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Follow our 200K journey to get out of debt! We share our best money tips to get out of debt and build wealth.

Sunday, November 30, 2008

Tax Tips for Business Owners



Tax time is right around the corner. Although I am not a CPA or tax adviser here are some tips that I have received from my CPA's over the years.

1. If you have an S-Corporation, remember you must issue at least a yearly paycheck for a reasonable wage for the stockholders of the corporation. Check with your CPA on this.

2. Take odometer readings on all business vehicles at year end to determine total miles used per business vehicle.

3. Keep a timely diary of your business activities during the year. This is essential for IRS documentation.

4. Record your monthly transactions on a computerized system. The best selling and most user friendly software is Quick Books Pro.

5. If you are going to buy a business asset in the next six months, buy before December 31, 2008. You can write off these assets, up to $250,000 depending on your net income. This increased deduction may be lowered in 2009.

6. On ALL expense receipts, you should write down the classic IRS questions, such as: Who, What, Where and Why? In an IRS audit, the proof of payment only is not enough documentation to support the expense.

7. All cash or non cash charitable contributions must be proven by receipt, cancelled check, or other proof of donation. The amount of detail required on a receipt for it to qualify as proof of donation increases as the value of the donation goes up.

8. If you have inventory in your business, be sure to have an accurate count as of December 31, 2008.

9. Temporarily transfer money from your personal bank account to your business to increase the current assets of your business so that your financial statements look better for financial presentation purposes. This goes on your books as a loan from you to your business that is repaid when you transfer the money back in 2009.

10. If you are a cash basis taxpayer, it is suggested prepaying 2008 expenses that will not be invoiced until 2009, assuming you have enough money in your bank.

11. If you are an accrual basis taxpayer, wait until January to pay your bills. The expenses can be taken in 2008 when you were billed, but the money stays in your bank account. This helps the balances of your financial statements for December 31, 2008.

12. If you have minor children living in your home, you could issue a paycheck to them form your proprietorship, write it off as an expense, and the child may pay little or no income taxes. The work the child preforms for the proprietorship must be documented in detail and correspond with the amount paid. Check with your CPA on this as there are payroll tax reports required to do this.

13. If you expect to be paid large amounts of income at the end of the year, please see your tax advisor so they can advise you on how to handle this income in order to decrease the tax impact.

15. If need to set up a pension plan or want to a second opinion about your over all investment portfolio contact you CPA.

Again I am not a tax advisor or CPA, Please check with them on all these suggestions. This is a reminder and guideline for preparing for the upcoming tax season.

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Posted by John Sholtz at 10:45 AM 0 comments

Saturday, November 29, 2008

Holiday Shopping Tips from CreditCards.com

Here are some great tips from creditcards.com to keep your credit card spending down this holiday season.



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Posted by John Sholtz at 3:55 PM 0 comments

Thursday, November 27, 2008

"All This Has Happened Before and It Will Happen Again," Part 3


Part 3 of our discussion of bubbles and crashes. "This has all happened before and it will happen again," is a re-occurring theme in the re-imagined version of the TV series Battlestar Galactica, now in it's fourth and final season. We continue our discussion of history repeating itself in regards to bubbles and crashes.

In 1711 in the United Kingdom stocks in The South Sea Company were traded for 1,000 British pounds (unadjusted for inflation) and then were reduced to nothing in the later half of 1720. A mass amount of money was lost.

The Eighteenth century was a time of great prosperity for the British. A large section of the population had money to invest and were looking for places to put their money. People had no problem investing in the South Sea Company when it purchased the rights to all trade in the South Sea.

The first issue of stock couldn't quench the thirst of the hardcore speculators, let alone the run of the mill investor who were assured of the company's coming dominance. People kept buying the expensive stock as soon as it was offered. It didn't matter to anyone the company was being lead by inexperienced management. The management was lead by however experienced public relation directors, who set up extravagant quarters. Once people saw the wealth the South Sea Company was generating they couldn't keep their hands off the stock.

The success that spread through the country and British pride led the people to beleive British companies could not fail. Blinded by their growing wealth, the people did not notice that the South Sea Company was run to poorly to break even. Shipments would be misdirected only to be left decaying in some foreign port. But people just kept buying stock. Soon demand came for more up in coming companies. IPO's were popping up everywhere. There were companies promising to reclaim sunshine from vegetables and to build floating mansions to expand England's land mass. People kept buying and buying.

Eventually the management of the South Sea Company realized their stock was nowhere the value of the company. So they sold their shares of the stock in the company hoping no one would notice. But like all bad news, everyone likes bad news, word spread, and panic selling ensued.

A complete crash which would lead to banks failing as well was avoided by the British Government. The governments prominent economic position helped stabilize the banking industry. The British Government outlawed the issuance of stock certificates. This law was not repealed until 1825. Over a hundred years later.

Joseph Spence wrote that Lord Randor reported to him "When Sir Isaac Newton was asked about the continuance of the rising South Sea Company stock...he responded "that he could not calculate the madness of people." Newton's neice Catherine Conduiit that he participated and lost twenty thousand pounds. All he didn't like to hear this much. This was a fortune at the time but it is unclear whether it was a monetary loss or an opportunity cost loss.

Next up: The Florida Real Estate Craze.

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Posted by John Sholtz at 10:03 AM 0 comments

Monday, November 24, 2008

Every Breathe You Take...Ben Bernanke

I remembered this parody today of the song by The Police "Every Breathe You Take." It was created by Columbia Business School students and features Columbia's Business School's Dean Glenn Hubbard singing about wanting Ben Bernanke's position as Federal Reserve Chairman.

The ironic thing is everything he said that would happen when Bernanke and crew began making policies did happen exactly. I found it interesting and had to share. Let us know what you think.



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Posted by John Sholtz at 10:38 PM 0 comments

Sunday, November 23, 2008

Suze Orman on the Financial Crisis

Here is what Suze Orman has to say about the financial crisis. All of her advice is what we have been saying on many of our blog entries. Everything will be OK. Don't panic it only makes things worse.



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Posted by John Sholtz at 7:37 PM 0 comments

Thursday, November 20, 2008

Financial Elite's 100th Post on Blogger

Financial Elite is celebrating it's 100Th blog post. With all the bad press going on right now in regards to our economy and since this is the month for being thankful, I thought I would write about what I am thankful for.

I am thankful for my businesses. I am thankful for them putting food on the table. I am thankful for my beautiful wife. I am thankful for my car. I am thankful for our beautiful home and former home that is now our rental property. I am thankful for being able to celebrate Thanksgiving with my family and friends next week. I am thankful for Google and for creating Blogger so I can write my blogs. I am thankful to Google again for creating AdSense, which generates another stream of income for us. I am thankful for the clothes I have to wear. I am thankful my health. I am thankful for the air that I breathe. I am thankful for my customers. I am thankful for my readers. I am thankful for etc, etc, etc.

I am thankful for so many things that I could go on forever. Let's stop thinking of all the doom and gloom out there and be thankful for what we do have. Come on people let's remember what we are thankful for and share it with us. Let's hear from you.

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Posted by John Sholtz at 11:36 PM 0 comments

Monday, November 17, 2008

All This Has Happened Before and it Will Happen Again..Part 2


Part 2 of our discussion of bubbles and crashes. "This has all happened before and it will happen again," is a re-occurring theme in the re-imagined version of the TV series Battlestar Galactica, now in it's fourth and final season. We continue part 2of our discussion of history repeating itself in regards to bubbles and crashes.

The Tulip Mania is the earliest example in history of a bubble and crash. At the time the contract prices for tulip bulbs reached extraordinary prices and then experienced a sudden collapse. At the peak of the tulip bulb mania in February 1637 tulip contracts sold for more than 20 times the annual income of a skilled craftsman.It is generally considered the first recorded speculative bubble. The term "tulip mania" is often used metaphorically as an economic bubble.

At the peak of the market , a person could trade one tulip for the price of an entire estate and at the bottom the price of a common onion. It goes without saying, but the prices were not an accurate reflection of the value of a tulip bulb. As it happens in many speculative bubbles, some people decide to sell and receive their profits. A domino effect eventually takes form and prices become lower and lower as everyone tries to sell when not many are buying. Prices begin to dive, which then causes a sense of panic and sell regardless of losses.

When the tulip contracts were no longer being honored people being to realize they traded their homes for a flower.Panic turns into pandemonium and the crash is under way. The government tried to step in and honor the contracts at 10% of the face value, but then the market crashed even further. This made restitution impossible. No one escaped the crash unscathed. Even people who heavily profited by taking their profits and running suffered from the depression that ensued after the crash.

This all sounds familiar to me. The only thing is this time we are experiencing this with homes. Our Government has developed a 700 Billion bailout plan, but are things going to get worse just like they did with the Tulip crash? Let's hope not.

Up next: The South Sea Crash.

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Posted by John Sholtz at 8:45 PM 0 comments

Friday, November 14, 2008

Financial Tip for Couples

A great News Years goal for next year is to start an emergency fund. You may never know when you will need additional cash. Car or home repairs, medical expenses or even a job layoff may arise when you will need extra money unexpectedly. Try to have three to six months of living expenses in a readily accessible savings or money market account. You might not be able to build this over night, but the sooner you start the better. Remember baby steps. A little at a time will really add up. You can do it!

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Posted by John Sholtz at 11:33 PM 0 comments

Sunday, November 9, 2008

All of this has happened before and it will happen again. Part 1

"All of this has happened before and it will happen again." Is dialog from the re-imangined version of my favorite show Battlestar Galactica, which is in the middle of it's fourth and final season. Can't wait until it returns January 16, 2009.

The phrase, first spoken by the Cylon known as Leoben, has become a re-occurring theme throughout the show as sort of a religious conitation. It is not quite clear as of it's meaning yet, but I suspect it will be revealed by the shows finale. The meaning for me is that history repeats itself.

History does for sure repeat itself. Maybe not in the same exact circumstance, but in similar patterns. What has happened to the economy after the mortgage meltdown has happened before and it will happen again. Similar instances have taken place throughout history and undoubtly will happen again. I am sure that some new craze will be on the horizon soon.

We will be taking a look at all the bubbles and crashes through the years. Some that were not so long ago that we have quickly forgotten. I will tell my own story as well, and reflect on how history seems to come full circle. Mainly because of us repeating the same patterns. "All this has happened before and it will happen again." is spoken by the Cylons, who are robots, but who indeed is more human. I guess being human can destine us to repeat the same things over and over again and not learn from our mistakes.

Here is what we will be looking at:

1. The Tulip and Bulb Craze.

2. The South Sea Bubble.

3. The Florida Real Estate Craze.

4. The Great Depression.

5. The Crash of 1987.

6. The Asian Crisis.

7. The Dotcom Crash.

Part 2 The Tulip and Bulb Craze.

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Posted by John Sholtz at 11:17 AM 0 comments

Sunday, November 2, 2008

Desperate Times...More Suicides.

More and more stories keep popping up of people committing suicide over losing their home. I discussed several instances of these tragic events a couple of weeks ago.

My biggest fear is we start seeing copy cats and more people doing the same. The newest story I read said that on the morning she realized her husband and son would learn the family was losing their house, Carlene Ballderama faxed a note to the mortgage company, then went to the basement and shot herself. She wrote on the suicide note to the mortgage company "I hope you're more compassionate with my husband than you were with me."

There is help out their for everyone. Please watch these warning signs if you feel loved ones are getting desperate about their finances.

-Beware of them being lethargic or withdrawn. If they make comments about being worthless or if they start gibing possessions away. Offer them to get help even if it's uncomfortable to do so.

-If you are feeling anxious, talk to someone. Private burdens weigh more than shared ones.

-Discuss practical options.

-Stick to normal routines, including regular sleeping and eating patterns.

Please know that there are resources available 24/7. If you are feeling desperate please seek help immediately. Your life is worth more than a stupid house. In a crisis, you can call the National Suicide Prevention Lifeline at 1-800-273-TALK (8255); Homeowners HOPE, a national hot line for foreclosures, at 1-888-995-HOPE (4673).

Additional help is available from the National Foundation for Credit Counseling at 1-866-481-6322. The foundation can offer advice on debt counseling and make referrals to other sources.

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Posted by John Sholtz at 1:47 PM 0 comments

Saturday, November 1, 2008

Are You Having Your Own Financial Crisis?

Never mind the $700 billion bailout Band-Aid for the financial crisis we are experiencing as a country. What king of first aid is there for your personal finances?

According to the Federal Reserves consumer credit report released recently consumer debt is now up to $2.58 trillion. Debt keeps mounting as many Americans struggle to pay their bills.

How bad are things for you? Bill Hardekopf, CEO of LowCards.com and author of "The Credit Card Guidebook", says the first step is admitting you have a problem.

Much like alcoholics having to admit they have a drinking problem, as part of their 10 step program, people in debt have to do the same thing. "It's important to make sure that you recognize and admit that you have a debt problem. Then you can face it head on," Hardekopf says.

Here's what financial experts often offer as steps to help get out of personal debt and tum your financial ship around.

1. Look at the big picture. Before fixing your finances, you must first take account of your complete financial picture. Compile your bills and outstanding debts, including your credit cards, mortgages, student loans, auto loans, personal loans and bank loans, and figure out exactly what you owe on each account. List the creditor, monthly payment, outstanding balance, interest rate, due date and credit limit for each.

2. Pay important bills first. If you have to make choices about what to pay, prioritize the bills that are necessary to cover health, shelter, basic food and transportation to work or school.

3. Call your creditors. They may be able to help you work out a payment plan, lower your rate, or lower your monthly payment, or even waive late fees. If they won't help you shop around for a credit card with a lower rate.

4. Transfer balances. If you have a high interest rates on your cards consider transferring those balances to a card with a lower interest rate. Some cards will offer 0% for twelve months for balance transfers.

5. Quit the cards. If you are feeling like you are drowning in credit card debt, stop using credit cards altogether. Switching to cash or debit cards will help keep balances under control.

6. Prioritize paying down debt. Start with the cards that have the highest interest rates.

7. Bulk up your payments. Pay more than the minimum on your loans and credit cards. As each card gets paid off take the amount you were paying on the card you just paid off and add that that amount to the payment on the next card your paying. If you keep doing this from one card to the next you will pay each card off faster and faster.

8. Check your credit report for mistakes. For your free credit report go to annualcreditreport.com or call 877-322-8228.

9. Get help. If paying down debt and cutting expenses doesn't seem feasible, contact a reputable debt counselor for help. The National Foundation of Credit Counseling (nfcc.org) is a good place to start.

10. Start saving. Nothing you do financially will help you sleep better at night than knowing that you have money in the bank for a rainy day. Even a little bit at time will really add up.

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Posted by John Sholtz at 4:46 PM 0 comments
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