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Dig Your Small Business Rut



Many small business owners are either all over the map in their business activities or trapped in a routine based on what they love to do. Neither approach is the best way to achieve your business goals or enjoy a high level of personal satisfaction. Surprisingly enough, the solution can be found in creating a productive rut and sticking with to it day in and day out. What areas of your small home based business can most benefit from digging a rut and staying in it?

Time

Time is a daily occurrence. The small business time rut you need to dig and stay in focuses on allocation. How you use your time is very important to your immediate and long-term business success. Are you in the rut of allocating how you will spend your time or what you want a block of time to accomplish? If your time allocation routine is sporadic and not daily you may be wasting not only time but also what you could have accomplished with it. The concept of good days and bad days often stems from poor allocation of daily time. As a small home based business owner you may cherish the idea of working for yourself and doing what you want with your time. But, if you don’t get into the habit of allocating the use of your time on a daily basis the rut you’ll dig may lead nowhere rather than to your ultimate success and profitability.

Money

Tracking the flow of money is an important rut to dig. The idea of a “penny earned is a penny saved” points out the value of keeping track of money. If your small business doesn’t have an easy system for entering and tracking your income sources and expense categories, you may be digging a rut of financial crisis rather then of increasing profitability. All too often, the only time a small business owner knows where they stand with money is at tax time. The idea of knowing exactly where you and your business stand financially is critical. Keep the money rut shallow through daily tracking or it may get so deep you’ll never climb out of it.

Marketing

Constantly developing customers is a great rut to be stuck in. There’s no aspect of your small business more important than creating daily sales results. To mine a river of gold you have to dig every day. For a large percentage of small home based business owners sales is their least favorite activity. Therefore, the activities associated with it are shoveled off to the next day for many days in a row. Before you know it, a huge amount of time has gone by and you’ve dug a financial hole rather than a steady stream of cash flow. Make sure you dig a marketing rut wide enough to accommodate the right number of sales to shore up the sides of your rut so it doesn’t all cave in on you.

Knowledge

What you don’t know could bury your small business. The only way to dig yourself out is to learn something new every day. The knowledge rut is very important. The challenge is one of impact. Learning something new every day on purpose doesn’t always seem like a good use of time because it has no immediate return on investment. When something happens in your small business because you didn’t know enough to prevent it you might say “I wish I’d known more about that”. When you learn something new and don’t use the knowledge immediately, you say “That was a waste of time”. But, the best advice is “Dig the well before you need it”. Dig your knowledge rut daily. It may be the only path out if you get caught in a landslide.

There are certain small business routines that you need to dig at daily. There are other routines you need to fill in and stop digging away at. As a small home based business owner you probably have a good sense of what you do daily that’s leading you nowhere and which ruts you should get stuck in. Time, money, marketing and knowledge are a few good small business ruts to dig daily.

Posted on: December 1st, 2010 Author: admin No Comments »
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Small Business Taxes – Know Your Enemy



This article will guide you through the small business tax maze and describe in details the various tax types your small business may be expose to. Use the article to learn which federal and state taxes you, as the owner of a sole proprietorship, general member in an LLC or officer of an S. Corporation is responsible for.

Federal Income Tax

The Internal Revenue Code (the IRC) is the source for imposing income tax on small businesses. The tax code treats each entity type a little different but in the end the income tax on the business taxable profits is payable by the small business owner. Sole Proprietor has to file schedule C to report business income and expenses and then report the taxable income on form 1040 where he discloses all of his income sources. Member of a partnership or an LLC reports his/her share from the business taxable income on form 1040 and Owner of an S. Corporation does the same. The rates of the federal income tax that a small business owner will pay depend on his/her filing status and residency status. For current tax rates please refer to IRS Publication 17 To register with the IRS you must fill out IRS form SS4 to obtain Employer ID Number (EIN).

State Income Tax

If your business is operating in a state that imposes income tax on business income, you will be liable for that tax in addition and regardless of the federal tax due on the same income. Very few States (Seven to be exact) do not impose income tax and among them are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two others, New Hampshire and Tennessee, tax only dividend and interest income. In general state income tax rates range from the lowest rate of 3% in Illinois to the highest rate of 11% in Hawaii. To register with each State’s Department of Revenue, you must complete the applicable registration forms to obtain State Tax ID Number.

Payroll taxAs soon as your business start hiring part or full time employees, it will be subject to Federal & State tax withholding from the employees’ gross wages (For current Federal Withholding rates please refer to IRS Publication 17 and for the Stare withholding rate, please refer to the State’s Revenue or Finance department), Social Security, also known as FICA (currently at 6.2% of gross wages is the employer’s responsibility and the same amount is the employee’s contributions with cap of $106,800 on gross wages) and Medicare (currently at 1.45% of gross wages is the employer’s part and the same amount is the employee’s contributions), Federal & State income tax withholding (at the rates publishes by the IRS and each State’s department of Revenue), Federal Unemployment, also known as FUTA (currently at a rate of 0.008 of gross wages up to $7,000 per year) and State Unemployment, also known as SUTA, at rates assessed by each State Unemployment Insurance Department. To register with each State, you should complete an employer application with the Department of Revenue and open an account with the State’s Unemployment Insurance Department.

Sales Tax

Sales tax is tax imposed on gross sales made to end users (as appose to resellers who purchase the product for inventory) and has many names: transaction privilege tax, gross receipts tax, general excise tax and more. The tax is imposed by each State, and in many cases includes Base Rates for all States residents and then additional rates that vary by county and city. Rates of sales tax vary by States with few States that impose zero percent tax (such as Delaware, Montana & Oregon) and others that impose rates in excess of 10% (such as Chicago Illinois)

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Posted on: September 16th, 2010 Author: admin No Comments »
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Useful Guide on Selecting a Household Budget Spreadsheet Software



Creating a household budget using the traditional pen-and-paper method has almost become the thing of the past. Today, more and more people are turning to more sophisticated ways to make their budgeting tasks a lot faster and easier. One of the best tools in effectively planning a family budget is a household budget spreadsheet software program, which is widely available on the Internet nowadays.

Choosing the best budget spreadsheet software can be difficult if you have no idea on what you exactly need. If you don’t know the exact features you’re looking for, then the safest bet would be a user-friendly spreadsheet software that can be easily used even by beginners. Look for this quality in a software program for household budgeting to avoid the hassle of using a very complicated program. To know if a household budget spreadsheet software is user-friendly, try several programs online and see which ones are easy enough to use by people with basic budgeting and computer skills. The layout of the spreadsheet should not only be easy to understand, but also be able to present all the necessary information in a glance. It should contain just the right number of graphics and details to avoid confusion for its user.

Another important feature of a household budget spreadsheet program is the flexibility to allow the user to enter all elements of the family budget. It must allow some space for the income sources, expenses, and utilities. That way, you can plan your family’s finances more efficiently.

You can find several home budget spreadsheets with standard add-ons such as calendar, calculator, savings planner, and credit card manager. The spreadsheet software you will use depends on the add-ons that you think are suitable to your budgeting needs.

A spreadsheet software for your household budget can be a valuable tool to avoid problems regarding your family’s finances. Take advantage of this tool to make budgeting a lot easier for you.
Posted on: February 19th, 2010 Author: admin No Comments »
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Budget Planning For Success



What Is a Budget?

The purpose of a budget is to give you control of your own money. With a budget, you actively decide what will be spent, and where your money can best be put to good use. There is nothing like the good feeling you get when you are in control of your money, rather than your activities and expenses controlling you.

What Is a Budget Plan?

A budget plan is a plan where you formally draw up a plan for expenditures for a given period of time, usually one year. The budget process includes all income sources and how that income will be allocated to expense categories. The biggest problem or hurdle with budget planning is to stick with it. Most families do not plan to fail, they fail to plan. A good plan will provide an excellent road map for success. A budget is just a tool and periodically, it needs to be fine tuned.

What Are Income Sources?

Do you know where your income is coming from and how much it is? Do you know what should be included as income? Here is a guideline regarding what should be included as income.

Wages. This is your net pay from all paychecks. How do you get paid: weekly, bi-weekly (every two weeks), bi-monthly (twice a month) or monthly. Retirement income. Interest and investment income. Do not include this unless it is consistently the same yearly. Alimony. Do not include this unless you consistently receive it and there is no reason to believe you won’t. Bonuses, a raise or overtime pay from your employer. Do not include these since they could be discontinued at anytime. Tips. Do not include this unless you can average the amount based on what you received in prior years.

What Are Expenses?

Expenses include everything you spend. Do you know how much you are spending for categories such housing, transportation, food, clothing, entertainment, child care, medical expenses, charity and debt? Are you overspending for non essentials and thus not able to meet your necessary obligations?

Based on US News and World Report for budget allocations, the following is a guideline for how budget expenses should be allocated:

35% Housing - Includes: mortgage or rent, utilities, insurance, taxes and home maintenance. 20% Transportation - Includes: car payments, auto insurance, tag & license fees, maintenance, gasoline, tolls and parking. 28% Other - Includes: food (12), clothing (3), entertainment (5), child care, medical expenses (5) and charity (3). 15% Debt - Includes: student loans, retail installment contracts, credit cards, personal loans, tax debts, medical debts and alimony payments. 2% Savings - You should plan to save this amount throughout your working years, with a goal to increase it to 10%.

How does your spending compare to the guideline? Or is it impossible to determine because you have no idea where your money is going and how to even categorize it?

Here is a list that will help you categorize your expenses.

Fixed ExpensesThese are expenses you have little control over.

Utilities: Phone, disposal, water, electricity, gas heat, sewer

Home: Mortgage (usually includes insurance and property taxes) if not, insurance and property taxes

Health: Dental, health, life, and eye insurance (these items are usually covered by payroll deduction) if not, than add them here.

Income Taxes: Include Federal, state, local and FICA taxes only if you are self-employed.

Additional Outstanding Debt: student loans, retail installment contracts, credit cards, personal loans, medical debts and alimony payments.

Non-fixed Expenses

These are expenses you have more control over.

Food: Groceries, lunch, eating out, snacks, and date night.

Child support: Day care, babysitting and alimony payments (if it applies to you).

Transportation: Gasoline, maintenance, repairs, tolls, taxis, subway, fees and insurance premiums for all vehicles.

Debt Payments: Credit cards, Student loans, other loans.

Entertainment: Cable TV, Computer expense, software, hobbies, dues, subscriptions, videos, movies & admission fees, amusement parks, and vacations.

Clothing: Children and parents.

School: Books, supplies, fees and gym expenses.

Pet Expenses: Food, Grooming, board, Vet shots (if this applies to you).

Miscellaneous Items: Toiletries, household products, gifts, church, other donations, grooming (haircuts, make-up etc.) birthday and anniversary cards, children’s allowance, spouse expense money (amount for each spouse to be spent by them for any reason without explanation) and insurance premiums (not covered by payroll deduction).

Savings: Emergency fund, savings for retirement or children’s college fund and vacation fund.

If you are still unable to determine how you are spending your income, keep track of your expenses for a couple of months or until you can more accurately list your expenses.

Create Your Budget Plan

You are ready to create your monthly budget plan. Using budget software or a Microsoft Excel spreadsheet will aid the process. The budget plan will be divided into monthly buckets. Take your total planned income for the year and divide it by 12. Take your planned categorized expenses based on prior actual expenses and divide the categorized expenses by 12. Enter your total income in monthly columns; then enter your total expenses in monthly columns. Compare planned monthly income with planned monthly expenses. The total monthly expenses must not exceed the total monthly income amounts. If expenses exceed income, planned expenses must be decreased. A good budget plan should show planned expenses less than or equal to planned income.

Share Plan with Family

Sit down with the entire family and provide them copies of the proposed family budget plan. If your children are under the age of 5, do not include them unless they are receiving an allowance. Go over all the details of the plan. Provide information on what will be done with raises, bonuses, and overtime income if received during the year.

Tell the family that this is a plan and is not cast in stone. Indicate that adjustments may be made during the year. Answer all questions. Get each family members buy in. Then, STICK WITH YOUR PLAN. If any major situation should come up, hold another family conference and explain to them the situation.

If you are single, make a commitment to STICK WITH YOUR PLAN. Make adjustments as needed.

What To Do With Amounts in Budget Plan Not Spent For a Given Month?

This is a real good question. As your budget plan is followed throughout the year, there will be months in which you will not spend a planned expense. When this occurs, do not spend this money on something for which it was not designated. Most families have a tendency to spend the money on some other item. To prevent this from happening, keep the unspent planned expense amount in a savings account. When the need for paying the planned expense occurs, the money will be available to transfer from savings into the checking account.

Conclusion

If you follow the process above you will begin to take control of your expenses and have a road map for greater success. As you continue the process year after year, you will see new spending control trends. You will become successful in controlling your spending. Remember, most people do not plan to fail, they just fail to plan.
Posted on: July 31st, 2009 Author: admin No Comments »
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Retirement Income Calculators – How Do They Work?



One uses a retirement calculator to determine how much monthly income your retirement savings may provide you in your retirement. In most cases, when performing retirement planning, one will enter financial information into the calculator, like current annual income, assumption of percentage of future income required, a listing of other income sources like social security or pension or annuity income, the current value of one’s retirement assets, and the number of years before retirement. Once the required information is entered, the retirement calculator will determine the expected income over the individuals life, assuming certain inflation and rates of return. The calculator will also determine if there is an expected shortfall. An expected shortfall will determine the additional amount of retirement savings required on an annual or monthly basis. If one has a positive amount or no shortfall, one can plan for a more comfortable or frivolous retirement, or one can expect to leave assets to one’s heirs.

Not all retirement income calculators are the same. Some take into account many more factors, such as one’s health and one’s life expectancy. Some calculators are not as detailed. So how do you know which one to use or believe? Most every calculator will handle the most basic functions, so one can pick one and get started. Calculators with more functions can be used, but it may be a mistake to rely solely on a retirement income calculator for exact retirement planning information, because in reality, it is really just a starting estimate. The further one is away from their expected retirement date, the more potential for difference across the calculations.

So, one thing that I do is to break down the calculation and use it to estimate the income to satisfy a particular use for the retirement income. So for example, pick an expense area, like critical living expenses (shelter, heating/cooling, food and clothing). Rather than inputting all your info into the calculator, just focus on what’s required for the expenses you want to satisfy. By doing this, you can experiment with the calculator and tweak various parameters and get a good feel for what the available income will be for that area. In this way, one can put effort or scrutiny into the areas that are most important. By building on a foundation of most important needs and then moving on to calculate less important or more comfort oriented areas.

Another item to consider when when using a retirement planner is to not assume total reliance on a single sum of capital for retirement. It can be beneficial to look at several income streams, with part time employment as one area that can be explored. By breaking down the income into several streams, one can match incomes to expenses and ensure that critical needs are met, regardless of the assumptions which can be difficult to make from many years out.

You can expect that the amount of money you have in your retirement nest egg at the time you retire, including the rate of return and the current and assumed inflation rate will give you an indication of expected income level. By adding in your retirement age, life expectancy and the total value of your estate into the retirement calculator can give a good estimate of an annual income as well as how much of the estate will remain as a bequest to survivors.

It is these types of variable that are difficult to plug into a retirement calculator, but allowances must be made for them. Calculating income conservatively and using aggressive numbers for expenses can also help to conservatively estimate a more accurate financial outlook.
Posted on: June 26th, 2009 Author: admin No Comments »
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