Wednesday, September 28, 2016

6 Terrible Money Situations You Need to Stop Getting Into

When it comes to money, I know I can be my own best friend and my own worst enemy. Most of the time, I'm frugal, intentional, careful and deliberate with my money. But, every once in awhile, it's like I forget all of those principles. Maybe I want something badly, even though I can't afford it. Or I am tired and it's easier to spend than to think first.

See Also on Kiplinger: 10 Financial Decisions You Will Regret Forever

Now, I've never gone totally off the rails financially. But I can see where these acts of — let's call them what they really are — self-sabotage — undermine the principles I desire to live by.

As I've gotten older, I've gotten better at staying out of these situations, and I know you can do the same. Here are some of the places where I've gotten into trouble in the past.

1. Overspending

It's hard to live within your means. It just is. There's so much that you want, and that doesn't even take into account what you need. But overspending — spending more than you make — is a sure way to get into deep financial trouble.

Even if you don't get into debt, and some overspenders don't, you'll end up living paycheck to paycheck, juggling which bills need to be paid so that nothing gets turned off this month. That life isn't any fun at all, even though spending the money might be a blast. Besides, eventually some large expense will come up, and you'll end up in debt because you won't have the money saved to cover it.

2. Credit Card Debt

This usually comes as a result of overspending for a period of time. When you get used to spending, it starts to feel natural to just put something on your card. Do this enough times, and you'll find yourself with a bill you can't cover at the end of the month.

The problem with credit card debt is that it feels deceptive. Sure, there's interest to pay, but the minimum payment looks so small. It might take you a while, but paying it off feels entirely doable.

However, you'll end up paying forever and paying a lot in interest. And even those minimum payments can add up. Maybe you can handle one or two of them, but get three or four (or 10), and making the payments becomes a lot more financial stress than you need.

3. Not Saving for Retirement

It's easy to prioritize everything else over retirement. When you're young, retiring feels like such a long way off that it's easy to wait too long to get started. And when you're older, it's easy to spend or save for your kids rather than for yourself. Many parents panic about paying for college and end up putting their savings there rather than into their retirement accounts.

Most "real" jobs come with some sort of retirement account and, often, with a matching plan from the employer. Take full advantage of this as soon as you are eligible. If possible, have the money deducted from your paycheck automatically, so you don't even have a choice in where it goes each month.

4. Buying Too Many Toys

This probably comes with the territory of overspending, but it seems like a specific trap that you can fall into. Many people (myself included) tend to live pretty frugally most of the time, but are willing to spend quite a bit of money on a toy. This can be something like sports equipment, a designer purse, a new car, technology and other splurges.

I think that a lot of us live such stressful lives that we feel like we deserve something that will help us rest or, at least, make us feel better about ourselves. So we spend a lot on an item based on the idea that it will improve our lives. Even if it does actually help us de-stress, the financial impact can cause as much or more stress in the long run.

It's much better to save up for a toy, or rent one, or ask friends and family to contribute to a fund toward it for your birthday or another holiday. That way you will actually lower your overall stress levels, rather than adding to them.

5. Going Out Too Much

Sure, it's fun to get dinner and drinks with your friends. And it's probably a good idea to go to happy hour with the coworkers here and there, to forge connections and get to know people. But when you're doing it every night, those bills are going to add up.

You don't need to deprive yourself to make good decisions about when and where you spend when it comes to eating (and drinking) out. Lowering your spending can be as simple as ordering an appetizer and a beer instead of a meal and a cocktail. You can get creative, too. Some of my friends and I take turns hosting a meal along with one or two signature drinks and the overall cost is much lower than what we'd spend if we met at restaurants.

6. Spending to Save

Sure, there are times when it's worthwhile to spend a bit more on a quality product so that you don't have to buy another one anytime soon. But I've also seen this as an excuse to spend way too much. Not sure how this might apply to you?

What about when your car dies? You might legitimately need a new one. But it's a trap to believe the voices that say, "Buy a brand-new car. That way you will save, in the long run, on maintenance costs." Instead, you can buy a car off a two or three -year lease. You still get the benefits of low maintenance, but you save a lot off the initial price.

Or, maybe, you see a pair of nice new boots in the store. They're high quality, and you think to yourself, "Sure, that's a lot of money. But if I buy those, I won't have to buy boots for several years." That might be true, but before you purchase, think about how many pairs of boots you already have sitting in your closet.

Sometimes, buying quality is the way to go. But other times, it's an excuse we use to let ourselves spend more than we should.

We're here to help you organize, prepare and manage your small business finances.  Click here or contact us for further information.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Tuesday, September 27, 2016

Your Customers Have These 30 Needs. Are You Meeting Them?

You probably remember Maslow's hierarchy of needs from school--that model demonstrating our most basic needs (food, security, warmth, rest) at the bottom of the pyramid.

The higher up the pyramid, the more complex our needs. And without the fulfillment of our physiological and safety needs, we're unable to achieve love, belonging, esteem or self-actualization, at the top of the pyramid.

New research from Bain & Company, published in the September issue of Harvard Business Review, extends Maslow's hierarchy of needs by identifying 30 fundamental attributes they're calling "elements of value" that drive consumer decision making.

Their elements are divided into four categories--functional, emotional, life changing, and social impact--and explain the inward and outward-facing needs consumers seek to have met.

Understanding these needs is absolutely critical in sales and marketing. The more elements you can provide for, the greater your customers' loyalty, the researchers say.

For example, consumers have a great number of functional needs. They're looking for solutions that:
  • Save time
  • Simplify
  • Reduce risk
  • Organize
  • Provide sensory appeal
  • And reduce effort.

If those basic values aren't met, you're really going to struggle to make an emotional connection with values like reducing anxiety, making a consumer nostalgic, or being entertaining.

Bain & Company collaborated with an online sampling and data collection company for a survey of over 10,000 U.S. consumers about their perceptions of nearly 50 U.S.-based companies.

Their survey confirmed that companies that performed well on multiple elements of value ended up with more loyal customers than the others.

30 Elements of Value--Setting Realistic Expectations

Now, it's worth noting that you don't have to check each and every value off the list on every level in order to successfully meet your customers' needs. In fact, Apple did comparatively well in Bain & Company's research, but even they only scored high on 11 of the possible 30 elements.

As the researchers explain, "The elements of value pyramid is a heuristic model--practical rather than theoretically perfect--in which the most powerful forms of value live at the top. To be able to deliver on those higher-order elements, a company must provide at least some of the functional elements required by a particular product category."

It's important to choose which elements are worth your devotion carefully. 
Check it out:

Learn more about what our B&M Financial Management Business Consulting Services can do for you. Click here or contact us for further information.

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Monday, September 26, 2016

Time Is Money -- How Much Is Your Time Worth?

The phrase has become hackneyed with overuse, yet hits the nail on the head when describing a small business owner’s relationship to time. In fact, in a study conducted earlier this year by the Electronic Transactions Association (ETA), the 592 respondents reported that they valued their time at an average of $170 per hour—making wasted time an expensive proposition for those small businesses.

Entrepreneurs understand the importance of managing time unlike just about anyone else. Creating jobs (two out of every three new jobs in the U.S.) isn’t a 9:00 to 5:00 proposition. This week OnDeck released a new survey that suggests America’s small business owners spend an average of 53 hours a week building their businesses compared to the national average workweek of 47 hours. What’s more, one-third of the business owners surveyed said they would need 69 hours a week to successfully run their businesses.

A longer-than-average day was certainly my experience as a small business owner. Like many business owners, I was motivated and felt my business required more of my time. However my wife would often call the office into the wee hours of the morning to ask if she needed to bring over a sleeping bag—my cue it was time to wrap up for the day and come home.

By the way, although 45 percent of them described work/life balance as an illusion, other surveys suggest the independence of working for themselves is worth it. That’s certainly the way I looked at it.

Why Would a Small Business Lender Be Interested in How a Business Owner Values Time?

That’s a good question with a very straightforward answer.

Speed to funding is a big deal to businesses and the time it takes to find a lender, complete the application, and hopefully obtain approval can take a business owner away from the important work of running the business. In fact, 63 percent of those in the ETA survey said speed was a primary reason for choosing the online lender they did. The ability to act quickly to take advantage of an opportunity is often critical to successfully leveraging that opportunity into increased profits.

According to a 2014 New York Federal Reserve survey, the average small business owner spends 33 hours applying for a small business loan. As a business owner, whether or not you value your time at $170 per hour or something else, those 33 hours become expensive—particularly when you consider the number of applicants that leave the traditional small business loan process empty handed.

The time it takes to find financing is a challenge for many small businesses and an opportunity cost that is simply too high. It’s not the decline rate that troubles me, but the lost time waiting for the decline.

We Need to Help Business Reclaim Some of that Time

Technology has changed the way we shop, the way we make travel arrangements, and even the way we hail a cab. In much the same way, technology can now streamline the loan process and give businesses faster answers so they can make decisions about the growth opportunities they can pursue, and those they can’t.

What’s more, it’s not just technology, it’s looking at small business lending from a completely different paradigm. How lenders evaluate business creditworthiness and the type of financing they offer are all part of the equation. There are even traditional lenders that are recognizing the problem and working on solutions.

What Would You Do With an Extra 33 Hours?

What if a small business owner could get some of those hours back?

“Our research shows that small business owners are racing against the clock and need to find ways to take hours back—through time-saving tools, software and innovative services such as online financing,” said Andrea Gellert, chief marketing officer at OnDeck. “To help hardworking small business owners make the best of the 33 hours they can get back when they turn to online financing, we’ll be unveiling a host of time management tools and best practices over the next couple of weeks. We’re committed to helping small businesses get efficient access to capital and take their time back.”

I seldom talk about what we’re doing at OnDeck in this column, but this is an initiative I can get behind—I’ve experienced the pain of feeling like there was never enough time to get everything I wanted to get done, done. As a result, in addition to other initiatives designed to share helpful timesaving tips over the next few weeks, I’ll be hosting a Facebook Live chat to share tips and best practices that will hopefully help you recoup some of that precious time. I hope you’ll join us. Visit OnDeck’s Facebook page, at 2:00 pm EST on September 1 to be part of the conversation.

We're here to help you organize, prepare and manage your small business finances.  Click here or contact us for further information.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Friday, September 23, 2016

5 Tips for Structuring Your New Business Like a Pro

Is your new business a “lemonade stand”? That’s the term we use to describe businesses that were set up quickly with lots of passion but will fade into oblivion instantly when hit with the first sign of a legal or tax challenge. Lemonade stands are not serious businesses and are not worthy of funding. Lemonade stands are here today, gone tomorrow, and never create a legacy of wealth or success for their founders.

Don’t let your next business be a lemonade stand.

Instead, opt for the “Fortified Cash Machine” model by using these five smart tips for structuring your new business right from day one:

1. Set up an “operating entity” rather than being a sole proprietor.

With guidance from your tax attorney or CPA, select and establish an operating entity, such as a corporation or LLC, through which to conduct your business. While operating as a sole proprietor is certainly the easiest method, doing so clearly shows you’re more interested in building income for yourself rather than in building an actual business.

“It almost never makes sense to conduct business in your own personal name,” says Tim Berry, an asset protection expert in Phoenix, Ariz. “Operating in that manner exposes you to the worst of everything: The worst legal liability, the worst tax rates and the lowest chance of being able to ever sell your business in the future.”

2. Establish a “trust” to hold your operating entity.

It’s wise to have a “buffer” between you and your new business so that challenges that you or your business might face in the future will be confined and not threaten everything else that you own. Establishing a trust is a great way to create such a buffer, and it can provide a plethora of other benefits.

“A trust is essentially a way to separate yourself from some of the risks of owning things like businesses, vehicles or other assets. When a trust is well-structured, it gives you the benefit of controlling an asset -- like your new business -- while taking far less risk. It’s a very wise move” Berry says.

Trusts can be very expensive to form, but don't need to be. Expect to spend a few thousand dollars to get a solid basic trust in place for your new business.

3. Separate your intellectual property from your business.

You might think that your new business has no intellectual property, but you’d be mistaken. The two most obvious and potentially valuable pieces of intellectual property your business already owns are its telephone number and its web address.

Berry offers this ominous warning: “Imagine it’s 10 years from now and your business has been very successful, when a frivolous lawsuit is brought against your company by a competitor. Unfortunately, your company loses the lawsuit. If your company owns your telephone number or website address, your competitor could actually legally take over your phone number and website and benefit from your great reputation.

“A simple solution is to let your trust own all of your business’ intellectual property, and simply license those assets to your business. This separates those assets from your business in the event your business ever faces any problems, and also could create some tax reduction possibilities,” Berry says.

4. Establish a solo 401(k) for your business.

A solo 401(k) -- sometimes called a self-directed 401(k) -- is a special type of retirement savings account that’s available only to small businesses. It enables you to sock away as much as $50,000 or more per year and get huge tax deductions.

But tax savings aren’t the only reason to set up a solo 401(k).

“The money you place in a solo 401(k) is, from a legal perspective, extremely secure” Berry says. “If you handle the account correctly, almost nothing can touch your 401(k) savings, including bankruptcy, lawsuits and usually even the IRS.”

5. Name your business with funding in mind.

Banks and traditional lenders prefer to lend to certain types of businesses more than others, and if you need to get funding for your business, you must bear this in mind when naming your business.

“We’ve seen over and over that some businesses are just less attractive to lenders than others. For example, all else being equal, most lenders will provide financing to a marketing or management company long before they’ll fund a real estate company, because the perceived risk is so much higher in real estate” says Ari Page, CEO of Fund & Grow.

This does not mean you shouldn’t be in the real estate business. Rather, it’s a suggestion that you should not stack the deck against yourself by making the name of your business overtly real estate-related, as that stigma alone may be enough to be rejected by your lender of choice.

Creating a new business is incredibly exciting and utterly terrifying at the same time. But if you use these five strategies to form your new venture on a firm foundation, your new business can rocket past its lemonade-stand-like competitors and enjoy a strong foundation forever.

Learn more about what our B&M Financial Management Business Consulting Services can do for you. Click here or contact us for further information.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Thursday, September 22, 2016

5 Steps To Prep For Leaving Your Job To Start A New Business

After you’ve chosen a career path, it’s easy to feel like you’re locked into that decision for the rest of your life. Maybe your job isn’t fulfilling, isn’t providing you with sufficient opportunities to develop your leadership, or you just feel like there is nothing new there for you to learn.

According to a survey from Deloitte, two-thirds of all millennials plan to leave their job by 2020 and 44% say they would leave their employer in the next 2 years.  If you have got the itch to leave your job, you are not alone.

The average American switches careers six times throughout the course of their life–meaning there’s a lot more room for second chances than you might think. You may know it’s possible to make a career change, but understanding how to take action in your own life is a different matter.

Meet Eric Finnigan, a professional copywriter and founder of Autopilot Email, an email marketing service agency that helps companies boost their revenues by $100k+ through automated emails. Today, Finnigan works a schedule on his own terms structured around projects he cares about. But just months ago, he was working a 9-5 for a corporate company that drained him.

I spoke with Finnigan about how he was able to leave his former career and restore purpose to his work on this week’s episode of Unconventional Life, “How to Leave Your Corporate Job and Pursue Your Dreams.”

Fresh out of college, Finnigan found himself broke and in debt, with all his credit cards maxed out and nowhere to turn. “I had this moment where I was like holy cow I just went to college and in theory I should be set financially, what’s going on?” he says. “It was kind of this panic moment where I realized I had to make money.”

Like many new graduates in this position, Finnigan was eager to start paying down his debt and immediately got a job. Over the next seven years, he would dedicate nearly all of his energy to getting promotions and salary raises until his financial insecurity faded to a distant memory.

Step by step, Finnigan climbed the corporate ladder to the position of Vice President, managing a $36 billion portfolio for his investment strategist company. His salary was abundant and he occupied a luxury apartment in NYC… yet something was missing.

“I would sit at my desk and think, do I really want this? I had this moment of yeah, I had succeeded in what I wanted to do, but what I had been working towards it turned out wasn’t the thing that was actually fulfilling for me,” Finnigan reflects.

Upon that realization, Finnigan decided it was time to make a change.

He still depended on his job as a source of income, so he didn’t just quit on the spot. Instead, he began investing all of his free energy into his lifelong passion for writing, which he never pursued because he didn’t believe it could be profitable. Within several months of studying the art of copywriting, Finnigan felt confident he could monetize it and quit his corporate job.

Today, Finnigan has created a livelihood around copywriting and has become one of the most sought-after contractors in his industry, running six and seven figure campaigns for many multi-million dollar clients. But the doubt and uncertainty that accompany making a major career change were not lost upon him. Below, Finnigan shares how you can succeed in making a similar transition.

1. Learn from others. Immerse yourself in the stories of others who have already made this transition and are thriving on the other side. Listen to podcasts and seek out news articles to encourage, motivate, and inspire you to do the same. You’ll begin to feel like it is possible for you, too, and you’ll benefit from learning from their mistakes and advice.

2. Ask for help. Ditch the mindset that you need to figure it all out on your own. “For me it was a matter of pride,” Finnigan says. “Have humility–you can make it much faster with help.” Asking for help might look like reading books, enrolling in courses, or finding a mentor. Guidance and accountability are essential to your success.

3. Hustle on the side. Use your current job as a safety net so you don’t put too much pressure on yourself to “figure it out,” which can actually be counterproductive. Be reasonable and give yourself time to develop your new skill until you feel confident that it will be able to provide for you financially. Be prepared to put in the hours both for your current job and your emerging passion. “I worked 4 to 5 hours a day in addition to my job,” Finnigan recalls.

4. Understand success isn’t linear. Unlike working in a corporate job, success isn’t linear when working for yourself. “It’s not like plug away for a few months and get your first paying customer, then in another few months get your 5th paying customer,” Finnigan says. “It’s frustrating coming from the corporate world, where you work hard and get a bonus at the end of the year.” While you may struggle at first, don’t be discouraged. Keep at it and be mindful of how you measure success–fulfillment is equally as important as profit.

5. Create your own urgency. “If there’s no urgency on your end, no one’s going to create it for you,” Finnigan says. Develop a timeline for your goals to keep yourself on track and be willing to let go of whatever may be holding you back.

We're here to help you organize, prepare and manage your small business finances.  Click here or contact us for further information.

Image Credit: Eric Finnigan

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Wednesday, September 21, 2016

9 Sales Strategies New Business Owners Should Look to Emulate

Once you've launched a minimum viable product and are gearing up to offer your new business to the masses, you'll want to consider what avenues are the most lucrative means of reaching your target audience. While mistakes are almost inevitable along the way, knowing the fundamentals of good sales techniques will help get you on track.

Nine entrepreneurs offer their best advice for new business owners just starting to get their feet wet with sales.

1. You learn a lot through open-ended questions.

We use open-ended questions when speaking with potential customers to learn about their business needs and pain points. Remember, you are selling a product should help them be more efficient in their jobs.

Through questioning, you can learn whether they're looking to boost sales, increase productivity, or anything else pertinent to developing the best solution for them.

- Laura Johnson, Salty Girl Seafood

2. Listening is more important than talking.

As a salesperson, you should always be doing more listening than talking. I typically follow the "80-20 rule" when speaking to a prospect: I explain our product specs for 20 percent of our meeting, then listen to their feedback and pain points for the other 80 percent of the time.

Within that 80 percent of time, I typically get all the information I need to determine if our offerings are a good match for the prospect.

- Tim Grassin, Candy Banners

3. Sales is about solving problems.

Sales is not about "closing" leads; it's about solving problems. You're not trying to convince a person to make a decision. Rather, when you sell to someone, you believe your solution can truly help them, and you're simply giving them the information they need to make that decision for themselves.

Focus on solving people's problems and being helpful to them, and you'll sell well.

- Claire Lew, Know Your Company

4. Good sales is about great storytelling.

The key to a successful sale is the story behind the product. Regardless of what you're selling, what really draws customers in is the sales narrative. Why is this product or idea so important? And how will it benefit them?

Salespeople must tell a story that engages potential customers. More importantly, they must be able to tailor the story to fit each client's needs and expectations.

- Joshua Moe, Odigia

5. You can't win them all.

Be ready to grow a thick skin, if you don't have one already. There is no way to win every sale, deal, or partnership.

Regardless of whether you're the best company for the job, sometimes your leads will choose someone else. Move on to the next one, and you'll be better off.

- Ben Walker, Transcription Outsourcing, LLC

6. Nothing is real until it's in writing.

You can get all the promises in the world, but they mean nothing without a written and signed contract. The best intentions and the most earnest of customers are meaningless if they don't pay up.

You need a contract, and so should they. It will protect everyone. Be sure to also have dated invoices with payment deadlines. Invoice factoring is unpleasant to deal with for any business.

- Ben Gamble, Quincus

7. Feedback is fundamental.

Sometimes there isn't always a demand for what you originally thought up, but your future customers will give you constructive criticism about what you should focus on.

While this might not be the response you had hoped for, be open: they're actually helping you shape what is likely to become an even better iteration of your original idea.

- Jessica Baker, Aligned Signs

8. Selling is a consistently evolving strategy.

As technology changes and different people fill procurement roles, our sales strategies have evolved to assure we can maintain a high level of quality leads to our sales teams.

Because of this, we create an ongoing dialogue with existing customers to better understand their ideal process to procuring services such as ours. We then communicate those insights to everyone who participates in sales.

- Justin Moodley, LASANAN

9. It's OK to say 'no.'

Early in the sales process, I ask the prospect to be up front with me and let me know if they are interested in moving forward or not. I ask for a yes or a no -- no "maybes."

Giving them permission to say no puts them at ease, because they know they have that option. This works well for me, because it eliminates anyone who's on the fence without any hurt feelings.

- Bryan Driscoll, Think Big Marketing, LLC
The opinions expressed here by columnists are their own, not those of

We're here to help you organize, prepare and manage your small business finances.  Click here or contact us for further information.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Tuesday, September 20, 2016

How Men and Women Think Differently About Money

When I get a massage, as I do periodically, I like to park my brain in neutral and bask in the serenity. So imagine the jolt when, a few months ago, my massage therapist wanted to spend our hour talking—about Social Security. A divorced woman in her fifties, she had heard that she could apply for Social Security on her former husband’s record. Was that true, she wanted to know, and if so, would it have any effect on her ex-spouse’s own Social Security benefit?

So instead of parking my brain in neutral, I had to shift into overdrive to explain the nuances of Social Security (yes, if her marriage had lasted 10 years, she could apply for benefits on her husband’s record once she’s 62, and no, it wouldn’t affect his Social Security). So much for my peaceful massage.

A few weeks later, I sat down for my regular haircut, assuming I could zone out while my stylist snipped away. But she wanted to talk—about her retirement plan. She thought that as a self-employed person she could sock away much more than she could in a traditional IRA, but she was hesitant to raise the subject with her accountant. I confirmed that she was probably eligible for a Simplified Employee Pension or individual 401(k), and that triggered a discussion about retirement investments that lasted as long as my haircut.

It occurred to me later that both women were in tune with the Kiplinger’s subscribers we surveyed earlier this year to learn more about how they invest. When we asked where they learn about personal finance, women were more likely than men to say that they talk to friends and family or ask questions of a financial adviser—or, in some cases, a client who happens to be the editor of a personal finance magazine.

That’s just one of a number of ways in which men and women differ in their attitudes toward money. After we published our April cover story on the secrets of women investors, I had a lively exchange with a few of our male readers, who wondered why we write occasional stories geared toward women. After all, they pointed out, financial products are gender neutral. “Let financial advice stand on its own merits,” wrote Al Oxley of Kalamazoo, Mich.

I totally agree. But women often use financial products in different ways than men because they take a different approach or find themselves in different circumstances. For example, as we reported in April, women tend to trade stocks less often than men—and they get better returns. In our special report on women and money in the June issue, we focused on the fact that women tend to live longer than men, which leads to worries about making their money last and paying for health care as they age.

Our reporting also turned up evidence that men and women even speak a different language when it comes to money. Annamaria Lusardi, director of the Global Financial Literacy Excellence Center at the George Washington University School of Business, says her research shows that jargon and technical terms are more off-putting to women. In teaching her own classes, Lusardi consciously starts with plain English and “builds the language of finance.”

Starting this month, we’re going to follow up our series of stories with a regular column that addresses—in plain English—the financial concerns of women. But like all of our stories, this column will stand on its own merits and have practical applications for men, too. For example, men who read the special report in our June issue learned a lot about maxing out retirement savings, leaving a legacy and paying for health care in retirement. And we hope they have shared that knowledge with the women in their lives.

My mantra has always been that men and women working together make a socko combination, and we want to make sure that each partner feels comfortable with the challenge.

We're here to help you organize, prepare and manage your small business finances.  Click here or contact us for further information.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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Monday, September 19, 2016

How big businesses get tax breaks meant for little guys

It's widely agreed that America's small businesses are worthy of support from the government. But in yet another perverse twist of the tax code, more than 100,000 "big" businesses reap billions in tax breaks designed to assist "small "companies, costing Uncle Sam hundreds of billions in tax revenue, according to the Center for American Progress.

The liberal think tank noted that these businesses each have annual revenue of more than $10 million and pay no corporate taxes. That's because they're organized as partnerships under "Subchapter S" of the tax code. That means taxes for these enterprises are "passed through" to their owners, who pay them through their individual returns.

So-called S Corps have surged from less than 25 percent of net business income in 1980 to more than half in 2012, the latest data available. Larger companies, such as those traded on the stock market are often organized under a different section of the tax code and are known as "C Corps."

"In fact, the United States is unique in this regard: No other country comes close to having such a large portion of business income that is not subject to the corporate income tax," according to the Center for American Progress.

Part of the problem is in defining "small businesses." According to the U.S. Small Business Administration, about 97 percent of all U.S. businesses are classified as "small," which means having 500 or fewer employees. The IRS defines small businesses as those with assets under $10 million.

"Indeed, several of the largest U.S. hedge funds are taxed as partnerships," the Center for American Progress said. "In part, because increasing numbers of businesses are adopting pass-through forms, the corporate income tax today contributes only about one-tenth of total tax revenues compared to one-third 60 years ago."

A recent study by economists from U.S. Treasury Department, the University of Chicago and The University of California, Berkeley, found that the growth of S-corps cost the federal government $790 billion in revenue from 2003 to 2012. To put that in perspective, it's more than double the size of Denmark's economy.

Owners of S-corporations pay federal individual income taxes (which have a top marginal rate of 39.6 percent), state and income taxes (as high as 13.3 percent) and are hit with limitations on deductions, which adds a 1.18 percent marginal tax rate, according to the Tax Foundation.

According to the National Federation of Independent Business (NFIB), about 75 percent of small-business owners in the U.S. are pass-through companies. A recent study from American Express found that the typical small-business owner earns about $67,000 a year.

"That's not a fat cat," said Jack Mozloom, an NFIB spokesman, adding that 90 percent of the organization's members have fewer than 20 employees. "I am sure there are corporations which are taking advantage of elements of the tax code to minimize their tax obligations," he said.

Mozloom said the NFIB supports taxing corporations and pass-throughs at the same rate.

Republican Presidential nominee Donald Trump has promised to provide tax relief to unincorporated small businesses and freelancers. Like many conservative economists, the former reality TV star wants to slash the 35 percent statutory corporate tax rate. His Democratic opponent, Hillary Clinton, has also promised to provide tax relief to small businesses, but she hasn't provided specifics.

The Center for American Progress wants an "entity-level" tax on these firms similar to the payments that "C corporations" make to the government. It also calls for policymakers to make sure the wealthy pay their "fair share" of taxes on pass-through income at the individual level.

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Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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