How To: Keep Track of Your Money Like the Bad A** Therapist You Are
Five things you need to track your money like the Bad A** Therapist you are.
Let’s be 100% honest here. The reason you are learning how to set up a private practice in counseling is to make money. We not only need money for our basic necessities, but also for the necessities that fill us up, and make us feel recharged and ready for the world as therapists. Our jobs are HARD. We deserve to be fairly compensated for our time and expertise.
So, once you start making money, what do you actually do with it?
01. Find A Credit card processing system
If you plan on being in private practice and choose not to accept insurance, you’ll need a way to take payments. Some therapists opt for cash, money transfer, or checks to avoid credit card processing fees. While it will save you money on processing fees, it does cost you time and effort. You’ll have to track each client with their session payments and make sure it’s paid it’s full.
For Julie, a credit card processing system is worth the fees. It’s a virtual assistant that automatically collects payments and frees up her time to do other things at a higher hourly rate. With Simple Practice, all client payments are set to automatically run at the end of the day. The payments are then transferred into her business bank account which is linked to QuickBooks Online. This is 100% online, which limits human error.
The credit card processing fees are then written off as a business expense. A win-win!
02. Get a bookkeeping system
Once you have a way to have credit card payments automatically transferred into your business bank account, you’ll want to connect it to a bookkeeping system.
Two options for a bookkeeping system in private practice:
Manual tracking system
If you choose to track your income manually, you’ll want an excel or google sheet that sets you up for success. Each month, you’ll document your income and expenses. This can be tedious and leads to human error, but for some people, it works. Etsy has downloadable excel templates for therapists in private practice to track their income.
Automatic tracking system
If you choose to track your income using a computer program, you’ll still want to go make sure it’s up to date at least once a month. This is your “bookkeeping” time. If this isn’t your jam, you can find a bookkeeper that works specifically for you for therapists in private practice.
03. Establish a payroll system
How to pay yourself in private practice
Figuring out how much to pay yourself will probably take some time to get just right. Generally speaking, you’ll want to save enough for taxes and expenses each month. But, while you are building your practice, your income could fluctuate month to month so it’s hard to set a salary from the get-go.
As you get started in private practice, we recommended transferring 50% of your income at the end of the month into your personal bank account. This will allow you to save enough for taxes and business expenses while you still get compensated for your time and work.
Once you have a more consistent income stream, think about how much you want to be paid each month. For Julie, she sets up automatic transfers on the 1st and 15th of the month into her personal bank account. These transfers account for retirement savings, health insurance, and a transfer to personal savings and investment accounts.
Some people use Gusto, which does all the transfers automatically. It also makes tax payments as you go. It does charge a monthly fee though, but if it gives you peace of mind that everything is done correctly, go for it!
We recommend Talking this over with your accountant for a more detailed plan.
04. Save for Quarterly tax payments
Each month, you’ll also want to save money in an account that you can use to pay your quarterly tax estimates. If you are just starting out in private practice, use an income calculator to predict your yearly income, and then save around 30% of that. It’s better to over-save and then pay yourself the extra at the end of the year than scramble for tax payments during tax season.
Set up automatic transfers to this account and forget about it. Whatever you do, don’t touch this money until you file your taxes. Discipline is key here.
Again, We recommend Talking this over with your accountant for a more detailed plan.
05. Plan for Retirement
Each month, you’ll want to set aside money for retirement. First, you need to set up an IRA with a bank or investment fund. Julie uses Vanguard and highly recommends working with them! The team is super supportive and friendly. Great for finance newbies with zero finance background.
Set up automatic transfers from your personal checking account into your retirement fund. Try to max out this account if possible.
That’s it! It’s pretty simple to get your retirement savings in place when you are a therapist in private practice.
To Review
Here are the five things you need in place to track finances in private practice:
Credit card processing system
Bookkeeping system
Payroll system
Quarterly tax saving plan
Retirement saving plan
Now go get that money!
JULIE GOLDBERG is the founder of Third Nature Therapy, a virtual therapy group offering holistic mental health care for people seeking a different perspective on wellbeing. As a co-founder of PREMADE and mental health practitioner herself, she offers straightforward and easy to implement methods for running a successful private practice.