Author: Leon Clinton

Business Financial Planning

Paying Off Debt the Smart Way

Being in debt isn’t necessarily a terrible thing. Between mortgages, car loans, credit cards, and student loans, most people are in debt. Being debt-free is a worthwhile goal, but most people need to focus on managing their debt first since it’s likely to be there for most of your life.

Handled wisely, that debt won’t be an albatross around your neck. You don’t need to shell out your hard-earned money because of exorbitant interest rates or always feel like you’re on the verge of bankruptcy. You can pay off debt the smart way, while at the same time saving money to pay it off faster.

Assess the Situation

First, assess the depth of your debt. Write it down, using pencil and paper, a spreadsheet like Microsoft Excel, or a bookkeeping program like Quicken. Include every financial situation where a company has given you something in advance of payment, including your mortgage, car payment(s), credit cards, tax liens, student loans, and payments on electronics or other household items through a store.

Record the day the debt began and when it will end (if possible), the interest rate you’re paying, and what your payments typically are. Add it all up, painful as that might be. Try not to be discouraged! Remember, you’re going to break this down into manageable chunks while finding extra money to help pay it down.

Identify High-Cost Debt

Yes, some debts are more expensive than others. Unless you’re getting payday loans (which you shouldn’t be), the worst offenders are probably your credit cards. Here’s how to deal with them.

  • Don’t use them. Don’t cut them up, but put them in a drawer and only access them in an emergency.
  • Identify the card with the highest interest and pay off as much as you can every month. Pay minimums on the others. When that one’s paid off, work on the card with the next highest rate.
  • Don’t close existing cards or open any new ones. It won’t help your credit rating.
  • Pay on time, absolutely every time. One late payment these days can lower your FICO score.
  • Go over your credit-card statements with a fine-tooth comb. Are you still being charged for that travel club you’ve never used? Look for line items you don’t need.
  • Call your credit card companies and ask them nicely if they would lower your interest rates. It does work sometimes!

Save, Save, Save

Do whatever you can to retire debt. Consider taking a second job and using that income only for higher payments on your financial obligations. Substitute free family activities for high-cost ones. Sell high-value items that you can live without.

Do Away with Unnecessary Items to Reduce Debt Load

Do you really need the 800-channel cable option or that dish on your roof? You’ll be surprised at what you don’t miss. How about magazine subscriptions? They’re not terribly expensive, but every penny counts. It’s nice to have a library of books, but consider visiting the public library or half-price bookstores until your debt is under control.

Never, Ever Miss a Payment

Not only are you retiring debt, but you’re also building a stellar credit rating. If you ever move or buy another car, you’ll want to get the lowest rate possible. A blemish-free payment record will help with that. Besides, credit card companies can be quick to raise interest rates because of one late payment. A completely missed one is even more serious.

Pay With Cash

To avoid increasing debt load, make it a habit to pay with cash. If you don’t have the cash for it, you probably don’t need it. You’ll feel better about what you do have if you know it’s owned free and clear.

Shop Wisely, and Use the Savings to Pay Down Your Debt

If your family is large enough to warrant it, invest $30 or $40 and join a store like Sam’s or Costco. And use it. Shop there first, then at the grocery store. Change brands if you have to and swallow your pride. Use coupons religiously. Calculate the money you’re saving and slap it on your debt.

Each of these steps, taken alone, probably doesn’t seem like much. But if you adopt as many as you can, you’ll watch your debt decrease every month. If you need help managing debt give us a call. We can help.

Asset Protection Business Financial Planning

Protect Your Business With The Right Insurance

Starting a business is expensive and the capital that you’ve poured into your company can disappear in an instant if, say, a major weather event damages your offices or one of your products injures someone.

Having the right kind of insurance is critical to your business, which is why multiple insurance policies should be in place before you even open your doors for business. In addition, they should be reviewed every year or, when a business change occurs such as stocking new products or moving to a new location.

Commercial Business Insurance

Commercial Property Insurance policies protect your office and its contents from damage caused by natural disasters, fires, or vandalism. They are either all-inclusive or risk specific.

Product Liability Insurance is necessary if you manufacture or sell products and safeguards you if a product defect causes injury to someone.

For protection against lawsuits related to negligence claims, you need to consider both General Liability Insurance and Professional Liability Insurance.

Other types of insurance your business might need include:

  • Coverage that protects Directors and Officers from personal liability
  • Key Executive Life Insurance
  • Business Interruption (covers lost profits and expenses)
  • Commercial Vehicle Insurance
  • Website Insurance (protects you from legal claims)

Employer-Related Insurance

Workers’ Compensation Insurance (administered by individual states) and Unemployment Insurance (under certain conditions) are mandatory in the United States. Some states require employers to provide other types of insurance. For example, if any of your employees are located in California, Hawaii, New Jersey, New York, Puerto Rico, or Rhode Island you will be required to provide Disability Insurance. Disability Insurance is a benefit provided to employees who are unable to work because of illness or injury.

Employers are not required to provide Life, Medical, and Dental Insurance for employees.

Make Sure You Get the Correct Insurance for Your Business

Some tips:

  • Don’t under-insure, but don’t over-insure either.
  • Assess your liability risk honestly and thoroughly.
  • Ask your lawyer for advice.
  • Get quotes from several companies.
  • Talk to your insurer about how you can minimize risk and premiums.

Your insurance company will be your ally if you encounter legal problems because of an accident or injury that happens to someone on your property, to an employee doing business for you, or if a service you provide causes harm to someone.

Avoid lawsuits by making sure you have the right insurance for your business. If you need help figuring out which insurance is best for you, then give us a call now.

Tax

Failure to File or Pay Penalties: Eight Facts

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. Call us if you need to set up payment options.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of 1/2 of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

If you haven’t filed your tax return yet, don’t wait any longer. Give us a call today. We’re here to help.

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