Category Archives: Financial Literacy

How to File Taxes as an Independent Contractor

Filing taxes for independent contractors can be a very different process than filing for employees. Contractors must pay a self-employment tax as well as income tax. Here’s what you need to know to file as an independent contractor:

Follow the Guidelines for Filing as Self-Employed

For IRS Purposes, independent contractors file as Self-Employed, which makes their earnings subject to Self-Employment Tax. Contractors are typically required to pay their estimated tax quarterly along with filing an annual return.

Self-Employment (SE) tax is basically the contractor’s way of paying the Social Security and Medicare taxes that would be withheld from the pay of most workers by their employers. The term self-employment tax does not include any other tax such as standard income tax.

Determine your SE tax and income tax by figuring the net profit from your business first — subtract your business expenses from your income. If this net profit from self-employment was $400 or more, you have to file an annual return; if it was less than $400, you only have to file an income tax return if you meet another other filing requirement listed in the these IRS instructions (use Charts A, B, and C on pages 8–11).

Independent contractors are typically required to pay their estimated tax quarterly along with filing an annual return.

Making Payments and Filing Your Return

To make quarterly payments, use the estimated tax worksheet found on IRS Form 1040-ES (be sure to have your prior year’s annual tax return handy, as you’ll need it to fill out this form). This worksheet has step-by-step instructions to determine and pay your quarterly payments, including the amount due on each date and a space to keep track of each payment’s date and confirmation number (check, debit or credit card). See the Estimated Taxes page and Self-Employment Tax page for more information.

Your annual return is then used to report the total income or loss from your business and the SE and income taxes you paid during the year. When it comes time to file your annual return on July 15, use Schedule C to report your income, and Schedule SE to report your Social Security and Medicare taxes. Follow these instructions for the Schedule C and instructions for the Schedule SE for step-by-step guides to filling out these forms from the IRS.

Take Advantage of Deductions

As an independent contractor, the IRS allows you to deduct many of your business expenses — costs for computers, printers and other technology used at work, plus the cost of phone calls, supplies, and travel, as long as all expenses were work-related. Deductions also apply to the costs of renting an office or running a home office. Additionally, half of the Social Security and Medicare taxes you pay are deductible.

You can apply home office deductions if you regularly use part of your home exclusively for your business. You have two options for deducting if you qualify: a simplified option that deducts $5 for every square foot of your house that qualifies as part of your business, up to $1,500; or a standard method based on actual expenses, adding up portions of your rent, utilities, mortgage interest, property taxes and homeowners insurance.

The details of these deductions are too extensive to summarize in all forms here. More information about tax-deductible business expenses can be found at this IRS Form, the home-office deduction factsheetForm 8829 (Expenses for Business Use of Your Home), the Self-Employed Individuals Tax Center and the IRS Tax Guide for Small Business. Further reading can also be found at this Kiplinger’s guide to the Most Overlooked Tax Breaks for the Self-Employed.

As an independent contractor, you can apply home office deductions if you regularly use part of your home exclusively for your business.

COVID-19 Updates to Taxes in 2020

It would be an understatement to say that many self-employed workers have been hit hard by the COVID-19 outbreak. Luckily, relief provisions have been put into place by the IRS in the form of tax credits for sick and family leave. For example, if you were forced to take sick leave for either your health or for the care of a family member, you may be eligible for a refundable tax credit for up to ten days of sick pay. Additionally, there is a tax credit for qualified family leave if your child was unable to attend school or daycare due to closed facilities. These credits are refundable, so if you are claiming a credit with an amount more than the taxes you owe, you will receive a refund for the difference. For detail on these credits, visit this IRS Overview Page.

The IRS will require proof that you qualify to claim each of these credits as well, so be sure to save anything you receive related to COVID-19 testing, your family’s medical care, and closures of schools and daycares. Note that these credits

The Best Ways to Manage Student Loans in a Financial Crisis

As many Americans wonder how they can pay off their debts in the wake of COVID-19, this pandemic has highlighted the importance of educating ourselves on what happens to student loans in a financial crisis. With college’s ballooning costs, 14.4% of adults holding some form of college debt and 54% of current college attendees taking out loans to pay for school, it’s become increasingly important to have a plan for paying off your student loans as soon as possible.

If you are a student loan borrower and you’re wondering what relief is available in a financial crisis like this current national emergency, as well as under normal circumstances, we outline some of the resources you should be aware of below.

Payment for federal student loans are paused until Sept. 30, 2020.

Student Loan Relief for COVID-19

With $1.41 trillion in student debt across America, representatives in the federal government understand the importance of student loan relief while we all practice social distancing. Under the CARES Act passed on March 27, 2020, all federal student loan borrowers are granted the following provisions through September 30, 2020:

  • Pausing of all payments.
  • 0% interest accrual for certain loans (Direct Loans, FFEL Program loans, Federal Perkins Loans and defaulted HEAL loans).
  • No garnishment of wages or tax refunds.
  • Ability for your employer to pay up to $5,250 of your student loans tax free.

Outside of legislation passed for COVID relief, there are other actions to help you pay back your student loans that you can take at any time:

  • Refinancing your student loans, consolidating existing balances into a single loan with a lower interest rate.
  • Change your repayment plan to one of the eight options for federal student loans.
  • Visit studentaid.gov or call 1-800-4-FED-AID for information and advice on solutions for your particular loans.

These conditions will only apply to federally-held student loans, however. If your loans are commercially or privately held, you will have to contact your lender to see what measures they’re taking for their borrowers. Some lenders are offering to pause payments for up to 12 months, but it’s most likely that interest will still accrue during this forbearance. Be sure to contact your lender and familiarize yourself with the terms and conditions of your loan. When you’re negotiating, be sure to ask all the questions you can so you’re well-informed on the status of your debt.

Take advantage of the payment hiatus to pay whatever amount you can for now.

The Perfect Time to Keep Making Payments

Take advantage of this unique payment hiatus by making whatever payments you can afford to anyway. This could help you pay down your student loan balance faster, because the full amount of the payment will be applied to the principal balance instead of interest accrued. Ideally, you’re saving money on other expenses like gas, auto insurance, dining out and gym memberships during this time. If it’s within your means, a good idea is to funnel some of what you’re saving in these categories of your budget to pay down your student loans. Now is a unique time to be proactive — take advantage of these provisions while you can and keep your eye on the goal of a fully-paid student loan.


Read our other articles in the Focus on Your Money series to get tips on prioritizing debt in a crisis, saving more money with budgeting, and how to improve your credit score.

FFS Agents – share this blog with your networks using our resources in the ABO..

How to Prioritize Your Debt in a Crisis

Unfortunately, payments and bills are still due even if you’ve experienced financial hardship in the wake of COVID-19. Debt management looks a little different during a crisis, but the essentials are still there — avoid late payments, put down as much as you can afford, and focus on certain debts over others.

Crisis situations are the ultimate times to re-evaluate your “needs” and “wants.” You have to ask one question about new purchases and ongoing expenses right now: “Can I live without this?” Everyone’s answers are unique. Maybe you can do away with your streaming services if you can’t afford living expenses — there is always free streaming content, jigsaw puzzles, and books that can entertain you and your family while you’re getting back on your feet. It’s possible, though, that Disney+ is keeping you sane with children at home, or your wellness app is keeping you centered. Your well being and saving your credit score for the future are your top priorities in a crisis. In this post, we’re offering a guide for what to pay first and what you can do for relief.

Your most important goal is having a safe place to live.

Mortgage & Rent

Housing expenses should be your highest priority payments. Your most important goal is having a safe place to live and keeping a home in which to shelter. While many states have put eviction freezes in place, you’re not completely off the hook. Failing to pay rent or mortgage can still result in eventual foreclosure or eviction; the freeze only makes it so you can’t be evicted right away. You may end up having to pay all of the back-logged rent at once when this is over. Keep up with your payments if possible and work with your landlord or mortgage lender to come to a deal that won’t leave you stacked with late payments when the freezes are lifted.

Household Utilities

Stay up to date with your water, sewer, electric, and gas. You don’t want to accrue fees that might bar you from energy assistance programs or shut off your utilities entirely, making it that much harder to stay healthy at home. If you’re having trouble making payments, reach out to your utility providers — many have hardship assistance programs and deferred-bill options.

Car Payments

Your car payments should remain your highest priority after your home expenses. You’ll want to avoid a repossession at all costs — you need that car for essential errands and getting to work when life returns to normal. Luckily, most major auto brands are offering payment deferrals and waiving late fees. Contact your lender to discuss how you can keep your account in good standing. While it may be tempting to cancel auto insurance, doing so can raise your rates later and leaves you open to serious expenses if your car suffers storm damage or is stolen while parked. If you don’t own your car outright, cancelling insurance isn’t an option. Many auto insurance companies are offering refunds on premiums paid during COVID-19. You should be able to work with your insurance company to reduce your rates during this time.

Federally held student loans will stop accruing interest until at least Sept. 30, 2020.

Credit Cards & Other Debts

Your other debts shouldn’t have such a direct impact on your health and safety, and therefore can be renegotiated right now — medical bill and back taxes for example.

Thankfully, the government has mandated that all federally held student loans will stop accruing interest until at least September 30, 2020. You do not need to do anything to take advantage of the 0% interest. Do not pay anyone who offers to reduce your federal student loan interest rates for a fee. The 0% interest does not, however, apply to private student loans – negotiate with your loan officer for support.

As for credit cards, most major banks are letting their borrowers defer for now. Many are also refunding certain fees and altering minimum payments. For reference, there is a list of relief-options offered by different card carriers. You’ll have to call your specific lender to take advantage of these provisions, however. Ask them directly what they can offer in terms of deferment and other measures of assistance.

Stay on Track

Remember that ignoring your debt is never a good idea. If you can’t cover a bill, confront it — contact the lender or creditor and let them know the crisis has made it so you can’t make a payment. They’ll likely be willing and ready to make an arrangement with you due to the unprecedented nature of this crisis. You have options. Take a deep breath — with planning, you can prioritize your debts and keep your credit under control. For more information on paying off debt, check out our latest Focus on YOUR Money webinar here*.

Read our other articles in the Focus on Your Money series to get tips on saving, budgeting, and how to improve your credit score.

* Webinars are available to current FFS Agents.

FFS Agents – share this blog with your networks using our resources in

The Five Most Common Questions About Identity Theft

In this week’s Focus on YOUR Money, we covered the dangers of identity theft. Here’s everything you need to know in five common questions:

Why would somebody steal my identity?

People live a good portion of their lives online now, and thieves have adapted accordingly. These criminals can now find identifying information online like your credit card or your Social Security Number and use them to make fraudulent purchases, apply for credit cards and loans, or even file taxes without any consequences to their credit record or financial history. This information is found and sold on the dark web, a criminal sector of the internet where thieves are almost impossible to catch. There is a new victim every two seconds—without a clear path to justice, the most important thing for you to focus on is prevention.

What are the consequences of identity theft?

There are many types of identity theft, each with slightly different consequences. The most common type of identity theft is strictly financial, where thieves use your credit line to buy things on your credit card. This can badly damage your credit score and make financial recovery a big headache. Other types of identity theft include medical (using your information to get false medical coverage and prescriptions), criminal (impersonating you when speaking with police), and concealment (using your information to hide from creditors).

Who is at risk for identity theft?

Everyone with a Social Security number can have their identity stolen, but the two demographics that are particularly vulnerable are children and seniors. Identity thieves will try to steal children’s identities to establish a “clean slate” identity, because kids don’t have a financial history yet. It’s important to pay attention to your children’s credit reports so you can catch suspicious activity early.

Criminals also target seniors because people are more trusting as they get older. These scams are usually over the telephone or through internet phishing. Remind your elders to be careful answering calls and emails from people they don’t know.

How do I avoid getting my identity stolen?

When it comes to identity theft, prevention is the most important thing. There are many measures you can take to keep your information safe, such as enabling two-factor identification on your online accounts, using strong passwords and secure web pages, shredding documents, and ignoring strange emails from people you don’t know. For detailed information on how to prevent identity theft, read more here or watch our latest webinar*.

What channels are safe?

Both FFS and our carrier partners take every possible measure to protect your information when you upload documents and images to our sites, so you can be sure that these channels are secure. This professional protection is why we provide agents with an FFS email address. There are also ways to protect your home network as more people start working from home during the spread of COVID-19; Consumer Affairs has recommendations for how to prevent identity theft in your home office.

Read our other articles in the Focus on Your Money series to get tips on saving, budgeting, and how to improve your credit score.

* Webinars are available to current FFS Agents.

How Time Tracking Will Make You a Better Entrepreneur

We may think it only applies to freelancers and hourly employees, but time tracking for entrepreneurs is also essential. Our time is our most valuable commodity, and the more successful you get, the scarcer it becomes. Ideally, everything you do should get you closer to the life you want to be living. We all know that time is money, so time tracking is as important for your financial security as budgeting. After all, what is time tracking but simply budgeting your hours?

To begin, organize how you spend your time into categories like “family,” “meetings,” “travel,” and “internet.” Start logging how much time you’re spending on each category. Whether you want to track every minute or just portions of the day for each task, it matters less how in-depth you track your time and more that you do it consistently. You can easily do this with a pencil and paper, in a spreadsheet, or using one of many time tracking apps available today. Here are three apps best suited for entrepreneurs:

1. Toggl

A helpful all-around time tracker that’s also free, Toggl is probably the best starter software for anyone who wants to start logging the hours of their day. It’s simple, easy-to-navigate, and it has an app available for pretty much any device.

2. HourStack

HourStack is interesting because it represents time differently from most other apps. The hours you work appear as blocks in the app, as if they were appointments on a calendar, putting an emphasis on setting goals for your times before you even start working. It shows time in blocks as if the time it takes you to work on a task were an event on your calendar. The app will then send you alerts to help you keep to your planned schedule. It’s not free like Toggl, but it is only $7 per month—less than a streaming subscription, and one that can help make you money in return.

1. Timeular

Much different than other time trackers, Timeular has a physical controller to help you log your time instead of having to wade through messy interfaces just to start a timer. It uses an eight-sided Bluetooth device that you turn to represent which task you’re currently working on, tracking the time until you flip it to a new side and start a new task. While it’s a pricier first-time payment, it can be a creative and effective way to form time tracking habits and stick to them in the long term.

Time tracking is as important for your financial security as budgeting.

Invest Your Time Toward the Best Return

Dedicate yourself to time tracking for a week using your app of preference. When you’re finished, look back on your week and see if you notice any patterns. How much time are you spending on email, in meetings, on your phone? How many hours are spent traveling? Then, determine which tasks are making the most of every hour of your time, and repeat the habits that get you the best return on your hourly investment. For example, three hours with a client ending in a sale brings you a much better hourly rate than other time-eating tasks like checking social media.

As an entrepreneur, you should be eliminating tiny routines that cost you more time than they’re worth. Are you writing the same email over and over? Save it as a pre-written template to spare you from spending time writing the same thing every other day. This will save you more money in the long run—focusing on your time is focusing on your money.

Find the tasks that only you can do and consider outsourcing the rest. It might make sense for you to hire a cleaning service for your home, freeing up your time to build your business. Luckily, FFS already supports entrepreneurs by outsourcing most of the administrative work to our Home Office. By using the FFS Business Building System, you’re already optimizing your time.

Eliminate routines that cost you more time than they're worth.

Time Tracking Can Change Your Brain

By time tracking, you can actually increase the dopamine levels in your brain. Dopamine is a type of chemical called a neurotransmitter that is released by the brain to help you feel rewarded for things that you do. Originally thought to be associated solely with pleasure, a study by Vanderbilt scientists analyzing its levels in “go-getters” versus “slackers” showed that the go-getters have more dopamine, making it more closely associated with motivation and cost/benefit analysis than pleasure alone.

So how does time tracking increase your dopamine? “It’s possible to manipulate your dopamine levels by setting small goals and then accomplishing them,” according to Psychology Today. In other words, an entrepreneur who writes down S.M.A.R.T.E.R. goals *, tracks their time, and makes incremental daily progress towards these goals would be raising their dopamine levels, increasing their motivation, solidifying good habits, and feeling better all around!

Read our other articles in the Focus on Your Money series to get tips on saving,

What is My Credit Score and How Do I Improve It?

Everybody has a credit score, but many people still don’t understand exactly what it is and how it affects them, especially if they were never taught about managing finances growing up. Through our LiSA Initiative, the following Focus on YOUR Money webinar*  tips will show you how to improve your credit score, as well as how it is calculated.

Simply put, credit is a way to gauge a person’s trustworthiness with regard to paying back the money that they borrow. If your friend asked you for $150 to pay for a new pair of shoes, you may ask yourself: how likely is it that he’ll pay me back? You might look to how much money he owes and how timely he has been at paying those loans back in the past. This is very similar to the risk assessment that credit card and mortgage companies do on you in the form of credit reports and credit scores.

Some financial advice columnists have recently become adamant about paying cash for everything, even your car, and your home. We don’t adhere to that philosophy; after all, if you’re using cash for everything, you’re not impacting your credit at all, and there are ways you can improve your score with every purchase you make. If done correctly, using credit can be a very positive and powerful thing.

The Difference Between Your Credit Report and Credit Score

Though related, your credit report and your credit score are actually two separate things. A credit report is a document that tells the history of your financial life. There are three major credit bureaus that collect your personal information (name, address, social security number) and financial data (loans, collections, bankruptcies, and number of accounts) and compile it all into your credit report.

The activity on your credit report is then used to derive your credit score, which is a number—usually between 300 and 850—that acts as a sort of “grade” that represents your creditworthiness. The higher your score, the lower the credit risk is to potential lenders, and vice versa.

You’re entitled to a free credit report every year through AnnualCreditReport.com. Take advantage of this by making sure you check your score every year. An easy way to remember to check your score might be to always do it during your birthday month. You can also have a service like Credit Karma check your credit score multiple times a year and report it back to you. Regardless of how you check your score, it’s important that you do so. You have to know your numbers to change your numbers, after all.

Credit report v. credit history

How is Your Credit Score Calculated?

Your credit score is made up of five aspects of your finances in the following proportions:

Payment History – 35%

The largest portion of your credit score is based on how timely you are in making payments on your loans. Late payments can stay on your credit report for up to 7 years, so the most important action you can take to keep up your score is to always pay on time.

Credit Usage – 30%

Credit bureaus will keep track of the amount of your available credit you are currently using. The more you’re using, the lower your score will be, which is why your credit utilization should always be less than 30% (e.g., if you have a $10,000 credit limit on your cards, you never want to be owing more than $3,000 in credit).

Average Age of Credit Accounts – 15%

The longer your accounts have been open, the higher your score. This shows how long you’ve been responsibly managing your finances. This also means you shouldn’t close any of your accounts—keep them open to improve the average age of your overall credit.

Account Types/Credit Mix – 10%

A diverse variety of open accounts will prove to lenders that you responsibly manage multiple forms of debt. For example, having ten credit cards will look less reliable than if you were managing a mortgage, car payment, student loans, and two credit cards all at once.

New Credit/Inquiries – 10%

There are two types of credit inquiries: hard inquiries and soft inquiries. Avoid the hard inquiries—these are the ones that affect your score, sometimes by up to five points. Hard inquiries are any applications for new loans, cards, or other credit lines. Soft inquiries are credit checks made by your landlords or by your employer when applying for things like apartments and jobs. Also, remember that you never get penalized for checking your own score.

Credit Score Pie Chart

Who is Calculating Your Score?

Your credit score is calculated by each of three major credit recording bureaus: Experian, TransUnion, and Equifax. Your score may differ between each of these three bureaus because each has its own calculation model. Models are specific methods of statistical analysis used by bureaus to evaluate your worthiness to receive credit. The two major credit-scoring models are FICO (or Fair Isaac Corporation) and VantageScore.

FICO scores are the most common credit score model. The FICO score is used in over 90% of U.S. lending decisions and has been an industry standard for over 25 years. You don’t need a large income to have a high FICO score,

How to Have More Money with the Beauty of Budgeting

When you practice budgeting, you get to be in charge of exactly where your money goes. Sometimes, we can forget the true value of every dollar—that each one was earned with a specific amount of our time. When we see our paycheck come in, we feel flush with opportunity and we can lose sight of all that time we worked to earn it. Remind yourself how much work went into each dollar. Do you want to waste precious time by spending those dollars wherever your impulses take them?

This is just one of many important reasons to keep a budget. Here are a few others:

  • It lets you keep your eyes on the prize.
  • It ensures you don’t spend money you don’t have.
  • It leads to a happier retirement.
  • It helps you prepare for emergencies.
  • It sheds light on bad spending habits.
  • It’s better than counting sheep at night.

As we learned in the last Focus on Your Money webinar, we have to know the full scope of our financial situation in order to change it. Hope is simply not a strategy. You’ll have to take a more realistic look at your money before you can gain control over it. Luckily, we’re here to help.

Essential Steps to Budgeting

It may seem overwhelming at first, but by following the steps below, you’ll see that budgeting is actually quite simple—it’s just a habit that you need to form. Before you begin, set a financial goal to look forward to, like a dream home, a place to retire, or an exciting vacation in Europe. These goals will help you stay focused and make budgeting a little easier.

Know your income

The money you take home will become your budgeting baseline. The catch? You can’t build your budget on your salary alone—you’ll have to build it on your net income. Deduct your income tax and set it in your savings account before you pay yourself. Then, you can use the amount that’s left over to start your budget.

Determine your basic expenses

Count up the bills that have fixed payment amounts, such as your mortgage, your car, your insurance, or your student loans. This is also a good time to set up your emergency fund—pick a number to save monthly and factor that into this category.

Determine your variable expenses

Variable expenses are those that will change from month-to-month. These are your phone bill, your groceries, meals at restaurants, and entertainment—all things you have control over.

Prioritize

Now that you know your expenses, determine what’s really important to you. We all tend to think we won’t be able to live without the latest iPhone, but gadgets like this fall in the “Like to Have” column instead of the “Necessity” column. Be ready to make tough choices: do you really need unlimited texting? Do you really need 400 channels? You’ll have to take an unsparing look at your lifestyle to figure out what’s truly necessary and what is a luxury.

Follow your spending and review it monthly

Keep an eye on your spending—especially credit cards—and watch out for small things that quickly add up. It’s easy to cave on these minor expenses from day-to-day, so stay diligent!

Keep track

Find the best way to keep track of your expenses and income. You can use pen and paper or your favorite mobile app if you prefer, but luckily, Maria Riofrio of the LiSA Initiative has made a budgeting spreadsheet that will do most of the heavy lifting for you.

FFS Monthly Budget Tracker

Customized just for you, this spreadsheet is built with specific formulas that will automatically do all the math your budget needs. To begin, put your projected income and expenses into the left-most column. This will anticipate every dollar coming in and out of your budget each month. You’ll find your fixed expenses are coded in green, the flexible expenses are blue, and the intermittent expenses are represented by yellow.

After you’ve projected your expenses for the month, you can start tracking what you’re making week-to-week and stay on track by adjusting accordingly. Place your income in the top row (remember to save your taxes first and only use net income), and the sum total will automatically populate in the upper right-hand corner of the sheet. Your weekly expenses will also populate just below your total income as you go along. The difference between the two will then be calculated to show you the money you have left as the month goes on.

Start budgeting today with our LiSA Budgeting Sheet.

The Ten Best Ways to Save Money

Soon, you’ll be able to see which habits you need to change to have more money every month. The best way to positively affect your budget is to lower your expenses and increase your income. For this, an irregular income can actually be a good thing—when you need more income, you can simply go out and do more business.

If you have a normal 9-to-5, you’ll have to focus more on cutting down your expenses, as there’s not much you can do to raise your income outside of getting a promotion or a new job. Here are the best ways to cut your expenses and save money:

1. Eliminate debt

Interest and annual fees