Cryptocurrency use is on the rise – better get a grip on it
You may have heard the terms Bitcoin, Silk Road, cryptocurrency, PeerCoin, CoinFunder, and so forth, and if you’ve turned a deaf ear because it sounds geeky, that’s a mistake. Cryptocurrency is a digital currency that some say is a fad, others insist it is the currency that will eventually become mainstream.
Victoria Treyger, the CMO of Kabbage, which provides working capital for small businesses. She says she joined the company because she loved the message: To understand customers better and provide them with cash when they need it. We’ve been writing about Bitcoin for years, and Treyger agrees that Bitcoin and other digital currency is important to business.
“Bitcoin use is on the rise; however, most people today still do not understand the use, distribution, and regulation of Bitcoins. The big question concerning Bitcoin and your small business is whether you should accept Bitcoins in the first place,” said Treyger.
She adds, “There are many advantages and disadvantages in implementing Bitcoin into your business plan. Yet at the end of the day, it’s a decision you as a small business owner need to make when taking into account Bitcoin’s regulation, security, value, taxes, security, and acceptability.”
Because Bitcoin is inexpensive and fast, it is popular in the financial world, and Treyger says it is “tech-forward, which also garners many followers for the digital currency.”
Bitcoin is not currently regulated by any government agency, Treyger notes, so it is an international form of currency available to anyone with Internet access. So far, not many businesses accept Bitcoins, making Bitcoins difficult to spend and seemingly useless even as their exact value fluctuates daily. So will the Bitcoin bubble eventually burst?
In her own words, Treyger dives into what Bitcoin is, how it works, and what you need to know for your business.
Who regulates Bitcoin?
Bitcoin currently has no government or protocol regulation. Instead, there are Bitcoin miners who essentially process Bitcoin transactions and secure the network. Because there are so many Bitcoin users spread out across the world, it is highly improbable that a form of regulation will ever be implemented.
So far, the only type of regulation that could emerge is some sort of government regulation that either bans the use and distribution of Bitcoins or designates laws for legitimate uses of Bitcoins. And if a regulatory system were put into place, it would create higher transactions costs for Bitcoin, taking away one of its main advantages. Bitcoin is also resistant to any form of regulation, which makes it potentially the prime type of currency for questionable activities.
Bitcoin is argued to not be a legal currency. Its value fluctuates and changes daily, and the volatile nature of Bitcoin’s value could cause the bubble to pop due to the perception is gives to users. As a Bitcoin user, you can hold onto your individual Bitcoins in the hope that the value increases or you can exchange them into legal tender for their current projected value. If the value of Bitcoins steadily decreases for a long enough period of time, it could cause users to sell all of their Bitcoins, causing the Bitcoin network to crash.
Is Bitcoin secure?
Fraudulent use of bank accounts and credit cards can be reversed easily, yet Bitcoin does not offer the same services. All Bitcoin transactions are final. The only person who can decide to issue a refund through the Bitcoin network is the person who has the currency in their Bitcoin wallet.
A wallet is a digital platform that holds your Bitcoin codes for fast, simple, and easy use. Because there is also no Bitcoin regulation, no Bitcoin user can be forced to issue a refund.
Consumer losses are generally greater on the Bitcoin network than any other payment plan network because of the lack of mandatory refunding. Most other payment networks set up consumer protection to avoid stolen funds and hackers. So if your Bitcoins are stolen or lost due to network failure or hacking, there is no way to ever get them back and there is no sort of insurance on them.
To turn Bitcoins into legal currency, a Bitcoin exchange must be used, which charges a small fee and also opens your wallet door up to hackers. The FDIC does not protect Bitcoin wallets either, so wallets are constant targets for hackers.
Exchange sources are also large targets for hackers because they receive thousands of keys to wallets every day to perform exchange transactions. If their network is compromised, all of those Bitcoins are gone for good. Bitcoin software is still being developed to try to make the system as a whole more secure and accessible, but for now if you insist on using Bitcoins, exchange them quickly.
User error also leads to a lot of Bitcoin security issues every day. Bitcoin wallets essentially hold keys or passwords for Bitcoins that can be accidentally deleted, lost, and stolen. There are independent insurance companies that offer insurance on Bitcoin wallets as well as third party service providers that can handle all of your wallet information for you. Bitcoin is still currently working on security procedures to implement to give their users greater protection.
What is the value of a Bitcoin, and how do I handle Bitcoins during tax time?
Bitcoins gain value based on consumer and merchant implementation into use. Bitcoins are only valuable if they can be accepted as a form of currency, and this is backed by the trust that its users instill into it when they purchase them.
The value fluctuates based on amount sold and distributed. There is a fixed amount of Bitcoins that will be sold to the public, and as demand for Bitcoins increases, so does its value. Bitcoin’s price is determined by this same principle of supply and demand. Because there is a predetermined number of Bitcoins, which are distributed at a decreasing rate, demand for Bitcoins outweighs supply, keeping inflation at bay.
Because the Bitcoin market is currently so small, the price of Bitcoins is extremely volatile. If your business accepts Bitcoins, depending on the day, you could gain or lose money based on exchange rates. Inflation could cause the downfall of Bitcoin eventually, leaving them worthless. Technical failures, waning interest, and government regulation could all garner Bitcoins useless one day.
Despite that Bitcoin is not a legal form of currency, tax issues still arise. Not claiming Bitcoin income could lead to audits from the IRS. For now, there is no exact way to designate the value of your Bitcoins for tax purposes but regulations will eventually be put into place.
How widely are Bitcoins accepted?
Widespread use of Bitcoins as currency has not fully taken off yet, if at all. Few businesses accept Bitcoins, which make it hard to spend and use them. This is probably because a lot of people still don’t even know what Bitcoin is or how to use it properly.
Its use is so small, which makes the value extremely volatile. Bitcoin can be seen as unstable, which deters more people from implementing it into their business plan. As a result of its unpredictable nature and potential use in questionable activities, most merchants have not accepted Bitcoins as a form of payment for their stores.
When considering whether to accept Bitcoins as a form of currency for your small business, there are a few key things to remember. Bitcoin transaction fees are quite small, usually between zero and one percent. Because Bitcoin is a digital form of currency, there is much higher risk of fraud and hacking, and all transactions are final, meaning there is no consumer or merchant protection plan put in place to keep your Bitcoins safe.
Bitcoin and consumer protection
Because Bitcoin lacks these basic consumer protections, a lot of customers could be deterred from buying from vendors who use Bitcoin as their primary payment type. The fluctuating value of Bitcoins also means that your business could lose or gain money each day based on Bitcoin supply and demand.
Because no government agency currently regulates Bitcoins and Bitcoin is an online marketplace, it is extremely vulnerable to fraud and hacking. The risks for a small business are equal or greater than whatever benefits you could get out of using and accepting Bitcoins. The major thing you need to think about is liquidity and whether you want to have your business tied up in Bitcoin currency.
Bitcoin is extremely risky, which could be part of its appeal, but think about what the consequences are for you and your business. For now, it is hard to tell what the future of Bitcoin is. As a small business owner, you have a few things you definitely should take into account when determining whether accepting Bitcoins as a payment method makes sense.
Tips on setting a more accurate freelance rate
Setting a freelance rate can be difficult given that any industry has conflicting norms regarding an appropriate billing amount – a fact made more difficult by about a billion other factors such as experience, location, and so on. Whether you prefer to determine your rate the long-form way or you just want a calculator to point you in the correct direction, here are some tips for figuring out how much you should be charging.
Jennifer Bourn, business guru and freelancer extraordinaire, eschews the general “start with the salary you want and work backward” approach. Under this model, you would theoretically determine the amount of money you want in a year, divide that number by the number of hours you plan on working in a year, and charge whatever the quotient is (for example, $100,000 divided by 2080–which is 40 hours per week times 52 weeks in a year–is roughly $50 per hour).
The problem with this model, Bourn posits, is that it doesn’t actually get you what you want to earn. Once you take into account things like your overhead spending, vacation time, insurance, profit margin goals, and actual billable time versus the time you need to do administrative things, you’re looking at a substantially smaller figure at the end of the year.
Bourn’s solution is to start with the salary you want, add all of your expenses, multiply that result by your desired profit margin (e.g., 1.10 for a margin of 10 percent), and then divide by a realistic look at your billable hours for the year–not just the standard 2080 work days in a year (which is already problematic due to the aforementioned vacation time and potential for sick leave).
If all of that sounds like way too much effort, there are a myriad of rate calculators that you could use instead. Each of our following picks has a variety of applications:
- Clockify is a simple, straightforward calculator that looks at your industry, location, and experience level to generate an average hourly figure.
- Nation 1099starts with your desired salary and then gives you an hourly rate and a daily rate based on many of the factors espoused by Bourn.
- Your Rate asks for your desired annual income, your number of weekly billable hours, and your anticipated time off per year to come up with a set of rough figures for weekly, daily, and hourly rates.
- Freelance Rate Calculator is a Google Sheets template that takes into account your goals, expenses, billable hours, and more.
- All Freelance Writing is a more intensive calculator with an advanced option to determine all of your costs, goals, billable hours, time off, and so on, making it a pleasant option somewhere between Bourn’s long-form calculations and something like Clockify.
You should test your salary calculations in a variety of spaces if you have the time. This will ensure that you end up with a solid, well-corroborated result that you can quote to clients rather than having to fall back on one website’s opinion. Whichever option you choose, though, remember that you deserve to be paid what you’re worth–not just what your services are worth.
How should freelancers be saving for retirement (is it even possible)?
(FINANCE) Adulting is hard, but retirement looms no matter your age – here are some ways to start squirreling money away so it’s less stressful later.
Freelancing is a tenuous approach to employment, made all the more so by a profound lack of amenities usually offered by more stable arrangements – chief among which is a retirement fund. It can feel impossible, especially when your business suffers amidst a pandemic, so some of what follows can be ignored until the ship isn’t sinking, but don’t wait a minute longer than that – deal?
So there are several schools of thought regarding the best way to start saving and where you should put your money, but the bottom line is that, if you’re a freelancer, you should be allocating your own retirement funds. Here are some ways to do just that.
Before you can even get into the weeds of how to invest in retirement, you should have a parachute in case things go sideways. My Bank Tracker suggests starting with an emergency fund of $1,000, adding to it as you can until you have anywhere from 3 to 12 months of expenses covered.
This serves two purposes: ensuring that you’ll have the luxury of time if you need to perform an abrupt job hunt, and establishing how much you can safely put away each month without jeopardizing your business or standard of living (within reason).
Having a relatively large sum of money on hand for emergencies is always good, and if you never have to use it for the purpose for which you set it aside, it can supplement your retirement whenever you decide it’s time to cash in.
My Bank Tracker also suggests storing your emergency fund using a “high-yield” bank account, such as an online savings account, rather than sticking with traditional, low-interest savings options.
You also need to plan for taxes, which in addition to whatever your tax bracket percentage is, includes allocating 15 percent of your income to pay Social Security and Medicare. This means that you’re probably putting aside a pretty hefty sum (at least 30%) each month.
Once you’ve established your emergency fund and planned for taxes, you should have a general idea of what your wiggle room looks like vis-a-vis saving for retirement.
The actual saving part of retirement entails investment in a retirement account such as an IRA, Roth IRA, a 401(k), or a pension plan (referred to as a “defined benefit plan”).
Each of these account types has benefits and drawbacks depending on your situation.
- A Roth IRA will allow you to contribute a certain amount each year, and you can usually set up an account quickly from a variety of online locations. The money that goes into a Roth IRA is post-tax, meaning you don’t have to pay tax on the retirement funds you pull out. Your income, however, can disqualify you from investing – if you earn above a certain threshold ($140,000 in 2021), you won’t be able to use a Roth IRA.
- Other IRA options exist as well, each with a cap on how much you can contribute per year and varying tax requirements. For example, a traditional IRA account requires you to pay taxes when you withdraw the money, and there’s an upper limit on how much you can contribute.
- A SEP IRA is similar, but the upper limit on investment is substantially higher – and you need to be self-employed (or an employer) to have one.
Nerd Wallet also points out that a 401(k) is a reasonable option for self-employed people who don’t employ anyone else, especially if you plan on saving “a lot in some years — say, when business is flush — and less in others.” 401(k) accounts allow you to put up to a certain amount ($58,000 in 2021) in each year pre-tax, and you pay taxes on withdrawals whenever you start pulling out money.
More eccentric retirement options exist as well. Taxable Brokerage Accounts let you invest in stocks and securities through a brokerage, and you’re able to use the money whenever you please – but you’ll have to pay taxes on your gains each year, which can become expensive in the long run.
And defined benefit plans are expensive and entail high fees, but they allow you to set up a pension with high investment opportunities as opposed to some of the lower-investment options.
Whichever option (or options – you can always invest in multiple accounts) you choose, make sure you’re saving for retirement in some capacity. And remember that these accounts represent exponential growth, meaning that the sooner you start saving, the better off you’ll be when you begin your retirement journey.
Stripe makes it easier to collect money from customers
(FINANCE) Stripe didn’t reinvent the wheel, but they are outshining competitors by adding features that help small businesses.
Payment processing is an attribute of any sales process that can make or break the customer’s experience – and, with it, your revenue stream.
While coding in a payment portal can be time-intensive and costly, payment processor company, Stripe has a simple alternative: Payment Links.
Stripe Payment Links are exactly what they sound like. Rather than linking a customer to a product and then having them check out via the usual cart process, you can send them a Payment Link for that specific product; the customer then enters their payment information in the ensuing window, and the product is theirs.
It’s a very straight-forward process that is made easier by Stripe’s no-code presentation, a choice that ProductHunt posits is an effort to go with the no-code flow we’ve seen in the last year.
And, the easier the checkout process is, the more likely a customer is to complete a transaction. It’s one of the reasons why Amazon’s “Buy Now” feature is so rewarding (and dangerous, especially at night).
By offering a customer a direct link to a product with a space to enter their card info in a hassle-free manner, Stripe has created an incredibly convenient way for them to pay – and, without the usual process of checking out involved, customers have less time to second-guess that payment.
Call it what you want (manipulative, pushy, morally grey), but if a customer doesn’t get the chance to rethink their purchase before the payment form has been filled out, chances are decent that they’ll follow through.
Certainly, there are drawbacks to this system. The link applies to individual products or services, which means that, while you can create an individual link for each item on your site, your payroll processing will categorize each of those links differently. That can be a mess to sort out at the end of the day.
But it’s a great way to ensure that customers who want something specific can get it quickly and without much ado about anything.
Putting a Payment Link in your bio after advertising a product on Instagram, sharing your link on Twitter, or even DMing links to interested customers is sure to be a productive, if shameless, endeavor.
Here is a quick rundown from Stripe:
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