Tag Archives: invest

Great Tips for Your Home-Based Business

Home-based businesses can be financially rewarding and provide a certain amount of flexibility with your day-to-day schedule. Here are some tips to keep your business running at full steam.

  • Stay on top of accounts receivable. It’s easy to get caught up with fulfilling your business obligations while invoices you’ve sent out go unpaid. Agree to payment terms in advance with new customers and immediately – but politely – communicate with them as soon as they miss a payment deadline. Keep current with regular invoicing and collections.
  • Keep your bookkeeping records up-to-date. You may not realize you have an unpaid invoice that’s several months old unless your bookkeeping is up-to-date. Keeping accurate books involves more than balancing your bank accounts once a month. In addition to your monitoring your bank accounts, also consistently look at your accounts receivable, accounts payable, any debts (credit card, car loans or other borrowings), and all money you invest in your business. Ask for help if you don’t have enough time to do the bookkeeping yourself, or if you need help properly setting up your bookkeeping software.
  • Check on permit requirements. Depending on what type of home-based business you have, you may be required to obtain various permits, licenses or other registrations. If you have not already done so, check with your town or city for local requirements. The Small Business Administration is also a good source to research information on permits.
  • Get insured. Obtain adequate insurance for the type of operation you’ll be running. Besides the insurance required for business activities, you might consider adding a rider to your homeowner’s policy for liability protection should an accident occur on your property.
  • Stay on top of technology. While you may not need a top of the line computer, be sure that the technology equipment you use can handle the bandwidth of everything you’ll ask it to do, including video calls, software apps and data storage. Also consider scheduling a time for your internet provider to visit your home to make sure everything is in working order and your security protocols are top notch. Have a back-up plan in place for when a device breaks down, including where you’ll go to have it repaired.
  • Cash in on tax breaks. Take advantage of the tax breaks available to home-based businesses, including deductions for supplies, equipment and vehicle expenses. You may even be able to deduct the cost of your home office, including a pro-rated amount of your real estate taxes and utilities, if certain conditions are met.
  • Set aside money to pay your taxes. Ask for help to calculate how much of your incoming cash you should be setting aside to pay your federal, state and local taxes. Consider opening a separate bank account to transfer your tax money into.

It’s BACK! Inflation is Among Us

How to Shield Your Money From Inflation

Recent high inflation rates are driving up the price for almost everything and eroding the value of your money. With varying opinions on the potential duration of the current inflation surge, it’s important to understand the causes and how you can protect your money.

Possible causes of this inflation

While the root causes of inflation are not always easy to identify, the premise is simple – prices are going up for goods and services. This is often because demand is higher than supply. Here are some of the basic drivers of today’s inflation.

  • The demand-pull situation. Demand for a product increases but the supply remains the same. Think of a vendor selling ponchos at a state fair. If it rains, demand is going to spike and fair-goers are willing to pay up to keep dry. This situation is rampant during the pandemic, as we all see runs on things like toilet paper and hand sanitizer. And now we are seeing pent-up demand being released, as some of the pandemic restrictions are eased. An example of this is popular vacation locations being all booked in advance.
  • The cost-push situation. Demand stays constant but supply is reduced. An example of this is a lower-yield crop season when a major drought hits a region. Consumers still want their dinner salads, but lettuce is sparse. So, retailers charge more to cover their increased costs. Or when paper mills switched production to handle higher toilet paper demand, pulp used for paper and packaging had supply reductions creating a shortage which increased their prices.
  • Factoring in the money supply. The more money there is available to spend (high money supply), the more the demand on all goods and services goes up. This is being manifested in wage increases as employers are having a hard time filling jobs and is also the result of many of the government spending programs during the pandemic.

Ideas to protect yourself during high inflation

  • Alternative savings that is NOT cash. The value of your money sitting in your wallet or in low interest bank accounts is shrinking before your eyes. The past year has seen the highest inflation rates in the last decade at 5.4%, according to the Consumer Price Index (CPI). That means if your savings account is earning 0.6%, you’ve lost 4.8% in purchasing power over the last 12 months. Get your money to work for you by considering:
  • Low risk, dividend-paying stocks
  • CDs, bonds and other investments with various maturities to prepare for higher rates
  • Direct lending vehicles through vetted, respected facilitators
  • Investing directly in property, small businesses or other tangible assets
  • Invest in yourself to learn a new trade or skill
  • Lock in fixed rates on debt. Inflation can be your friend if you have a low interest, fixed-rate loan. For example, inflation will tend to increase the value of your house over time, yet your monthly payment will remain the same. So borrowing money at a low fixed interest rate, while the underlying property value increases with inflation, can be a strategy to consider.
  • Delay large expenditures. Do your part to reduce demand by postponing large purchases. Consider delaying the purchase of a new car, adding to your home or taking an overseas trip until demand flattens and prices come back to a normal rate.

It’s impossible to avoid the effects of high inflation altogether, but with some smart investing and the will-power to temporarily curb spending, you can reduce inflation’s impact on your personal bottom line.

Ideas to Lower Your 2021 Tax Bill

Now is the time to begin tax planning for your 2021 return. Here are some ideas:

  • Contribute to retirement accounts. Tally up all your 2021 contributions to retirement accounts so far, and estimate how much more you can stash away between now and December 31. So, consider investing in an IRA or increase your contributions to your employer-provided retirement plans. Remember, you can reduce your 2021 taxable income by as much as $19,500 by contributing to a retirement account such as a 401(k). If you’re age 50 or older, you can reduce your taxable income by up to $26,000!
  • Contribute directly to a charity. If you don’t have enough qualified expenses in order to itemize your deductions, you can still donate to your favorite charity and cut your tax bill. For 2021, you can reduce your taxable income by up to $300 if you’re single and $600 if you’re married by donating to your favorite charity.
  • Consider a donor-advised fund. With a 2021 standard deduction of $12,550 if you’re single and $25,100 if you’re married, you may not be able to claim your charitable donations as a tax deduction if the total of your annual donations is below these dollar amounts. As an alternative, consider donating multiple years-worth of contributions to a donor-advised fund if you have the available cash so you can exceed the standard deduction this year. Then make your cash contributions from the donor-advised fund to your favorite charities over the next three years.
  • Increase daycare expenses. If you and/or your spouse work and have children in daycare, or have an adult that you care for, consider using a daycare so you and a spouse can both work. This is because there is a larger tax break in 2021. If you have one qualifying dependent, you can spend up to $8,000 in daycare expenses while cutting your tax bill by $4,000. If you have more than one qualifying dependent, you can spend up to $16,000 in daycare expenses while cutting your tax bill by $8,000. To receive the full tax credit, your adjusted gross income must not exceed $125,000.
  • Contribute to an FSA or an HSA. Interested in paying medical and dental expenses with pre-tax dollars? Then read on…If you have a flexible spending account (FSA), you can contribute up to $2,750 in 2021. This allows you to pay for medical expenses in pre-tax dollars! Even better, unspent funds in an FSA can now be rolled from 2021 to 2022. And if you have a health savings account (HSA), you can contribute up to $3,600 if you’re single and $7,200 if you’re married. So, add up all your contributions to your FSA or HSA so far in 2021 and see how much more you can contribute between now and December 31.

Use Your Tax Refund Wisely

Three of every four Americans got a refund check last year and the average amount was $2,777, according to IRS statistics. Because the amount of a refund is often uncertain, we may be tempted to spend it without too much planning. One way to counteract this natural tendency is to come up with a plan beforehand to spend your refund purposefully.

Here are some ideas:

Pay off debt. If you have debt other than your home mortgage, a great spending priority can be to reduce or eliminate it. The longer you hold debt, the more the cumulative interest burden weighs on your future plans. You have to work harder for longer just to counteract the effect of the debt on your financial health. Start by paying down debts with the highest interest rates and work your way down the list until you bring your debt burden down to a manageable level.

Save for retirement. Saving for retirement works like debt, but in reverse. The longer you set aside money for retirement, the more time you give the power of compound earnings to work for you. This money can even continue working for you long after you retire. Consider depositing some or all of your refund check into a Traditional or Roth IRA. You can contribute a total of $5,500 to an IRA every year, or $6,500 if you’re 50 years old or older.

Save for a home. Home ownership is a source of wealth and stability for many Americans. If you don’t own a home yet, consider building up a down payment fund using some of your refund. If you already own a home, consider using your refund to start paying your mortgage off early.

Invest in yourself. Sometimes the best investment isn’t financial, but personal. If there’s a course of study or conference that would improve your skills or knowledge, that could be a wise use of your money in the long run.

Give some of it away. Helping people, and being able to deduct gifts and charity from your next tax return, isn’t the only benefit of giving to a good cause. Research shows that it makes us feel good on a neurological level. In fact, donating money activates our brains’ pleasure centers more than receiving the equivalent amount.1

If a refund is in your future, start planning now on how it can best help your financial situation.

1 https://www.wired.com/2010/12/the-science-of-charity

Five Smart Uses for Your Tax Refund

So you were fortunate enough to receive a tax refund this year. What are your plans for the money? Here are five ideas worth considering.

Pay down debt – Start with debts that carry the highest interest rates first, then move down the line. This is like savings on savings as you are freeing up future cash needed to pay the interest on this debt.

Ideas: Pay off credit card debt. Lower your student loan debt. Make a principal payment on a mortgage.

Add to savings – Save some of your refund for later use.

Ideas: Add to your emergency fund to have enough to cover at least six months of your every-day expenses. Add to a college savings account or a tax-advantaged retirement account.

Invest in yourself – Spend some money improving yourself or your well-being. Investing in yourself can have long-term benefits.

Ideas: Take a class to develop a hobby into a career. Consider a fitness membership. Take up meditation. Become accredited in your chosen profession.

Spend for permanence – Instead of spending your refund on day-to-day expenses, use some of it for capital purchases. Capital purchases are for items that last longer than one year.

Ideas: Replace a worn out couch. Purchase a replacement bicycle. Upgrade an outdated light fixture. Consider a minor home improvement.

Have some fun – Finally, consider using part of your refund for a well-deserved break. When balanced with using a portion of your refund to improve your financial condition, you can feel better about a little splurging in your life.

Ideas: Shop last minute flight deals for a weekend getaway. Take a road trip to a favorite destination.