What Do I Need to Do Now That I'm Making Some Legit Money Freelancing? [Ask Lifehacker]

Dear Lifehacker,
I did a couple of small side projects for friends and now it looks like I might get some steady freelance work and actually make some real money part-time. I'm not ready to quit my day job, but do I need to do anything official like actually start a business or register somewhere now that I'm actually making money freelancing?

Thanks,
Moonlighter

Dear Moonlighter,
Congratulations and welcome to the wild, wonderful, and challenging life of a freelancer. We've touched on the topic of freelancing a few times before, from psychological and financial preparations you should do to how to decide how much to charge for your freelance services. It sounds like you want to know what you're legally required to set up, though. Thankfully, the answer is—depending on where you live and what your line of work is as a freelancer—not much. Let's take a look.

You don't need to start a business, because actually once you start making money as a freelancer or independent contractor—surprise—you already do have a business, at least in the eyes of the law. You are now the owner of a one-person business (technically a sole proprietorship)!

With that power and responsibility, however, may come licenses, their associated fees, and possibly permits—depending, again, on where you live and how your work is set up. Most business licenses and permits are required by local governments—your specific city or possibly county you live in.

DBA (Doing Business As): If you want to do business under a name other than your own (e.g., "Joe Smith Widget Building"), you'll need to file a fictitious name statement or DBA ("doing business as") from your county before getting the local city license. (The DBA will also be needed to open a business bank account if you want one. You don't need a business bank account as a freelancer, though.)

City or county licenses: To keep things simple, however, you could just use your own name for your freelance work, in which case you wouldn't need to file for that DBA, and your locality also might not require you to get a local business license. The local business license is really just a tax-revenue collecting permit to allow you to do business in the area. You'll have to check with your city and county business licensing office to be sure, of course. If you are required to get a license regardless of whether you use a DBA or your own name, it's usually a painless process. You just have to go to the office, fill out a form (possibly get it notarized) and pay the annual fee. The fee can range from $25 to a couple of hundred dollars, depending on the type and amount of work you expect to do.

Local home business permits: Aside from the city or county license, while you're talking to the local business licensing department, you might want to ask them about any permits required to work from home (assuming that's the kind of freelancing you're doing. If not, move along). Some communities do have zoning regulations against home-based businesses, to restrict things like parking problems, commercial signs, and things they consider nuisances like lots of people coming and going. You can also check with your local chamber of commerce to find out how your area is zoned. If you find out a home business is prohibited, you could a) ignore the restriction, as some freelancers do, but keep in mind the risk of fines, b) try using an alternate mailing service for your business, c) apply for an exception or variance, or d) move (as a last resort).

State and federal licenses: More licenses, you're thinking? Don't worry, unless you work in a specific type of profession like architecture or real estate, you probably don't have to worry about business licensing from your state; chances are you'd know if you'd need a license already, but if not, go to your state's website at www.state.[your state's two letter abbreviation].us to check. The federal government doesn't really license small businesses either.

Only one more topic to discuss about freelancing requirements—taxes. Yup, our favorite. There are two issues:

Sales tax collection and permits: Depending on the freelance work you do, you might need to collect sales tax for your state and possibly local government and turn it over to them on whatever schedule (annual, quarterly, or monthly) they designate. If this is the case, you'll probably need to apply for a permit to collect sales tax (Yay! Isn't this fun?). Generally this applies if you sell or resell products that are subject to sales tax, but it can also apply, in rare cases, to some services in some states. As an example, finished graphic design work transferred on DVDs or in print to clients is a tangible product subject to sales tax, at least in NY, but writing, being a service, is not subject to sales tax. But, again, your mileage will vary depending on your work and where you live, so refer to your state's website.

Federal Employer Identification Number (EIN): Last but not least, as a freelancer, your identification number on your tax forms and licenses will be your Social Security number or a Federal Employer Identification Number (EIN). You're only required to get an EIN for certain circumstances, such as if you want to hire employees or if your insurance company or a vendor requires you to have one. In that case, you can get an EIN from the IRS for free by filing Form SS-4. While not necessary, it might be a good idea to get an EIN to protect from identity theft. Finance Diva suggests that since the EIN is free and easy to get, you should use it instead of your Social Security number when you have to provide your information to companies and individuals you work with, including subcontractors. This is optional, though, but still something to consider.

In short, you only really need to look into getting: a local business license if your city or county requires it, possibly a home permit, and a sales tax permit, depending on your work.

That Coveted Unlimited Data Plan Might Be Costing You Money [Saving Money]

Everyone has been looking for ways to keep their unlimited data plan ever since carriers started getting rid of them, but a new study by Consumer Reports shows that nearly half of those people could save $10 by switching to a metered plan.

Sure, it's nice not having a data cap hanging over your head, but chances are you probably don't use the data as much as you think you do—and even if you do, wi-fi is everywhere these days. Consumer Reports' data is based on a group of AT&T subscribers, about 48% of whom used less than 300MB of data a month. AT&T's unlimited plan costs $30 a month, while a 300MB plan costs $20 a month. Check out the graph to the right to see more data. If you want to rethink your data plan, you can keep track of your own usage for a few months using something like My Data Usage Pro for iPhone or Onavo for Android (though Ice Cream Sandwich also has data tracking built-in). Hit the link to read more, and if you're on an unlimited plan, share your thoughts on the subject in the comments below.

More Than One In Four AT&T Subscribers Would Pay Less by Switching to a Metered Plan | Consumer Reports

Photo by Chris Young.

Make "Do Not Need" Lists To Save More More Money and Reduce Clutter [Saving Money]

Clutter is an evil we all have to fight, and if you've ever discovered that you bought something you didn't need—spaghetti sauce, for example, when a jar was hiding in the back of your pantry—doing an inventory and making "do not need" lists may help.

Aloysa on My Broken Coin suggests a couple of places where these lists can be put to use: In the bathroom, you might fight scores of cleaning supplies, shampoos and shower gels. The pantry and freezer are two other obvious spots to check; a "do not need list" will keep your actual shopping list shorter.

Also take a look at your closet and do an inventory before you go clothes shopping. (I'll admit to spur-of-the-moment clothes purchases for my daughter where I would've saved some money if I had this "do not need" list.)

How "Do Not Need" Lists Can Save You a Buck | My Broken Coin via Mainstream Mom

Guestmob Saves You Money on Hotels, but Plays a Little Russian Roulette to Get the Best Deal [Travel]

 New webapp Guestmob promises that their algorithms and carefully curated relationships with hotels in its markets will save you a good deal of money when you book your next vacation. Looking at the prices the service offers, they can definitely deliver on their promised discounts—the catch is you have to be willing to give up a little control about where you stay to get the best price.

Guestmob is available in about 20 major US markets, including cities like New York City, Washington DC, Dallas, Los Angeles, Seattle, and more. Each city is broken up into regions, and once you're registered and logged in (you can sign up with Facebook or create an account via email) you can select your destination and the dates of your visit. You'll see the regions of the city, the hotels in that area, and the average room prices for each location. Select the region you'd like to stay in, and you'll get more information about the specific hotels in each area, and you'll be able to see how much Guestmob can save you over already-published booking prices at other travel sites.

 When I tested it, Guestmob was able to save me about 15% off over the lowest available rates for all four hotels in the New York area I searched for the same dates. Here's the catch: when you book, you book a region, and you don't know which hotel you're staying in until Guestmob finishes the negotiations for you. This only matters if you're worried about one of the hotels in a region, and from what I could see, all of the hotels in every region I browsed were all well rated. Even so, you have to be willing to give up that control to get the additional bargain. If you land a hotel you hate, your booking is fully refundable, and you can try again.

Hotel prices being what they are, there's definitely room for a service like Guestmob, but the lack of precise control might turn some people off. What do you think? Would you be willing to give it a shot if it saved you money, or are you uncomfortable letting go of the reins? Share your thoughts in the comments.

The Stupid Things You Do with Your Money (and How to Fix Them) [Personal Finance]

Money. You need it to live, but whether you're a spendthrift or a miser, money can make you do foolish things. You'll waste it trying too hard to save, spend it on things you don't need, and simply overpay on regular expenses every month. Here's how to avoid being stupid with your hard-earned cash.

Frugality has its downfalls. When you try too hard to save, sometimes you end up wasting your money in the process. This may seem almost impossible, but it happens when you try so hard to cut costs that you stop paying for things you actually need. Doing this leads to more problems down the road—problems that are far more costly.

For example, skipping regular checkups at the doctor and the dentist can save you a few hundred dollars each year, but there will come a day when your lack of preventative care—which is very important—will earn you a much higher bill.

Doing your own taxes with inexpensive software may also seem like a good idea, but if the software makes any mistakes you could end up paying for them later. If you're going to do your own taxes, make sure you have the time and resources necessary or you could run into problems.

Buying cheaply made products is another way to throw away your money. It may save you cash in the short term, but you're bound to find yourself replacing it far sooner than a well-made product. If you've ever purchased a cheap inkjet printer, you know this works. It'll print well for about six months to a year before you start to run into clogged ink heads and other issues. While the printer may be under warranty, manufacturers will often just replace them because it's less expensive than the cost of repair. This is not only bad for the environment, but it can be bad for your wallet if you end up paying any of the costs yourself. It's always better to look for a good deal on a well-made product than sacrifice quality manufacturing for the sake of a discount that will possibly cost you more in the long run.

Buying in bulk can also cost you more in the long run if you don't use everything you buy. Bulk food can be great for multi-person households—especially those with children—but buying in bulk isn't necessarily ideal for just one or sometimes even two people. Before you make your way to CostCo or Sam's Club, ensure that you're going to actually use everything you buy and that you're actually getting a good deal—because sometimes you're not.

Overall, if you think your purchasing decisions through before you make them you shouldn't have too hard of a time realizing when your efforts to cut costs will actually hurt you in the long run. A little thought is enough to solve the problem.

When you aren't bringing in as much as you'd like with each paycheck, it's hard to reduce that amount by cutting out a chunk that's just going to sit in a bank account and earn minimal interest. In some cases, you may think you can't even afford to save. Neither option looks particularly attractive, but there are numerous benefits to saving even a small portion of your paycheck that you may not realize—benefits that save you even more money in the long run.

While this probably goes without saying, saving money means you have a reserve of cash at your disposal. It's worth mentioning nonetheless because you may not realize that you can end up spending more money in the long run when you don't save at all. This not happens because you can quickly rack up credit card debt by buying things you can't afford, but because using your savings to purchase an item means you have the freedom to spend at the most optimal time—such as when a good deal comes along. If you don't have the necessary savings when that deal arises, you'll have to put it on a credit card that you can't pay off immediately and the interest will quickly negate those savings. If you have cash at the ready, you won't face this dilemma.

You can save money even if you don't have a lot of cash reserves—just start small. If it hurts to take a chunk out of your paycheck each month, consider saving a dollar or two every day. Because you likely spend at least that much cash on a daily basis, funneling it into a jar won't seem quite as difficult as watching about $30-60 disappear each month from your paycheck. Contributing in small amounts will grow your savings slowly, but as you get in the habit you may feel more comfortable increasing the amount. If you're really having trouble finding the money to put in your savings account, consider where you can cut back and use the leftover cash to sock away each month. In the next section will discuss reducing your bills, which is an excellent way to find an explicit amount of extra cash each month, but you can also cut back in other ways if necessary. Cooking at home is one of the biggest savers. If you cut out prepared food and coffee runs on most days, you can save a lot. Buying generic—which sometimes gets you an identical product for less—is a great way to save money further. You can also save a lot by reducing your electricity usage, which can often be as simple as remembering to turn things off and using more efficient light bulbs. You'll also want to consider what you actually have to buy and what you can reuse. Razor blades, for example, can be used for a couple of years with a simple sharpening technique. Consider what can be kept before you toss it in the garbage.

Contributing to your 401k is another great way to save, but many people avoid this because 1) retirement seems a long way off and 2) they want to build an emergency fund beforehand so they're ready in case of a problem. There are two issues with avoiding a 401k. First, if your company matches any contribution you make you're basically throwing away money by not taking advantage of that benefit. Second, your 401k can also serve as an emergency fund. In many cases—such the an inability to pay rent or a medical emergency—you can withdraw money from your 401k early with either a reduced tax penalty or none at all. You will be subject to the income tax, but you'd have paid that if you put it in a savings account anyhow. Not every 401k allows for hardship withdrawals, so be sure to check with your plan (or any plan you're considering) beforehand. If you are covered, there's really no excuse to contribute to your 401k right now.

When you see a price tag on an item you want or receive a monthly bill in the mail, the general assumption is that this price is not negotiable—but that's where you'd be wrong. You can end up easily overpaying by quite a bit if you just accept the price you see. Often times there is a less-costly alternative.

When it comes to your bills, there are two things you can do to lower them. The first simply involves making a few phone calls each year to negotiate your rates. If you pay your bills on time and you've been loyal to the company for the last year or more, it's not hard to get some sort of discount. I do this twice a year with my cable bill and end up with a discount, a free upgrade, or both. In addition to your cable (or internet) bill, you can target cellphone carriers, credit cards, car insurance, and gym memberships. All you have to do is ask what they can do to help you get a lower price and be persistent.

In the event you can't get a cost reduction by simply asking, you can make some small sacrifices. In general, many monthly services include something you do not need and can easily live without. For example, text messaging plans can be replaced with Google Voice. Cable packages likely include a few premium channels you bought as a bundle but don't need anymore, and a super-thin HD antenna (like the Mohu Leaf) could replace your cable package altogether and even save you some space. Switching to a lesser bundle may not only be cheaper, but lock you into another discount for six to 12 months. You just have to look at what you're currently paying for and think about what you really need. Most often, you can live with less than you think because there are free alternatives available.

As for in-store prices, people tend to think they can't haggle when they often can. Big ticket items like furniture, appliances, and mattresses are rarely set in stone and you can make a deal if you try. This even works at big-ticket retailers like Best Buy. You can negotiate prices on televisions, for example, and often get a lower price and/or free accessories (like those overpriced cables). Cars and home prices are also commonly negotiable, and you can even reduce your medical bills with a simple question. Insurance companies are often ending up with lower rates, so if you're paying your doctor or dentist out of pocket you should see if they offer a cash discount. I get 10% off every dentist appointment for paying with a check. While you don't want to haggle for absolutely everything you buy, when the cost is higher than average it never hurts to ask. You may not get a discount, but if you do that quick negotiation will prove worthwhile.

We're lucky enough to live in a world with plenty of great products and so it's easy to turn to a credit card to buy them when you don't have the cash. Just because racking up unnecessary credit card debt is common these days doesn't make it a healthy practice. Carrying debt that you take time to pay off can amount in huge interest charges that don't take long to get into the range of thousands of dollars even if you always make your minimum payments. There's rarely a good excuse to carry debt on your cards, so if you do you it's time to put together a plan to stop right now.

If you really have a spending problem, you need to find ways to prevent yourself from using your credit cards. Enforcing a mandatory waiting period on your purchases or switching to a cash-only policy are two practical ways to start, but even ridiculous options like storing your credit cards in a jar of peanut butter or a block of ice can work because they make buying quite a bit more difficult. Simply taping over the magnetic strip and writing "DON'T USE ME" can work as well as a reminder is often enough. However you choose to go about it, take the necessary measures to ensure you don't actually use your cards.

To eliminate the debt, you need to make a plan. Figure out how much you can pay every month and how long paying that amount will take you to become debt free. ReadyForZero is a web app that can help you put that plan together. Once you have your plan, all you have to do is follow it. Debt can seem insurmountable at times because it can take years to pay off, but if you're patient and persistent it will be worth it in the end.

Checking your credit report is incredibly important and yet many people neglect to do it even though it's free. Not only is it important to know if there are any negative ratings on your account, but it can help you catch identity theft early on. The Consumerist posted about a man named Mike who found an anomaly in his credit report and it helped him that turned out to be fraud:

I check my free credit report every year. Well apparently last year I didn't check my Experian report, which was good news for me this year because I still have until May for my other two. Well, lo and behold, there's a default filing for $163. At first I was like, oh I forgot to pay something, what the hell cost me $163 that I missed?

The $163 was a fraudulent charge that Mike wouldn't have known about for a long time had he neglected to check his report every year. Ideally, you'd want to check quarterly to stay on top of any potential issues but you'd have to be willing to pay in that case. If you want a free report, we recommend using AnnualCreditReport. Not all free credit report services are actually free, but we know that one is. In addition to keeping an eye on fraud, you can use your report to improve your credit score. For the most part, paying your bills on time, avoiding collections, and only applying for new cards or loans a couple of times per year should keep your score on the rise. That said, you may find something on your credit report that shouldn't be there, so be sure to call the major three reporting agencies (Equifax, Experian, and TransUnion) to have it removed if you do.

What stupid things have you done with your money and how did you fix them? If you've got advice to share, post it in the comments!

Save Money on Groceries By Cooking Like a Peasant [Saving Money]

Making great meals using just a few resources is an art many of our grandmothers and great-grandmothers know how to do. Get Rich Slowly reminds us that we can use the same principles of using cheap, filling ingredients to make comfort foods today—and reduce our grocery bill.

The same cheap ingredient can be made multiple ways—each culture, for example, has its own take on rice:

Risotto in Italy, Spanish rice in Mexico, dirty rice in New Orleans, paella in Spain - all filling dishes that can satisfy a family with just a few ingredients.

Cheap but satisfying dishes you can fall back on and incorporate into your meal plan include ratatouille (example shown in the photo above), bibimbap (a Korean dish typically made with rice, vegetables, a raw or fried egg, and sliced meat), frittatas, and fajitas.

Rice, eggs, and veggies are the inexpensive ingredients. Stock up on those items (beans too) and some other staples (like bacon, extra-virgin olive oil, and some salty extras) and you can whip up a tasty meal and have more money in the bank.

(By the way, it looks like it's out of print now, but The Frugal Gourmet on Our Immigrant Ancestors by Jeff Smith is a great cookbook along this same line, containing recipes celebrating lots of ethnic traditions and old world peasant dishes.)

What peasant-like staples do you keep on hand?

Want to Save on Groceries? Cook like a Peasant | Get Rich Slowly

Ask and Answer Questions About Saving Money [Help Yourself]

Every day we're on the lookout for ways to make your work easier and your life better, but Lifehacker readers are smart, insightful folks with all kinds of expertise to share, and we want to give everyone regular access to that exceptional hive mind. Help Yourself is a daily thread where readers can ask and answer questions about tech, productivity, life hacks, and whatever else you need help with.

If you're like many, you are constantly trying to find new ways to save money. We all know it is financially healthy to deposit at least a small amount of money into your savings account from every paycheck, but what else should you be doing? If you have questions regarding how to save the most money possible, please ask them.

On the other hand, if you have a money-saving technique that has brought you a lot of success, or if you are an expert on money-saving matters, we want to hear from you. Provide your advice, and feel free to answer any questions our readers may have. Ask and answer questions about saving money in the comments.

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