsing Facebook or watching excess TV. (Several years ago, the Web’s wine king, Gary Vaynerchuk, said it best: If you want to find time to work on the side, “…stop watching fucking LOST!”)

Although finding decent time blocks you can dedicate to freelancing is most important, there are other things you can do to optimize your time management.

GET ORGANIZED

“Try creating a freelance schedule to make sure you’re using your time most efficiently. Use an egg timer to help you stay focused.” – Krystal Yee, freelance writer and designer

Disorganization. It’s plaguing our nation. Shows about hoarding are an extreme, but how many of us suffer from some kind of clutter and disorganization?

If you can’t keep your life organized, fitting in freelancing will be difficult. This isn’t an organization or cleaning blog, but I suggest you start by creating a clutter-free workspace. If you’re life is organized, you will be a better freelancer and be able to make more time for your work. But, it will be impossible to create top-notch work if your “freelance life” isn’t organized either.

Here are some things that you’ll need to keep organized when you start freelancing:

1. Administrative items. Keep your hours billed and invoice records in one place. (If you bill more than a couple clients and/or need to track your hours, Freshbooks is a billing app that may help.) Similarly, store tax-related items in one place (you’ll be happy you did this come tax time).
2. Contacts. Thanks to today’s tech, this is an easy task. Make Gmail or your smart phone apps work for you.
3. Your Work. I like to seperate my freelance work by clients. I have a seperate folder and notebook for each client. That way I don’t make an embarrassing gaffe like sending a draft to the wrong client.

CHANGE THE WAY YOU THINK

“Learn to accept some chaos. Focus on one or two major goals per day. Prioritize. Be gentle with yourself. Oh, and coffee. Lots of coffee.”   – Kelly Gurnett, freelance writer for Brazen Careerist

Once you get into the habit of freelancing, you can become even better at this “job” if you change the way you think.

Remember how I mentioned that you can create time in your day for your freelance work? Once you get that habit down, take the idea a bit further. Start living your freelance work.

Let me explain.

A majority of freelancers are doing this kind of work because they enjoy it; often, it’s a hobby that turned into a side business. For this reason, we tend to think about our freelancing more often than our traditional 9-5 job. This is good; this can help you become a better freelancer.

When I’m starting to write an article, I often start writing it in my head. I usually do this while I’m on the way to work, getting ready in the morning, working out, or doing other thoughtless, mundane tasks. Once I get the idea to paper, I’ve already written the opening paragraph. Things flow much more smoothly after that.

But, this idea isn’t just for writers.

By letting your mind wander and thinking about your freelance work throughout the day, you can become inspired by your daily activities. Keep a notebook handy or use an app like Evernote to record ideas that come to you throughout the day as it relates to your freelance work. Here are some examples:

• Do you do design work on the side? Take pictures or record thoughts for new designs.
• Do you develop apps?  Use conversations with your friends for tips on refining or creating your next project.
• Do you coach basketball at night?  Use team experiences at work to create team exercises on the court.

Once you get into the habit of regularly thinking about—or “living”—your freelance work, you’ll find you can really be inspired throughout your day. It can jump start your tasks when you get to them that evening (or the next morning, if you’re an early riser).

Do you work on the side? How do you make time? Share your best tactics in a comment.

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We buy insurance. We work for a paycheck. We put our money in an FDIC-insured savings account even though it pays less than 1.0% interest.

These things aren’t necessarily bad; a little bit of caution is a good thing.

But when you become conditioned to reject nearly any risk in your life, think of how this influences your behaviors and, more critically, how it impacts your life.

• you don’t talk to that beautiful guy/girl at a party because you’re afraid of rejection; you stay single
• you don’t take credit for an outstanding job at work because you’re afraid others will think you’re bragging; somebody else gets promoted
• you don’t follow your passion because you’re afraid others will call you crazy; you have major regrets in 30-40 years

Risk is good.

Risk creates progress.

(In this video, Peter Diamandis explains why he’s comfortable asking people to risk their lives in pursuit of the X PRIZE, which he created.)

But you don’t have to risk your life to rocket into space. You don’t have to quit your job to become an entrepreneur (unless you want to, in which case, you probably should). But this year, after your resolutions to hit the gym and stop buying lattes have failed (and most of them will), resolve to take a risk or two.

Talk to a pretty stranger. Go skydiving. Start freelancing. Leave a job.

There is a line, of course. I’m not telling you to stake your life’s savings on red at the roulette wheel. There are big risks and small risks. Some risks have positive expectations, like the strong likelihood a boss will grant a hardworking employee’s request for a modest raise. Some risks have negative expectations—roulette, for instance.

Of course, not all risks will pay off.

But success is earned on the back of many such small risks, and the obdurate takers will be rewarded with far more than the costs of their failures.

I know this isn’t specific financial advice you might be expecting, but it is—most importantly—actionable. You can resolve to take risks this year. And you can start today.

MY LATEST RISK

I’m taking risks all the time. And recently, I took a big one:

Last month, I left my day job to work full-time on Money Under 30.

Now, if you’ve been around awhile, you’ll know that for a few months in 2009, Money Under 30 was my primary focus while I juggled some other part-time projects after moving from Boston to Portland, Maine to be with my wife. I then began work as a marketing manager for a software company until I left that job last month.

What changed?

In 2009, Money Under 30 was ready to be worked on full-time, only I wasn’t ready to do it.

I had just moved to a new city. I was getting married. I had repaid most of my debt, but I needed to save a lot more before feeling comfortable being self-employed. And I’d soon be a dad.

I know that some people would’ve made the leap sooner. But, then again, some people wouldn’t make the leap at all.

I admit, I hesitated.

I liked having two incomes. (Indeed, I still believe in diversification, and will be consulting with my old employer and some other contacts to ensure my livelihood isn’t 100% dependent on this blog).

Ultimately, however, I’ve always known that I wouldn’t be truly happy unless I were working for myself. It’s a personality thing. Some people work well—or at least tolerate—working under supervision. I can’t. It makes me resentful, even angry. I would get the worst cases of road rage because of how much I dreaded marching into work for 8:00 on somebody else’s schedule. And I’ve had GREAT bosses. I’ve gotten along with all of them. They’ve been nice people and competent managers. But that doesn’t matter. I just need set my own hours, and most importantly, go at my own creative pace. If I want to be working on A but you tell me to do B, I can’t do it. I simply can’t. If I try to focus on B, I’m too busy thinking about A and won’t get anything done. Despite all this, I waited to take this risk because of the same reason people don’t ask strangers out, ask their boss for a raise, or make any big change in life…

…fear.

Not fear that that I wouldn’t succeed on my own. Of that, I’m quite confident. But the fear of what other people think. The fear that my parents would think I’m throwing away a “real career”. The fear that my friends would think, as a blogger, I must just be sitting on my ass eating bonbons all day.

This is the worst kind of fear, of course, because it’s totally irrelevant. If you’re skydiving and afraid your chute might not open, at least that fear serves a purpose; it might remind you to inspect the parachute.

The fears that prevents us from taking little risks in our daily lives, however, are mostly unnecessary. Unfortunately, that doesn’t make them any less paralyzing, and you need to overcome them.

Ultimately, in order to take the risk I needed to take, I had to face my fears. My friends and loved ones can think what they want. I don’t care. I’m doing what I love, and I’m far happier because when I get up every day, I get to work on creating my own material that will help you. And that’s awesome.

WHAT RISK(S) WILL YOU TAKE?

That’s my story, but I want to know: What risk(s) will you take this year? How do you expect it to change your life? Share with us in a comment. (And when you follow through, don’t forget to circle back and let me know how it worked out.)

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Although I’ve done it once or twice before, I try to avoid recommending individual stocks or funds. Such “picks” are a dime a dozen on other blogs, in major financial magazines or on Jim Cramer’s TV shows.

At best, investing in stocks and funds featured in the media won’t hurt you. The problem is, it could.

This is why I recommend beginning investors invest solely in one or two index funds that track the entire stock and bond markets. Often times, the entire market will beat most mutual funds anyway. But most importantly, when you invest this way, it’s a lot harder to make mistakes.

If you get to the point in your investing that you feel you need more specific investment recommendations, it’s time to hire a fee-only financial advisor who can evaluate your situation and provide some unbiased recommendations. In my opinion, you probably need at least $100k invested before you consider this, and you’d probably be OK waiting until you have $200k or so in play.

For the rest of us, simple index funds do the trick.

If you are investing in your employer’s 401(k) or similar plan, you will have to choose your investments from among a limited list of investments. That’s why these general guidelines on how to pick a mutual fund—choose an index fund with less than 1.0%—are more useful than individual picks.

If you must know, however, here are a couple of example mutual funds that meet these criteria.

STOCK MARKET MUTUAL FUNDS

Vanguard Total Stock Market Index Fund (VTSMX)
Expenses: 0.18%
Turnover: 5%
Min. Investment: $3,000*

If I were going to pick only two funds in which to invest, it would be a mix of this one and the Vanguard Total Bond Market Fund (below). Providing total exposure to the stock market and extremely low fees, this fund is the perfect incarnation of low-cost index investing.

TIAA-Cref Equity Index (TINRX)
Expenses: 0.29%
Turnover: 11%
Min. Investment: $2,500

Although Vanguard’s mutual funds are synonymous with simple, low-cost investing, this TIAA-Cref fund is proof that good, low-cost index mutual funds exist elsewhere. This fund holds a portfolio that closely tracks the U.S. equities market.

Vanguard Total International Stock Index Fund (VGTSX)
Expenses: 0.29%
Turnover: 11%
Min. Investment: $3,000*

This fund invests in both developed and emerging markets around the globe, excluding the United States. That makes it an ideal compliment to a US Stock index fund. Investing in foreign stocks is thought of as riskier in the short run but provides the possibility of bigger long-term returns, making it a good option for young investors with a long time to stay invested.

Dodge & Cox Stock Fund (DODGX)
Expenses: 0.52%
Turnover: 12%
Min. Investment: $2,500

Unlike the other funds listed here, DODGX is actively-managed; it’s not an index. But with low turnover and modest expenses, the Dodge & Cox Stock Fund is a solid bet for someone looking to keep things simple with one fund providing exposure to both domestic and international markets.

BOND MARKET MUTUAL FUNDS

Vanguard Total Bond Market Index (VBMFX)
Expenses: 0.26%
Turnover: 75%
Min. Investment: $3,000*

Every portfolio should have some bonds in it for diversification and stability. (Bonds are less volatile than stocks, but also don’t provide the growth potential that stocks offer). For many investors, you don’t have to look further than this Vanguard fund to grab some exposure to bonds.

*You can avoid the minimum investment by purchasing these funds as ETFs. Also, if you have $10,000 to invest, the Admiral’s Shares versions have even lower expenses.

Do you have other favorite low-cost index funds you would recommend to new investors? Share them in a comment.

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