Monday, April 5

Comments on How I Calculate Income


Okay, you might want to skip this post. It's a little on the dry side.

I've been meaning to post this. Not sure if I'm posting to satisfy those accountants out there who read my blog or just because I usually like to boil things down but sometimes fear I'm being superficial.

Since I am not a "corporation", I am free to define my own accounting standards. For instance, each month I recognize the gain or loss in my retirement accounts when calculating my income. It would probably be more accurate to only list my gains or losses from transactions like selling stocks, but since I am generally a buy and hold investor, listing it this way would lead to irregular swings. Then again, some might argue I should omit this line item altogether. These are retirement accounts, so their gain (or loss) should only be viewed as progress towards my retirement goals.

I might just do that one of these days. I should set a goal for the value of my retirement accounts at some point in the future, and measure my progress, right? I'll have to let that marinate a little.

I also realize that I'm being inconsistent with reporting my earned income from mystery shopping in one post (A Month in the Life of a Mystery Shopper) but my cash income in another. The reason I do that is because I pull a report from Quicken when calculating my income, but I use an Excel spreadsheet to keep up with my day-by-day earnings. The Excel spreadsheet is mostly accurate, but for some assignments, mostly merchandising, I am estimating the fee I will be paid and do not know for certain until I actually get paid.

Finally, I've been detailing all my income, but not all my expenses. Am I being a braggart? Not at all. In fact, I plan to start listing my expenses as well. One of the reasons I have held back on listing all my expenses is because I've tried to figure out whether I should separate business expenses from personal ones. For example, in Quicken I have one line item for "Mortgage Interest", but that includes the mortgage on my house (a real live expense that I should work on reducing) as well as the mortgages on income-generating investment properties.

Still reading? Sorry if I bored you. These are some things I've been wanting to explain. Posting it here saves a lot of footnotes and asterisks in my regular posts.

2 comments:

  1. When I report my business income I have most business expenses already deducted from that. I don't report my business expenses separately.

    I don't really think gains in your retirement accounts should be counted as income since you can't spend that money now and it may disappear before you can.

    If you stop in KC give me a shout. I'd like to see your mystery shopping in action.

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  2. Put columns on your MS spreadsheet for Date Invoiced and Date Paid. Then you'll be able to do an Aging calculation. That will give you good insight into which companies you need to contact for collection purposes, as well as which companies you might want to not work for again. In my book, anybody who wants a report in 24 hours or less but takes 90 days to pay me is either in trouble or not good managers of their money.

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