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Tips and Tools for Tracking Deductible Business Expenses for Taxes (and beyond!) - YouTube
Channel: All Up In Yo' Business with Attorney Aiden Durham
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hi everyone i'm attorney aidan durham
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with 180 law co in colorado
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and you are watching all up in your
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[Music]
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business
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in this episode of all up in your
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business we're going to talk about
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tracking
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business expenses i'm going to give you
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guys some tips for tracking business
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expenses
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let you know why it's so important to do
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so and we're going to cap it off with
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some of my favorite apps and tools
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for tracking business expenses but first
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don't forget to
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like subscribe and share and check the
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description for links to additional
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information and resources
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okay so most of us didn't decide to be
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self-employed because we wanted to be
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bookkeepers
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but nevertheless a fun side effect of
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being self-employed is that we often get
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to be our own bookkeepers
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web designers receptionists and uh our
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own lawyers sometimes despite my
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protests otherwise
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but regardless even if you have a
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bookkeeper accountant cpa or somebody
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else
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handling your business's bookkeeping and
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accounting properly
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tracking your business expenses is going
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to make all the difference
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and if you can set up a good system for
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tracking your expenses early on
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from the very inception of your business
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then it's going to
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make everything else that much smoother
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and more efficient moving forward we can
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also easily get lost in the day-to-day
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of
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everything else having to do with our
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businesses so
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entering all your receipts and doing the
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books gets you know pushed back to the
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back burner and next thing we know
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boom it's three months later and we're
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spending an entire weekend trying to get
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caught up but if you've got a good
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system in place and take advantage of
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different tools and
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apps and programs the rest of it can be
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set up largely on
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autopilot so why is it important to keep
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good track of business expenses easy
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because
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it's going to help you save money on
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taxes when we prepare our tax return
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every year we have to tell the irs
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how much and what kind of income we've
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earned over the past year
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and if we earn income from being
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self-employed we
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usually need to use schedule c to report
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that income
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in a nutshell we use schedule c to tell
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the irs
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how much revenue your business received
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how much you spent to keep your business
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running and the net income
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or loss for the year we don't pay
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taxes on the revenue our business
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receives we only pay taxes on the profit
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or net income which is the money we
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received minus the money we
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spent any ordinary and necessary
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payments that you make to run your
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business are considered
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business expenses and business expenses
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are deductible
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on your schedule c meaning that we get
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to subtract
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those expenses from our businesses
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taxable income
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business expenses potentially can be
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anything
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again as long as it's considered
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ordinary and necessary
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then it's going to be a deductible
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business expense but here are a few
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examples of common
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business expenses advertising bank
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fees consulting fees professional fees
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contract labor dues and subscriptions
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mileage office supplies postage printing
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payroll software travel utilities and so
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on
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so that's why it's so important to track
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business expenses so we know
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what to report on our taxes and so we
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don't miss any potential business
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deductions
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and end up paying more in taxes and we
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actually have to
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so let's say if the business made a
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hundred thousand last year and you don't
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deduct
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any of your business expenses then
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you're paying tax on the full
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hundred thousand let's pretend your
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average tax rate is thirty 30
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that means you're paying 30 000 in taxes
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and by the way i'm saying 30 just as an
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example i don't mean that all of you are
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going to be taxed at 30
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but if you properly track your business
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expenses then they total
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let's say forty thousand dollars that
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forty thousand
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is deducted from the hundred thousand
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and now you're only paying taxes
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on the sixty thousand dollars of profit
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or net
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income that means you're paying eighteen
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thousand dollars in taxes
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as opposed to thirty thousand and that's
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a pretty big difference
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but we're also doing this to make things
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easier on ourselves come
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tax time we don't want to waste our
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valuable time
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combing through boxes of receipts and
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trying to piece together our tax returns
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in time for the filing deadline
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or even worse pay somebody like our
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accountant or cpa
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to try to make sense of our chaos and
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it's not just enough that we track
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what the expenses are we often need to
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remember
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why we spent that money meals for
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example
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are often deductible business expenses
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but it makes a difference if we bought
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that meal
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let's say during a business meeting or
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if we bought it while we were on a
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business trip
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again we can deduct anything that is
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ordinary and necessary
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and we want to be able to prove that it
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was both ordinary and necessary
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if the irs ever comes in knocking so
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having a good
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system in place to track your expenses
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is going to save us time and money and
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in addition
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to reducing your overall tax bill best
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practice is to make a regular habit of
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tracking
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business expenses throughout the year we
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don't want to wait until the end of the
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year to record
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all of our expenses if we regularly
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track our business expenses throughout
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the year that makes it easiest
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easier for us to keep a close eye on our
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businesses financial health
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makes it easier to budget and put money
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aside in savings and helps us see
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exactly where
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every dollar is going it doesn't matter
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if you do it daily weekly monthly
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quarterly
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just make sure you dedicate some time on
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a regular basis to track your expenses
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in bookkeeping
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or even better take advantage of the
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millions of programs apps software
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and other tools available to automate
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all of it for you
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seriously there's like actually zero
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reason for you to manually
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track all of your business expenses or
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income we can
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quite literally use technology to do all
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of that for us
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so here are some of my favorite tools
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for tracking and managing
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business expenses and finances
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let's start with the free stuff because
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you know it's cool if you don't have to
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spend more money just to track
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where you're already spending money
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first
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your bank a lot of banks are starting to
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incorporate expense tracking
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tools into their online banking
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platforms i bank with chase
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and i have a chase business credit card
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you can categorize
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payments and expenses and see your
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spending report
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right there in the online banking
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platform now i mentioned this because
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it's probably
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already available for a lot of you and
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it's free except for you know any fees
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that your bank's already charging you
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but i wouldn't totally rely on this
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method of tracking expenses if you have
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very very few expenses then i guess it
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could work just fine for you but most of
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us are going to want something a bit
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more substantial
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keeping with the simple and free trend
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mint is another really good option if
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you're not familiar with mint
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it's an online budgeting platform that
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connects to your bank accounts and
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automatically downloads all of your
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transactions
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then you can categorize all of your
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income and expenses
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and create you know spending budgets and
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see where all of your money is going
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i have been a long time fan of mint but
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mostly for my personal budget
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budgeting kind of like what i was saying
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about chase you can view spending
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reports and track where you're spending
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money
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but it's not really going to give you
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like detailed reports or financial
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statements
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now if you're old school or just a fan
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of spreadsheets excel
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is a really good option i guess it's not
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technically free since you still have to
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buy the software but i'm including it in
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the free category or
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google sheets which is actually free
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most of the time
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you can literally just have a simple
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spreadsheet of expenses
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you know the dollar amount who it was
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paid to why
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the date of the expense it doesn't have
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to be fancy or
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it can be fancy and you can create
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spreadsheets to track and categorize
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expenses and collect cash flow and
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budgeting and more so
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those are a few simple and mostly free
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options for some basic expense tracking
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but most of us are going to need a
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little bit more and this usually means
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some kind of full-blown accounting
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software
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there are a lot of options out there but
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there are a few
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things that we want to look for when
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we're trying to
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decide which one to go with first make
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sure it's a program that syncs with your
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bank
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almost all of them do that these days
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but it's going to make
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things so much easier if your accounting
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program can just
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automatically pull in all of your
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transaction data from your bank
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as opposed to you manually entering that
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information
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find one that offers a mobile app so you
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can record your expenses on the go
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a lot of programs have apps that include
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automatic
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mileage trackers for example if you're a
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gig worker or if you drive a lot for
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work
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a mileage tracking app is gonna be a
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lifesaver
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it's also great if the mobile app allows
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you to scan
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and save digital copies of your receipts
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it's good practice to hold on to
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all of your receipts for at least three
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years in case of an irs audit
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many programs allow you to scan your
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receipts on the go and you can attach
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them to
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each transaction for further record
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keeping finally
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bonus points if it integrates with other
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apps
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a lot of programs have the ability to
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integrate with e-commerce platforms like
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shopify you can integrate with your crm
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systems or
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email marketing tools and so on so most
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programs
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you're gonna have to pay for it if you
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want all of the great bells and whistles
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but there are some really good options
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that are free or offer
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free plans and i'm gonna link to all of
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these things in the description so you
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guys can check them out later
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wave wave apps has a great accounting
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software that is completely
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free to use i'm a big fan of wave zip
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books is another popular one and they
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offer a free plan
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though a lot of their features are going
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to require the paid plan
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one that i think is very cool is new
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cash
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spelled gnu cash it's a free
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open source software that has a lot of
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accounting capabilities
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the only downside though is that since
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it's open source there's not really a
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whole ton of
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support available if you need help
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setting it up or with troubleshooting
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like i said you can get a lot out of
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these uh
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for free but the additional features
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that you get with some of the paid
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options really might be worth the cost
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which brings me to some of the more
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traditional
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accounting and bookkeeping tools
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quickbooks
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is a heavy hitter in this category and
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it does way
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more than just tracking your expenses
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quickbooks really can be used to handle
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all of your finances running payroll
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invoicing and accepting online payments
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tracking your expenses and bills and of
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course managing
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taxes and so on and so forth but you
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know
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quickbooks can easily become pretty
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overwhelming just because of how much it
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can do
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so if you're brand new to the scene and
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you don't already have an accounting
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or bookkeeping background it might be
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too much for you
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unless you're going to hire somebody to
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set it up and manage it for you
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but freshbooks offers a lot of similar
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features to quickbooks but it's a bit
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more simplified and be
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would be a good option for service based
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businesses and
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you know solopreneurs and freelancers
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and stuff and then xero
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is another good option similar to
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quickbooks and freshbooks
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lastly outside of these full-blown
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accounting programs there are a lot of
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great apps
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on your phone that can help with
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tracking business related expenses
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mile iq i love mile iq
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i used mile iq's mileage tracking app
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for like six years
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i only just recently canceled a few
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months ago
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only because of covid19 though and
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because i'm not driving for business
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anymore i
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really just stay home now but up until
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then i used it on
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on a daily basis and it was well worth
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it mile iq
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uses gps to automatically track all of
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your mileage
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and then you can categorize your trips
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and calculate your business mileage
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if you're a gig worker or you drive a
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lot for work mile iq
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is is going to be life changing
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everlance is another
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app that's really similar to mile iq
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from what i understand i haven't used it
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myself but it does have a gps tracker to
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log your mileage and you can scan
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digital copies of receipts into the app
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as well
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both mile iq and everlance they offer
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free
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and paid plans shoeboxed is a really
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cool app that i recently learned about
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that helps with tracking
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and categorizing your receipts too and
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lastly expensify
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this is going to be primarily useful if
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you have employees who are going to have
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a lot of reimbursable expenses
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or if you have a lot of expenses that
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you reimburse to yourself
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again i'm going to link to all of these
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in
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all these apps and stuff down in the
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description if you guys want to check
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them out
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so when it comes to tracking expenses
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the bottom line is this
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have a system in place from the very
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beginning make it a regular habit to
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track
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review and categorize your expenses and
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finally take advantage of
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tools and programs to automate as much
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as possible
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that's all for this episode folks drop a
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comment below
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let me know what you think and don't
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forget to check the description for
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links to all the products that i
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mentioned
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as well as additional information and
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resources thank you all
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so much for watching i'm aiden durham
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and i'll see you next time
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