The foreign exchange market is also known as FX or it is also found to be referred to as the FOREX. All three of these have the same meaning, which is the trade of trading between different companies, banks, businesses, and governments that are located in different countries. The financial market is one that is […]
Done the last some age, the popularity of working out of the house has elevated immensely. The high applied science of the Cyberspace has made it lots simpler to communicate, shop, and gain cash from the home. If you get been exploring for ways that you can gain some extra cash or are searching for […]
After many years of investing I’m convinced there are exclusive two tactics that a property investor should employ.
These tactics are basic, but harmonic to your promotion pick.
When evaluating any promotion goods you should secure that it clearly meets one or the else criteria. In doing this you leave assure that you have a make adjust […]
I am the President and CEO of a uni-national corporation. A one-person S-corporation, to be exact. I chose this over an LLC for a variety of reasons (most of which I don’t remember anymore), but one of them was - what else? - to save some money. I wrote a relatively wordy post a few years back on Forming An S-Corporation To Reduce Self-Employment Taxes. But I just read this e-mail from MyCorporation* that has a concise example with a nifty graphic thrown in:
In an S-Corporation, only earnings paid to an owner as salary is subject to payroll taxes. Any money left in the business for reinvestment or distributed to the shareholder as a dividend is not subject to self-employment tax.
Maria is a sole proprietor bringing in sales of $90,000. After she pays her costs & expenses, her profit is $60,000. As a sole proprietor, she is required to pay self- employment tax of 15.3% on this entire $60K of profit, which equates to $9,180.
Now, let’s assume Maria formed an S-Corporation for her business, and chooses to pay herself $35K for the year in salary, and take the remaining $25K of profit through a distribution. She still earns the same $60K in profit. But, let’s look at the tax situation. Because corporations only pay Social Security & Medicare taxes on salaries, she’s only liable for $5,355, saving over $3,800 in taxes!
If you have a single-person LLC, the tax situation is usually very similar to that of a sole-proprietorship. (I should add that in some states you can also choose to have the LLC taxed as an S-Corporation. I would consult a local attorney for more details on this.) Now, the salary has to be “reasonable” based on the compensation of similar work elsewhere, so don’t get too crazy with this.
The catch? As an employer, the S-Corporation has to pay unemployment taxes. The exact rate varies from state to state, but the federal minimum is about $450 per year if your annual income is at least $7,000. However, as both the employer and employee, it is very difficult for me to actually “lay myself off” and claim unemployment benefits. So this fact cuts slightly into potential tax savings.
* I actually used LegalZoom to file my incorporation papers, but right now their competitor MyCorporation is still offering free LLC or corporation filing with promo code MYFREE (same thing costs $139 at LegalZoom). You still have to pay the registration fees charged by your state.
There are many forms of capital. Besides the usual definition of business capital (money), there is physical capital (a car, house, or other useful tool), human capital (your skills and education), and also social capital. According to Wikipedia, this describes the value held within our relationships with other individuals and larger social networks.
One of the books I am currently reading is Simple Prosperity by David Wann (co-author of Affluenza). Inside, there is a nice quote about social capital:
It is inevitable that our society will once again give higher priority to belonging and lower priority to belongings.
Look at the results of a study by the National Science Foundation, which found that one-fourth of all Americans say that they have no one that they can discuss personal problems with. Not one person. This number has doubled since 1985. One in 32 people is either in prison or on parole. If our ultimate goal is to be happy and fulfilled, then this can’t be a good trend.
Sociologist Robert Putnam believes the following are indicators of social capital:
It has been argued that growing social capital can keep you healthy, make schools more productive, reduce crime, and even raise home prices in a neighborhood. Perhaps the best thing about social capital is that “the more you spend, the more you have”.
My sister and brother in law just had a child. So, instead of heading to eRollover to check out the college funding data, they called me instead about 529 College Savings Plans. After chastising them for not thinking of my website, I briefly explained how it works, and why a 529 Plan is the best route to go these days.
The prospect of paying for a college education for yourself or your children is a daunting consideration. Continually rising costs mean people should carefully research grants and scholarships and consider saving money in a tax-free savings plan, such as the 529 College Choice Savings Plan.
It is a fact that the cost of sending your child to college is rising at a greater rate than other things. Not to mention, your investments probably aren’t doing so great right now due to the economic slowdown. Many wonder what to do. This question can be answered by looking at what stage of life your future college student now is in.
If you have a young child, begin by putting money into a 529 college savings plan. This money will grow tax-free, and as long as the money is used for qualified college expenses, it will come out tax-free, too.
If you’re a year or more away from having to pay college costs, the 529 college savings plan still is probably the best route to go. This plan has various enrollment date portfolios that range from a blended mix of funds proportionately allocated from a conservative cash and bond position to an aggressive all equity/ stock position.
For example, if the student is entering college 10 years from now, you could allocate contributions to the moderately aggressive Enrollment 2019 Portfolio. Likewise, if college entry is next year, the conservative Enrollment 2010 Portfolio should be the considered funding vehicle. Plus, households that contribute to the 529 College Choice Savings Plan receive a 20 percent tax credit on up to $5,000 of annual contributions. Because there are many variables that may affect a college fundraising effort, a financial and tax adviser should be consulted.
Keep in mind, another benefit of a 529 Plan is that it is not “use it or loose it” money. If your child turns out to not the college type, then these funds can either be transferred to another sibling. Or, lets say that you have money left over after the proud graduate has gone into the working world. You can even get more creative.
Consider going back to school yourself. Or, that culinary class in Venice, Italy lasts for 6 weeks, and you have do have room and board as well……don’t you?
The economy stinks right now. Lots of people are losing their jobs. If you are one of them, should you start your own business? Only you can make that decision.
That said, today’s Houston Chronicle offered 9 tips for starting your own business (sorry, no link for these tips) that I would like to share with you (along with my thoughts on each one). All of these are awesome tips.
1. Identify your talents. What are you good at? Don’t know? Ask your friends and family? Take some self-assessment tests.
2. Consult with colleagues. BE CAREFUL with this one. If you have a good idea, you might be picky with who you share it with.
3. Research, research, and more research. Before you jump off the deep end, make sure you know how deep it is.
4. Know your money. Better have some up-to-date financial statements. A budget and net worth statement will help you get a good idea of where you are starting from.
5. Know yourself. In my opinion, this goes with the first tip.
6. Keep records. Make record-keeping a habit. You’ll need them for taxes and other financial decisions.
7. Talk about lifestyle changes. Before you take the plunge, make sure everyone in your family is on the same page. Nobody likes nasty surprises. Everyone in the family needs to know in advance what the outcome could be and the sacrifices that may be required.
8. Find necessary resources. Financing? Employees? Equipment? Suppliers? Where are you going to get the necessary resources?
9. Write down why you decided to become an entrepreneur before you start a business. This one made me laugh when I read it but it is SO TRUE! It’s kind of like the investment policy statement that you should refer back to when times are tough. Writing down why you are doing what you are doing will help you get through the hard times and help you stay focused during the good times.
According to the Chronicle article, these tips were provided by Score.org.
I received the following email this morning from an AFM reader:
Hello,
I read your blog (and a few other financial blogs) mostly every day. I read a lot about the importance of keeping a liquid emergency fund for about 6-months worth of expenses. What I have not heard however, is what basis that 6-months is calculated on.
1) Do you include any employment insurance benefits as a reduction in the amount required?
2) Do you use your regular expenses as a guide for spending? Or can you take credit for some reduction in discretionary spending?Just looking for some opinions / guidance as I’m fairly new out of university and think it is important to have some level of financial stability. Thanks!
Brandon
First off, the “rule of thumb” is three to six months of living expenses. Where and how they came up with that number I’m not sure.
1) Do you include any employment insurance benefits as a reduction in the amount required?
As far as I can tell, the “rule of thumb” does not take into account unemployment benefits. So, unemployment benefits would reduce the amount necessary in your emergency fund. However, keep in mind that in addition to providing your day-to-day income needs, your emergency fund will also need to provide a cushion for unexpected needs that will pop up (car repairs, plumbing problems,…). So, I would look at unemployment benefits as just that: a benefit.
2) Do you use your regular expenses as a guide for spending? Or can you take credit for some reduction in discretionary spending?
During a period of unemployment, you would be advised to cut out all unnecessary expenses. Afterall, you don’t know how long you’re going to be unemployed. Plan your emergency fund need on a reasonable budget to give yourself some leeway during a period of unemployment. Some needs will be reduced while others may pop up. For example, you may need to buy a new suit (if you don’t already own one) in order to go on job interviews.
I think the main thing to keep in mind when it comes to emergency funds is to HAVE ONE! Too many people have nothing set aside and have nothing to fall back on in times of need.
One last thing: I would avoid using credit cards if at all possible. Charging up your credit cards and then not being able to pay them back would be devastating to your financial situation as well as your credit score.
TO A MAN, the majority of the world’s successful investors adopt an identifiably clear gameplan. This involves firstly to identify the businesses that can generate above-average profits; then wait until the shares of those companies trade for less than their intrinsic value before buying in. Finally, hold on to these shares long enough until […]
Paypal is the dominant payment processor on the internet today. It is hard to go just two sites now without finding someone who accepts this as a form of payment, it has made buying things dangerously easy! So how do you flip the coin and make money using PayPal?
There are a few different options, let’s […]