January 2011 - Posts

• Smart business owners know where to draw the line when it comes to financials

  Many business owners make the same mistakes when they are just starting out. One of the biggest mistakes they make is not keeping their business and personal finances separate. It’s usually a legal requirement for business owners to keep separate accounts for business and personal use, but there are those that blur the line – and this can lead to a world of trouble. Some owners think that because they are sole proprietors, they don’t have to keep separate accounts. But what happens when you find your personal cash flow is lacking? Often times, business owners going through a financial rough patch personally will dip into their business funds. This blurs the line as to what is okay to claim as a business expense on tax returns. Smart business owners will work to be sure they handle their finances in a much more meticulous fashion, not only keeping the accounts separate on paper, but in use as well. If you must borrow money from your business to make ends meet, be sure you don’t show it on your taxes, and that you pay it back as soon as possible. You don’t want to ruin good relationships with vendors who expect payment upon delivery ­– just because you needed help to make your house payment. Businessmen and women should learn to play by the rules if they don’t want to run into trouble, particularly with the IRS. Owners should take the time to discuss best practices with a tax attorney and an accountant, to be sure there are no uncertainties. Business owners have enough issues to worry about, particularly if they’re just getting their businesses off the ground. No one wants the IRS breathing down his back, so make sure that you’re careful not to muddy the waters of personal and business credit. Posted Jan 27 2011, 10:56 AM by moneycoach with no comments Filed under: personal finance, business finance, how to manage your business

• Check your credit report – and keep the big picture in focus

  The commercials tell you to be sure and get your free credit report – but they don’t tell you how to decipher it. A regular review of your credit report is vital to maintaining a solid credit rating and guarding against identity theft. Typically, a credit report contains personal identity information, a credit summary, account information, inquiries, collections and public records. The three credit reporting agencies – Equifax, Trans-Union and Experian – collect information to show whether or not you’re a good credit risk. But keeping an eye on just one credit report won’t help you much. It’s a good idea to review all three agencies’ reports at least once a year. Federal law requires each of the three bureaus to provide you with a free copy of your report each year. Once you’ve obtained yours, check the personal information to be sure it’s correct. Be sure that someone else’s information isn’t mixed in with yours. The credit summary includes the name of creditors, the type of credit, and the amount of the highest balance on each account. It also shows whether the account is open or closed. Creditors look at how you’ve made payments on the account. A large amount of past due flags with knock your debt-to-equity ratio out of line and hammer your credit rating. The section on public records will include bankruptcies, liens and judgments. This information remains on your credit report for seven to 10 years. In addition, your credit report will show every inquiry that’s been made into your credit history. Your credit score is based on your payment history, outstanding debt, length of time you’ve had credit, types of credit you have and the number of inquiries. Remember: checking your credit report will not damage your credit score. But not checking it could.  Posted Jan 20 2011, 10:52 AM by moneycoach with no comments Filed under: personal finance, credit history, free credit report, credit report

• Map out a successful financial future for yourself

  Even if you have a legitimate need for a payday loan, you may want to consider these suggestions from the Federal Deposit Insurance Corporation for strategies to save when you need to borrow money. First of all, be sure to pay your bills on time. Payday advance loans can carry a hefty penalty for late payments, and for rolling them over to another pay period. If you pay other bills late, generally speaking, you incur late fees that increase your debt. In addition, you could end up with a higher interest rate and a lower credit score, which impacts your ability to obtain new credit. Always pay more than the minimum required. Most credit card statements who you what a difference it can make to up your payment by even a few dollars above the minimum. Making only the minimum payment will keep you in debt longer. Fast payday loans are sometimes the only option for people with maxed-out credit cards. Do your best to keep some available credit on one card for emergencies. You shouldn’t carry too many credit cards. Credit card offers are sometimes hard to resist, but if you have a lot of credit cards, look into transferring balances to the one with the lowest interest rate. You may also want to consider cutting up the cards you want to pay in full so you’re not tempted to use them. Review your credit card statements, and make sure all the charges are legitimate. Check to see how much you are paying in interest, then contact your credit card issuer to see if they can lower your rate, particularly if your credit score has improved. Be sure to keep an eye on your credit report. You can qualify for additional credit at lower interest rates, and you’ll know you’ve qualified by checking your credit report. Also look for mistakes and report them immediately. If you rely on payday loans because you have too much debt and you can’t pay your bills, it’s time to create a budget and find places to reduce your spending so you can pay down your debt. Building an emergency fund should be your first priority so you can stop relying on credit for unexpected expenses. Making small changes to reduce your dependence on payday loans and credit cards can start you on the road to financial success. Posted Jan 13 2011, 02:20 PM by moneycoach with no comments Filed under: personal finance, financial success, personal financial success

• Give to charity – but do your research first

  Tax season will soon be upon us, so if you haven’t made your annual tax-deductible contributions to charity, you’d better get cracking. Or perhaps you need to plan your charitable giving for the year. If you’re thinking this way, it’s a good thing, because charities are reporting an increase in donations, but not enough to meet heightened demand for their services. So if you want to contribute to an organization that will put your money to good use, you should start by doing your research. The Internet has made it so easy to get information about the finances of nonprofit organizations. But there’s no way to gauge whether an organization is effectively using donor funds, unfortunately.  One of the best-known charity watchdogs, www.charitynavigator.org, is revamping its rating system, which currently relies on financial ratios, like the overall budget amount spent on programs vs. administrative costs. Critics of this say such ratings penalize charities which want to invest money to make their programs more effective. Aside from that, if you only focus on a charity’s overhead costs, you may miss some worthwhile organizations.  In addition to Charity Navigator, you can also check with the Better Business Bureau’s Wise Giving Alliance at give.org, the American Institute of Philanthropy at charitywatch.org or GiveWell at givewell.org. You should also check the charity’s Web site, and look for evidence of widespread results, not just heartwarming stories. You should also check the charity’s tax status. You can do so at irs.gov, which provides a list of charities and nonprofits that are eligible for tax deductible contributions. But this tax season holds a new wrinkle: many small nonprofits lost their tax exempt status this year because they missed the deadline to file an annual return with the IRS. This means donations made to those organizations this year will not be tax deductible.  But don’t discount those. As long as you know they’re doing good work, you should continue to support it.  You can find a list nonprofits at risk of losing their tax exempt status at irs.gov. Posted Jan 06 2011, 01:11 PM by moneycoach with no comments Filed under: charitable giving, bad charities, charities, know before you give, charity scams