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Money Coach

January 2010 - Posts

  • Starting A Small Business

    I recently completed writing an article about creating a small business and the pros and cons of working for yourself. I was proud of the final product – it was, I believe a fairly complete exposition of the potential rewards and common pitfalls of striking out on one's own and joining the ranks of the self-employed. When the article was complete, it offered many helpful suggestions for, not only evaluating the choice between traditional employment and self-employment, but also listed suggestions and resources that can be used to help make your small business venture  a success. I was pleased with the final product and, since my wife and I are opening a small store next month, looking forward to using some of my own advice!

    That is, until yesterday.

    Yesterday, my wife asked one simple question: “When should I start feeling scared?”

    You see, yesterday we made an appointment with the fellow who will be the landlord of the business space we are leasing. Up until now, all of the planning and deciding has been mainly theoretical – when we keep the appointment we made, we will have actually spent money, signed a year lease and set a target for opening the store. Now I have a name for that niggling, uncomfortable feeling I have had for the past month.


    When writing that well written, carefully researched, impeccably crafted article – chock full of advice and suggested resources and internet links to help the novice entrepreneur succeed, I neglected one obvious aspect of the problem. Fear. When jumping into the unknown, it is not at all uncommon to feel nervous about the future. Starting your own business can be a great risk, but one with great rewards if successful. I know this – in my head, intellectually.

    So, here are a few things I didn't even realize that I left out of that earlier article. Five steps you (and I) can take to combat the fear inherent in starting a new business venture:

    1. Write down your goals. Remember why you are starting a business of your own. Business owners who write down their goals are far more likely to achieve them. Writing down your goals forces you to visualize them, and prepares you for the hard work ahead.
    2. Make a list of the tasks you need to accomplish. Give yourself reasonable time to accomplish each, then, cross them out as you get each done. The tangible progress toward your ultimate goal will help build your confidence and self-belief.
    3. Educate yourself. For every issue regarding entrepreneurship and business, check out books, read articles from magazines and on the Internet and interview others that have started their own business. Having answers is always better than questions.
    4. Manage your stress. What do you do to relax? Make time for that weekly tennis game, chess match, day at the park with your kids, or whatever … don't allow the stress to take over and eliminate your ability to cope with it. Give yourself an end time each day – when its time to stop, stop. Once you leave, go home and be with your family and friends.
    5. Planning, planning, planning. Make a budget and stick to it – but update it weekly so you take into account anything that changes as you work toward your startup date.

    So – the real answer to her question: Now. Now is a good time to start feeling scared.

    Now the plans are real. Actual money is being spent. Feeling scared is certainly appropriate. Fear however, is not an impediment to business success. Fear, properly managed can motivate, so long as it does not paralyze. Use that fear – use it to keep focused on your goals … and you will almost certainly meet them.


    Posted Jan 31 2010, 11:45 PM by moneycoach with no comments
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  • I wonder what Joe the Plumber thought of that?

    He didn't mention “Joe the Plumber!”

    “Joe the Plumber,” whose actual name is Samuel Joseph Wurzelbacher, gained attention during the presidential campaign after asking Democratic candidate Barack Obama about his small business tax policy during a campaign stop in Ohio. Although John McCain made the story of "Joe the Plumber" a constant and not always accurate metaphor for middle-class Americans and small business tax policy, the question of how exactly Obama would craft his tax policies remained throughout the campaign and into the first year of his administration.

    He answered that question last night.

    Since the end of the Second World War, the unparalleled expansion of the United States economy has, in part, been fueled by small business. In today's economy, small business are vital. According to the Small Business Administration, small businesses employ just over half of all private sector employees and pay approximately 44% of the total payroll in the U.S. Small businesses have generated 64 percent of net new jobs over the past 15 years! They generate billions of dollars of sales in just the U.S. economy alone. Historically, one of the many reasons for the success of small business in the U.S. is the relatively easy availability of credit. Over the past two years, the financial crisis in the United States and worldwide, fueled by uncertainty over the housing market and the scale of the “toxic asset” problem faced by banks and other lenders, has caused the formerly easy availability of credit to dry up. As a result businesses in general and small businesses especially have struggled, many closing their doors forever or laying off critical employees.

    Among the many things that Obama proposed last night during his first official State of the Union address to Congress, is to stimulate the American economy and combat the ten percent unemployment rate by working to help those entrepreneurs who start small businesses and to assist existing small business to more easily raise capital, hire new employees and invest in the future. Specifically, President Obama proposed:

    To take up to “ .. $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.”

    “A new small business tax credit – one that will go to over one million small businesses who hire new workers or raise wages.”

    To “ … eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.”

    Obama also praised the unyielding spirit of the American people who, in the midst of the most difficult recession since the 1930s, remain “ … busy … starting businesses … going back to school … and helping their neighbors.” He spoke of their “stubborn resilience in the face of adversity,” which has long been a trait of the American character. He asserted that “ … it’s time the American people get a government that matches their decency; that embodies their strength.”

    He was right.

    The fact is, a new study by the Ewing Marion Kauffman Foundation and reported by the Wall Street Journal shows that the number of newly created start-ups remains steady throughout an economic cycle, and is not affected significantly by recessions (or economic booms as well). The  study analyzed data from the U.S. Census Bureau, which tracked the annual number of new businesses from 1977 to 2005. Over the almost-three decades examined, business creation remained consistent, fluctuating by only 3 - 6% each year. It appears from the data examined that recessions and expansions do not greatly influence entrepreneurs' decisions to form new companies.

    Obama's tax proposals for small business can only help. Even Republicans, guilty of an obstructionist legislative stance during the first year of the administration, will have a difficult time opposing these initiatives, given their historic support for business and party doctrine that government investment in business through tax cuts fuels tax revenue and jobs.

    Even Joe the Plumber should approve!

    Posted Jan 28 2010, 08:34 AM by moneycoach with no comments
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  • Tax Changes For 2009

    In this world nothing can be said to be certain, except death and taxes, wrote Benjamin Franklin in 1789. Well, its tax time again – time to file our annual reports on how we did – financially in 2009. And of course, to pay our share! In order to minimize the amount that you have to pay this year, here are some of the tax changes that may affect you when you file.

    According to the Internal Revenue Service, approximately two-thirds of all taxpayers claim the standard deduction. The standard deduction has increased over 2008. If you are single or married filing separately, the deduction has increased from $5,450 to $5,700. For married taxpayers filing jointly, the increase is from $10,900 to $11,400. The deduction for “head of household” has risen from $8,000 to $8,350.

    The amount that you can deduct for each dependent exemption you can claim on your federal income taxes has increased from $3,500 last year to $3,650 for the 2009 tax year.  

    The IRS has recognized that in has become increasingly more expensive to drive a car. For 2009, the standard mileage deduction has increased. For qualified business miles driven in 2009, you may deduct 55.0 cents per mile (an increase of 4.5 cents per mile over 2008). For miles driven for charitable purposes, the deductible mileage rate is 14 cents per mile and for medical travel, the deductible rate is 24.0 cents per mile. As you can probably imagine, this deduction is one that is often abused. If you do claim this deduction, be sure to keep a detailed log of your mileage. If you claim a large deduction, there is a very good chance that the IRS may flag it for review or audit, especially if there is a large change from 2008.

    The earned income tax credit (EIC)for 2009 for low and middle-income workers and working families has risen to $5,028, an increase from the 2008 deduction of $4,824. The most you can earn in order to qualify for the earned income tax credit has been increased to $43,415 over last years limit of $41,646. Additionally, the EIC has been increased to allow a maximum of three children. This is a fully refundable credit, meaning that the full amount of the tax credit is payable to you, even if you do not have tax liability to offset.

    The maximum Hope education credit has been increased to $2,500. The increased credit has been renamed the American Opportunity Credit and part of it is refundable. The credit is worth $2500 for qualifying education expenses. Qualifying expenses include tuition, fees, and required materials. The credit does not include computer hardware or software unless they are specifically required by your teacher or institution. 40% of the credit is refundable, which means you still get a tax refund even if your tax liability is zero.

    The popular first time homebuyer tax credit has been extended and expanded. If you purchased a primary residence in 2009 before December 1, 2009, and are a “first-time” homebuyer, you can qualify for a tax credit equal to 10% of up to $80,000 of the purchase price. To be eligible, you must not have owned a residence in the United States in the previous three years. The program was expanded in November 2009 to include existing homeowners, meaning those who have lived in the same principal residence for any five-consecutive-year period during the past eight years. Homeowners are eligible for a credit of up to $6,500 if they buy a replacement home to use as their principal residence. Homeowners are not required to sell their current home, but the newly purchased home must become their principal residence. In addition, income limits were expanded from the earlier version of the credit. Homebuyers who file as single or head-of-household taxpayers can claim the full credit if their modified adjusted gross income (MAGI) is less than $125,000. For married couples filing a joint return, the combined income limit is $225,000. Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit. The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI over $245,000. Also, homes costing more than $800,000 are not eligible for the credit. The tax credit is refundable.

    If you purchased a new car in 2009, you can deduct the sales tax on the purchase, even if you aren't itemizing your deductions. The Federal Sales Tax Deduction applies to new cars, motor homes, light trucks and motorcycles purchased after February 16, 2009 and before January 1, 2010. Sales tax paid on the first $49,500 may be deducted. This deduction may be taken if you have an adjusted gross income of less than $250,000 for married couples or less than $125,000 if you are single.

    There was good news for you in 2009 if you are saving for retirement. Retirement contribution limits for 401k as well as 403b plans increased in 2009 from $15,500 to $16,500.  Catch up contributions also increased by $500 to $5,500 in 2009.  Contribution limits to SIMPLE retirement plans also increased by $1,000 to $11,500, while the catch up contributions remained unchanged at $2,500. The income limits for those willing to contribute to traditional IRAs as well as Roth IRA plans increased again in 2009.  The income phase-out threshold for Roth IRAs now starts at $166,000 for those filing joint returns, and $105,000 for taxpayers with a filing status of single or head of household. Lastly, if you're covered by a retirement plan at work and you are considering contributing to a tax-deductible traditional IRA, then the income phase-out limits start at $89,000 for joint filers, and increases to $55,000 for those with a filing status of single or head of household.

    For additional information regarding these and other tax law changes for 2009, check out IRS Publication 17. It's free, and can be found online at

    Posted Jan 10 2010, 10:05 PM by moneycoach with no comments
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