How much to allocate and where?

I read today of a "90% Rule" in which you budget around being able to save 10% of your income.

My personal ideal would be to only have 30% on bills, 30% for enjoyment and non-bill expenses, and 30% saved, but this is probably absolutely impossible, and doesn't take debt into account (since I have none... yet).

Wikipedia seems to have some useful information.

Hi Lindsay! I own a small consulting firm (I'm an independent contractor).

Disclaimer...I am not an accountant and probably know just enough to be dangerous! LOL I have been teaching myself as I've gone along, but you may find it is really well worth a few hundred dollars to sit down with an accountant and come up with a strategy for a lot of your goals. However, you asked for my thoughts, so here they are, FWIW.

First, have you considered establishing an LLC or an S Corporation? Here in AZ, I was able to create my LLC for about $100 and without an attorney. It basically protects all of our personal assets from liability associated with the business but also allows us to keep the flow-through taxation I enjoyed as a sole proprietor (DBA). That may not seem necessary in some lines of work, but it's a good idea and small price to pay for the peace of mind. This can sound intimidating but I really encourage you to research this...compare remaining a sole proprietorship vs. and LLC vs. an S-Corp. Look at all the liability and tax pros and cons for each.

As for self-employment tax...I would suggest you either talk with an accountant or run the numbers through an online calculator and see what you think your tax liability will be. Very simply put, you typically pay 15% self-employment tax that is added on top of the personal income tax liability for those earnings in my tax bracket. Does that make sense? If you are in the 28% tax bracket, that sends your taxes to 40+% on your business income. Yes, Virginia, there is a Tax Man! LOL You can then send quarterly estimated tax payments to the IRS. The S-Corp set-up can help fence some of your business earnings from the self-employment tax.

Anyway, it is also really important for you to run these tax numbers in advance so that you ensure you are pricing your goods/services properly! You need to make sure that after taxes and expenses, you are earning enough to make it worth your time!

As for retirement, you should put as much into retirement as you can. At the minimum, open an IRA...most likely a Roth. The cap on a Roth is $5K/year starting in 2008. (As well as your husband maxing out his Roth and any employer-sponsored retirement program). You might look into SEP IRAs.

Meanwhile, I know between my husband's 401K, our Roths, we currently put 15-20% of our gross income into tax-advantaged retirement accounts. Plus I will be fully vested in my Air Force Reserve retirement in 3 years. It's still not enough IMO, but we are getting through the MBA, we have two kids who will be heading to college in 10 years, etc. So...baby steps...
I hope this helps! And I hope someone wiser than me will also chime in!

Hi Lindsay,

I've got a full time job (that I'm resigning from) and a part-time business. I manage my money for both using the JARS System. The system was developed and taught by T Harv. Eker, author of The Secrets of the Millionaire Mind.

You can read more here,

Managing Money - The JARS System