Economics for the self-employed

This time of year, with utility bills sky-high and April 15 on the horizon, the small businessperson's thoughts turn to money.

The thoughts go like this: What money? We used to have money. Then those Christmas excesses came to call. Now we have no money. The checks arrive at the usual snail's pace while expenses come faster and faster. Money gets to our house, then rockets out the door, never to be seen again.

The economy's been good to many of us who've gone out our own, establishing businesses or (God forbid) writing careers, working from home through the wonders of telecommunications. Now that's all come to a grinding halt, and it's time to retrench, rethink, have garage sales.

We're all subject to the vagaries of the economy, the ups and downs, the windfalls and the slow bleeds. And the New Internet Economy (now known as the New What-the-Heck-Was-I-Thinking Economy) is more volatile than the Old Economy, which centered on oxen. Now, one guy in Silicon Valley trips over an extension cord and your net worth gets cut in half.

The financial pages have never been more exciting reading. Politicians running around, screaming about tax cuts. Alan Greenspan, wearing a long wizard's cloak and pointy hat, giggling maniacally. A stock market that resolved to diet in the new year.

But unless you're a poor computer geek who's been shown the door.com, the national economic stumble probably concerns you less than the more immediate problem of whether to get a larger mailbox to hold all the bills.

Every household has a little economy of its own. Up cycles (check arrives!) and catastrophic setbacks (new water heater!). Inflation (your natural gas bill) and recessions (hairline, gums). All these factors can result in a Great Depression, the type that makes you hide under the covers and softly weep.

It's hard enough to budget when you get a regular paycheck. Add the fits and starts of a home-based business to the usual financial roller-coaster, and you have a wild ride of confusion and paperwork and dismay. Freelancers can get so desperate for income that they tackle the postman and rifle through his bag in search of checks.

But it doesn't have to be that way. With the right financial planning, it's possible for cottage industries to enjoy the same level of success as large, established companies such as Montgomery Ward.

Here are some Handy Tips for getting your financial house in order before the IRS man shows up with his scythe:

--Get a good accountant
Accountants cost less than you'd expect, and can be godsends when it comes to executing a budget plan. Accountants have an unfair reputation as being dull. They're actually friendly and playful. They don't eat much and can be kept in the garage or a large closet.

--Get bullish with your bills
Pay off credit cards and loans promptly rather than letting interest and late fees nibble away at your money. Find ways to rid yourself of monthly payments and quarterly surprises. Establishing a new identity in another state may be necessary, but you were ready for a change of scenery, right?

--Cut spending
Look for ways to simplify your life and reduce your expenses. "Do it yourself" whenever possible, up to and including orthodontia. Recycle. Tell the kids that Santa already delivered their birthday gifts, back in December.

--Find new sources of income
Lot of loose change under those sofa cushions. And there's always Powerball. Better, though, to find ways to expand your business with minimum risk, while making use of the inevitable downtime. Shoveling sidewalks for pay, for instance. Or, branching out into that ever-profitable stand-by -- macrame. Let your kids set up a sidewalk lemonade stand, then take most of the money for overhead. It'll be a good lesson in capitalism.

--Make a long-term financial plan
College tuition, retirement and a million unforeseen expenses all lie ahead. You must plan for the future. Put something in savings every week. Give yourself a cushion in case you need to jump off a ledge.

Once you've mastered your finances, you'll feel confident that you can ride out the coming economic storms. So take action today. Go feed your accountant.

(Editor's note: This column ran in newspapers in 2001. Amazing how things come full circle, eh?)