Friday, July 27, 2018

Some Self-Employed Taxpayers Get a Big Break Under New Law

Motivational speaker Ted Ma isn't sure whether the new tax break applies to his business Photograph by Nader Khouri

If you’re self-employed or have a side gig, you could qualify for one of the most generous provisions in the tax overhaul enacted by Congress late last year. But if you don’t already have an accountant or tax preparer, you might need one, because this tax break is also one of the most complex provisions in the Tax Cuts and Jobs Act. 

The break could benefit millions of sole proprietors, small-business owners, freelancers and gig workers, who “pass through” their business profits (or losses) to Schedule C of their individual tax returns and pay individual tax rates. Starting this year, many of these taxpayers will be allowed to deduct up to 20% of their qualified business income—net income after they’ve claimed business deductions—before they calculate their tax bill. For example, if you’re self-employed and earn $100,000 in qualified business income this year, you could be eligible to deduct $20,000. If you’re in the 24% tax bracket, that would reduce your tax bill by $4,800.

You don’t have to itemize to claim this new tax break. The deduction won’t reduce your adjusted gross income, nor will it reduce your earnings for purposes of calculating taxes for Social Security and Medicare, says Nathan Rigney, a research analyst at H&R Block’s Tax Institute. (Unlike employees who work for someone else, self-employed workers must pay the full 15.3% of self-employment taxes, although they can deduct half of the amount from their AGI.)

Congress made this change in an effort to create tax parity between small-business owners and big corporations. The Tax Cuts and Jobs Act cut the corporate tax rate from 35% to 21% but only reduced the top personal tax rate from 39.6% to 37%. Excluding 20% of qualifying income effectively cuts the top rate from 37% to 29.6%.

Proponents of the tax cut say it will encourage self-employed people and small-business owners to invest in their businesses, thus contributing to economic growth. So far, though, that’s not happening. A survey by the National Association for the Self-Employed conducted before the tax deadline of April 17 found that 83% of its members don’t understand how the tax law will affect their business.

Who gets the deduction. The confusion is understandable because this tax break comes with more caveats than a TV ad for a prescription drug. Several factors could disqualify you for all or part of the pass-through deduction, including the amount of your business income, other sources of income and the nature of your business.

Let’s start with the income thresholds. If your total taxable income—which includes interest and dividends, as well as income reported on Form W-2, if you also have a regular job—is less than $157,500 on an individual return or $315,000 on a joint return, you’re a winner. You can deduct 20% of your qualified business income no matter what type of business you’re in. Keep in mind that the 20% deduction is limited to income from your business. For example, if a married couple who file jointly have taxable income of $150,000, and $75,000 is qualified business income, they can deduct 20% of $75,000, or $15,000.

At higher income levels, the calculation gets more complicated. In an effort to prevent affluent doctors, lawyers and, say, hedge fund managers from gaming the system, Congress created a higher standard for professionals who provide personal services. For these business owners, the deduction phases out once total taxable income exceeds $157,500, or $315,000 for married couples, and disappears once taxable income tops $207,500 for singles and $415,000 for couples.

The tax law says the higher threshold applies to professionals who work in “specified service” fields, including law, health care, accounting, performing arts, consulting, athletics and financial services, as well as any business in which “the principal asset is the reputation or skill of one or more of their employees.” (Business owners who don’t fall into the “specified services” category can take the full deduction, no matter how much taxable income they report.) That’s open to a lot of interpretation, and tax professionals are awaiting guidance from the IRS on what constitutes a “specified service.”

Ted Ma of Point Richmond, Calif., recently started his own business as a motivational speaker for corporate clients. He also works as an independent contractor for a company that sells subscription-based legal services. Ma believes his speaking business falls into the “specified service” category, but his sales job could be exempt. He’s not sure, though, and his accountant isn’t, either. Ma says he’d like to invest more in advertising and “building his brand,” but he’s reluctant to spend the money until he has a better handle on how the new tax break will affect his bottom line.

A  bookkeeping and financial-management services firm, based out of New York, believes to falls into the “specified service” category, but their taxable income is low enough to qualify for the full 20% deduction on business income. Still, “one big contract could throw that out the window.

Lower your income. Amid this uncertainty, there are steps you can take that will increase your eligibility for the tax break. If you’re close to the cut-off, contributing to a tax-deferred retirement plan will reduce your taxable income. Self-employed people can contribute up to 20% of their net income to a SEP IRA, up to $55,000 in 2018. Another tax-saving option is a solo 401(k)—also known as an individual 401(k)—which is a retirement plan designed for self-employed people who have no employees other than a spouse. In 2018, you can contribute up to $55,000, or $61,000 if you’re 50 or older.

The tax law nearly doubled the standard deduction, but if you have a lot of deductible expenses, you may still end up itemizing. In that case, increasing your charitable contributions could also lower your taxable income below the thresholds.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Thursday, July 26, 2018

36% of Self-Employed Workers Admit to Not Paying Taxes, but it May Not Be Their Fault

Whether you’re filing for yourself or relying on an expert, taxes are complicated and confusing. So complicated, in fact, taxpayers might be tempted to roll the dice and just skip tax season altogether. Knowing the IRS is watching may be the only thing holding some people back from doing just that.

Yet, a recent independent survey of 500 freelancers by QuickBooks Self-Employed shows some 36% of self-employed workers are taking their chances. Why are more than a third of the self-employed not paying taxes?

The complications are real

It’s no secret self-employed workers face more challenges than W-2 employees in many respects. While traditional employees can count on a regular paycheck, 31% of self-employed workers say they struggle to get paid on time.

In fact, it’s their No.1 challenge, followed by:

  • Self-motivation (30%)
  • Finding work (26%)
  • Doing taxes (20%)
  • Marketing (20%).

There are good reasons why doing taxes makes the top five of anxiety inducing struggles for the self-employed. While 17% of workers worry about finding deductions, 1 in 5 says they’re concerned about saving enough money for taxes in the first place.

Meanwhile, 1 in 4 is concerned they’re not making accurate estimations regarding how much they should be paying in taxes. That makes a lot of sense since 30% of self-employed workers are worried they might not be filling out the forms correctly, perhaps because the same number report they’re bad at keeping track of paperwork.

Older workers are more tech-savvy

While self-employed workers aged 18-34 struggle more with filling out tax forms correctly, workers aged 35 and up say they’re primarily concerned with keeping track of their tax forms.

Part of this might have to do with the fact over two-thirds of self-employed workers still aren’t using a tax-filing software. They’re either still filing on paper or going through a trusted accountant.

Interestingly enough, older generations are more comfortable filing through a tax software. While 42% of taxpayers 55 and older use such programs, only 33% of self-employed workers aged 18-24 do the same.

Tax evasion (however accidental) is risky business

You might think tax audits only happen to the wealthy, but the truth is they can happen to anyone. In fact, 36% of self-employed workers have been audited by the IRS, and almost 1 in 3 of those had errors on their taxes. Part-time/occasional self-employed workers had the most errors (50%, to be exact).

You might be surprised to learn younger workers are more likely to be audited than their older counterparts. Only 11% of self-employed workers age 54 and older have been audited, but the same cannot be said for nearly half of all 18- to 24-year-olds. On average, 46% of these young taxpayers say they have been audited.

The injustice of this, to some young taxpayers, might be that older individuals are more likely to not report their income on taxes. While 7% of taxpayers aged 18-24 report none of their earnings, that number goes up to 10% for self-employed workers over the age of 45.

One reason self-employed workers are audited so frequently likely has to do with the fact it’s easy to get behind on taxes when you work for yourself. 33% of self-employed workers admit to getting behind on their taxes. Reasons include everything from underestimating how much they need to pay (42%) to forgetting to pay (16%). Other factors include not being able to afford the amount they owe (30%), not knowing they have to pay taxes (16%), and not knowing how to pay taxes (10%).

But getting behind on taxes is one thing. Not filing them at all is entirely another. So why are 36% of self-employed workers not paying taxes?

Breaking down that 36%

Of the 36% of self-employed workers who don’t pay taxes, 9% cite no reason (saying they “just don’t” pay taxes), 17% say they don’t make enough to pay taxes, and another 10% say their losses exceed their profits, so they don’t owe any taxes.

While these are likely all true, the numbers are tough to verify since only 68% of self-employed workers report all their income on their taxes. Another 6% don’t report any of their income, while 13% say they report half or less.

As it happens, part-time self-employed workers are less likely to pay taxes compared to full-time self-employed workers. That’s likely due, in part, to the fact that 31% of part-time self-employed workers say they don’t make enough to pay taxes.

Once again, it’s hard to check the math on these assertions, because part-time/occasional self-employed workers are twice as likely to underreport their income compared to full-time self-employed workers.

While 1 in 10 full-time self-employed workers will report 50% or less of their income, 1 in 5 part-time self-employed workers will do the same.

More awareness could mean better behavior

A lack of overall tax knowledge could be a contributing factor to why some self-employed workers aren’t paying taxes or reporting their income. The fact that 10% don’t know how to pay taxes suggests this is likely.

On December 22, 2017, Congress passed the Tax Cuts and Jobs Act, which will immediately affect every American’s taxes for the 2019 tax season. While it’s understandable most people have no idea how the new law will impact their taxes, many CPAs would cringe to know 1 in 10 self-employed workers didn’t know there even was a tax reform. Of those who did know, 28% say they expect to pay more, 16% say they think they’ll pay less, and 20% say they don’t know how it will impact their taxes.

Often, a lack of understanding results in a lack of action. But what if self-employed workers understood their taxes so well, they knew what parts of the new law would affect them the most? Perhaps they’d be able to make a plan in advance, knowing, for instance, that certain deductions (including the home office deduction) were scrapped and replaced by a few new deductions (like the qualified business income deduction). Could improved awareness and comprehension help self-employed workers stay on top of their tax responsibilities?

When asked what areas of taxes they’d like to know more about, self-employed workers named “anything and everything tax-related” as their No.1 response. This was followed by deductions, write-offs, and tax breaks, then why they pay so much in taxes, industry specifics, and lastly, how to get better at estimating and saving for taxes.

In the end, the IRS might be the stick that keeps taxpayers in line, but it’s possible the best way to make taxpayers out of non-taxpayers may have more to do with education than punishment. Encourage self-employed business owners to learn more about their tax situation and the resources available to them. With more awareness, better understanding, and access to great resources and professionals who can ensure tax returns are filed correctly, getting taxes paid on time should be the least of a business owner’s worries.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Wednesday, July 25, 2018

5 Reasons You Shouldn’t Use Excel to Manage Payroll

If you operate a growing business, you probably invest a great deal of time processing payroll. Payroll requires you to calculate, report, and submit payments for taxes and worker benefits. If you’re using Excel to process payroll, you’re spending far more time than is necessary.

How Payroll Is Processed

To understand why it’s not a good idea to manage payroll in Excel, it’s important to understand a few of the components of payroll. It includes a lot more than simply paying your employees. Companies must also deal with insurance payments, retirement plan contributions, and other required payments.

Here is an overview of the steps required to process payroll and other contributions:

  • Collect Data: Each employee completes a W-4 form to determine the amount of taxes that must be withheld from payroll. Business owners must also determine the benefits that they will offer employees.

  • Withhold: Businesses use the data they collect to calculate withholdings from pay. A company must withhold federal and state tax payments, along with FICA payments (Social Security and Medicare). Firms may also withhold insurance premium payments and retirement plan contributions.

  • Pay Taxes, Insurance and Benefits: Once all of the amounts are calculated and withheld, a business must submit the payments to several different entities. Taxes, benefit contributions and insurance premium payments all require separate reports that are submitted with each payment.

If any worker information changes, the data collection forms must be changed. New data also means that the withholdings and reporting will be different. A firm with dozens or hundreds of employees may have multiple changes every pay period.

The Problems with Using Excel for Payroll

Payroll is a dynamic process—things are always changing. Using Excel to process payroll will become more difficult to manage as your grows. Here are just a few of the issues that Excel users face.

1. Data is scattered.
Using Excel makes it difficult to automatically link the steps needed to process payroll. For example, the data you collect about withholdings will not post automatically into your payroll calculation spreadsheet. Each employee’s withholdings will be different and can change for many reasons, creating lots of error-prone, manual work. The process involves more steps than an automated system, which also makes adding employees difficult.

2. There is a high risk of human error.
Many businesses use linked spreadsheet tabs to process payroll. If the calculation of net pay is in tab number one, for example, the spreadsheet will require additional tabs to compute federal and state withholdings, FICA, and other amounts. Using a large number of linked spreadsheet tabs increases the risk that a link has an error.

3. Manual data entry is a pain.
The data you collect from employees must be input into any payroll system. An automated system only requires you to enter the data in one location. If you use Excel, you may need to manually enter data into multiple locations to process payroll. More manual entry increases the risk of error.

4. Your workflow probably isn’t documented.
As your business grows, you may need to hire and train new people to handle your payroll process. An Excel-based system is more complex and requires more steps. A complex process is also more difficult to document and to explain. Using Excel will require you to spend more time explaining your payroll process to new employees.

5. Investors and accountants don’t like it.
Finally, using Excel for payroll may communicate that your company is not investing in the right tools to grow the business. If you need to attract investors, you need to demonstrate that your company operates efficiently. Using Excel for payroll may inhibit your ability to grow the business over time.

Here’s How Running Payroll with Spreadsheets Goes Awry

Assume that Jill operates a Kerman Landscaping, which has three locations in town. During the winter months, Kerman handles leaf removal and snow removal, so Jill’s business requires a staff of workers year-round.

Kerman manages payroll using Excel. When a new employee is hired, Jill manually inputs the W-4 information and other data into the tabs of an Excel spreadsheet. The spreadsheet contains formulas to calculate taxes and other withholdings for each worker. Once Jill calculates each staff member’s net pay, she pays employees and sends the information to her CPA. The CPA firm completes each of the reports and returns them to Jill. Finally, Jill sends each payroll report with the required payment.

During the month of May, Kerman has several payroll changes that must be addressed:

  • Tax withholding schedules: Jill’s CPA emails her new withholding schedules for state taxes. Kerman must change the tax withholding formulas in the spreadsheet to comply with the tax law change.

  • Insurance premiums: Kerman’s insurance company raises the monthly premiums for health insurance coverage. Jill changes the spreadsheet so that each employee’s premium payments reflect the change. Kerman’s company expense for the employer’s share of premium payments must also be updated.

  • Retirement contributions: Three workers change their percentage of gross pay that they contribute to the company retirement plan. The Excel document must also reflect these changes.

In addition to updating the spreadsheet, Jill must document the changes so that her payroll records for each employee are correct. Kerman must also change the information in each form it must send. Since these steps are not automated, the changes must be entered manually.

If Jill grows her business, she will deal with even more changes each month.

Invest in Automation

QuickBooks can take payroll off your to-do list by calculating pay based on withholdings, calculating and paying federal and most state taxes and paying your employees with the click of a button. Learn more about our payroll plans and get back to running and growing your business. We can help with payroll or do it all for you.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Tuesday, July 24, 2018

Best QuickBooks Apps for Small Business Users

QuickBooks is one of the top bookkeeping tools available today. With a desktop software and online version available, businesses of all sizes have used the product to track their earnings, expenses and other financial data.

But the platform can do even more when you start making use of integrated apps. There are third-party apps available for everything from uploading data from spreadsheets to tracking employee time and pay. All of these are available in the QuickBooks App Store, where you can browse or search and then download the apps of your choice directly from each product page.

So if you’re looking to improve your QuickBooks experience, here are some of the most popular and highly rated QuickBooks apps to consider.

Best QuickBooks Apps

TSheets Time Tracking

One of the most highly rated apps in the QuickBooks marketplace, TSheets offers a time tracking, payroll and invoicing solution for teams that need a bit of help managing time and/or their employees’ time and pay. There’s a free version for single-users, so you can access it just to track your own processes. Or you can opt for a paid plan starting at $20 per month, plus an additional $5 per user per month.


It’s becoming more and more important for small businesses to have a way to track expenses even while on the go. So Expensify offers a tool that you can use to take photos of receipts and other expense data so that you can automatically update that information in Quickbooks. Pricing starts at $5 per active user per month.


LivePlan is an app available for QuickBooks that helps business owners plan for the future with financial forecasts and budgeting tools. It works with QuickBooks to give you real time updates on your key business metrics, so you can see exactly how any new developments might make an impact on your company’s finances in the future.

Business Payments

Since so many businesses use payment platforms like PayPal and Stripe to actually facilitate transactions, Business Payments offers a solution for syncing those services directly with QuickBooks. For businesses that process less than 50 transactions per month on these platforms, the service is free. For those needing additional transactions, pricing starts at $9 per month.


For businesses looking to grow by accessing funding, Fundbox is a tool that integrates with QuickBooks so that you can apply for funding easily and automatically add your financial data from your books to provide some context about your company’s ability to pay on a loan. The price for this tool is set per invoice, with fees starting at 4.66% of the funds you use.


A CRM tool designed specifically for QuickBooks, Method:CRM gives you a way to manage all of your communications or relationships with customers and integrate your sales and CRM data together. Starting at $25 per user per month, the tool basically allows you to streamline your CRM activities by including sales and financial data within the same platform.

Bill Pay for QuickBooks Online and

To manage your company’s regular bill payment schedule, Bill Pay integrates with Quickbooks to let you pay vendors and contractors with a single click. Then you can also save time on data entry, since those payments will automatically be added to your books. The version of this tool that works with QuickBooks online is free to use.

Business Importer

Business Importer allows you to automatically import invoices, payments, expenses and other financial data from an Excel or Google doc into QuickBooks. So if you have a small team that needs to send you sales reports or other documents, you can easily move between those docs and your bookkeeping software. There’s a free trial as well as a small business plan that starts at just $10 per month.

Performance Reviews by JuvodHR

An employee management app, this tool from JuvodHR offers the ability share performance appraisals and feedback quickly and consistently. The benefit of this is to make sure team members know what is expected with them and also feel engaged at work. Pricing starts at $3.75 per user per month.

Cloud Cart Connector

For e-commerce businesses, Cloud Cart Connector gives you an easy way to have online sales added directly to QuickBooks. It syncs QuickBooks with Amazon, Bigcommerce, Infusionsoft, Shopify, ShipStation, and other platforms where you can make sales directly to online customers. Monthly plans start at $29 per month.

Image Credit: intuit

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Monday, July 23, 2018

How Being Stingy With Time Leads to More Money

Being stingy with time is a sign of self-respect. Once you respect your own time, others begin to respect it as well.

When I started my business, there were several concepts that were difficult for me to understand. One of those was how being stingy with time would lead to more money.

I truly could not see how setting better boundaries and saying no more often would help my bank account. This is probably because, as a culture, we’re conditioned to believe that the more we take on the more productive we are. If we’re more productive, then that leads to more money, right?

Or, maybe we think that we can’t set boundaries because then people won’t like us and won’t pay us. That’s also cultural conditioning that doesn’t really serve us.

Now that I’ve been self-employed for five years, I see how being stingy with time does lead to more money. I’m making more money than ever. I’m also less stressed and overworked than ever. Here is how being stingy with time helps my bank account.

I am perceived as more in-demand.

This is a big lesson I received from a fellow personal finance blogger. They told me how they were leaving money on the table because they were too available. Once they started being stingy with time -- meaning they weren’t readily available all the time -- they were able to command more money.

Here’s an example from my recent life. I had to tell a client that I could no longer continue doing a specific project for them. That’s because I honestly don’t have the time to be doing projects that don’t meet a certain payment threshold. I’ve got plenty of work as it is.

Granted, this doesn’t mean lie to people and tell them you’re busy when you’re not. The reality is that if we have our priorities straight, then we really don’t have the time to be available at all hours or for all projects.

For example, maybe you set a boundary to clock out every day by 5:30 p.m. so you can go workout. That’s still time that you are not available because of your priorities.

I am respected.

Being liked could get you paid, but it’s a 50/50 shot. Being respected almost always gets you paid.

I see a lot of business owners struggling with letting people walk all over them. They will put in endless hours on projects where they aren’t getting a fair exchange of monetary value in return. This tells people that they don’t respect themselves, therefore, they shouldn’t be respected.

This is when you leave the door open for crappy clients and people who are difficult to work with. On the other hand, if you respect yourself and people can sense that, they won’t even try you.

My time is perceived as more valuable.

Finally, the reason being stingy with time leads to more money is because your time is perceived as more valuable. Time is already our most valuable resource and it’s limited. Once you really grasp this and start acting accordingly, people will respond in kind by paying you more money.

Final thoughts

Being stingy with time is a sign of self-respect. Once you respect your own time, others begin to respect it as well. Often times, this leads to more money in the bank because you are perceived as being more valuable.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Thursday, July 19, 2018

12 Expenses Successful People Don't Waste Time or Money On

Aside from the occasional indulgence, most financially successful people keep a close eye on their budgets and bank balances.

People have struck it rich by launching social media startups, inspiring wildly successful crowdfunding campaigns and writing wizard-themed best-selling books. But most successful people have far more boring backstories of accumulating wealth through savvy spending and smart saving strategies.

Aside from the occasional indulgence, most financially successful people keep a close eye on their budgets and bank balances. They rarely waste money on goods and services that don't offer much in return.

See below for which items to cut from your budget and get expert tips on how to manage your money better.

(By Charlene Oldham)

Lottery tickets

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If you truly want to strike it rich, don't play the lottery. This is a sure way to burn money fast -- and rich habits simply don't include a weekly stop at the convenience store lotto line. Your chance of winning the Powerball grand prize is about one in 292 million. Those odds are not in your favor.

Take a look at the math: A Powerball ticket costs $2. That might not seem like much, but if you play twice a week for a year -- and buy two tickets each time -- you'll have flushed more than $400 down the drain.

Don't waste your hard-earned money on chance when you can put it toward wealth-building goals, such as retirement or college tuition. Invest the same $416 each year, getting just a 5 percent return, and over 30 years you'll have $28,055.

Bank fees

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If you're always paying bank fees, you might as well just flush your dollar bills down the toilet. Successful, rich people are much too money savvy to waste precious dollars on fees that can often be avoided.

Like many businesses, banks charge fees for their services. For instance, many banks require monthly maintenance fees for certain accounts. And America's three largest banks -- JPMorgan Chase, Bank of America and Wells Fargo -- earned more than $6.4 billion in 2016 from ATM and overdraft fees alone, according to a CNNMoney analysis.

The easiest way to avoid these fees? Play by the banks' rules. For example, Bank of America's Core Checking account charges a $12 monthly fee. But you can get the fee waived if you meet one of the several requirements, such as maintaining a specific average daily balance or arranging at least one direct deposit that exceeds a set minimum.

Interest on credit cards

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A credit card can be similar to eating from a tub of ice cream. You might feel a little guilty for overindulging afterward, but it's just too convenient. Sure, it's easy to swipe the plastic -- but you won't catch wealthy people accruing high credit card interest. They know it's a waste of money.

To avoid accruing interest, only buy what you know you can pay for when your statement comes. If you are carrying a balance, transfer or consolidate your debt to a credit card with a zero percent introductory APR. Just be sure to pay off your balance before the promotional period ends.

Inflated interest rates

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Americans' average FICO score hit 700 as of April 2017, its highest mark since Fair Isaac Corporation, which created the credit risk scoring system, started tracking statistics. That's a money-saving milestone since a clean credit record gives conscientious consumers more than just bragging rights.

Credit scores play a leading role in determining your interest rate for auto loans, mortgages and more. Just by having a higher credit score, you can save hundreds or thousands of dollars in interest over the life of a loan. People with substandard scores, however, might not be able to land loans at all.

Financially successful people keep their credit reports pristine by paying bills on time, keeping debt levels low and fixing mistakes on their credit reports. And if you already have a decent credit history, but carry a balance on some credit card accounts, consider calling card issuers to request a higher credit limit. A higher limit will reduce your credit utilization rate -- the percentage of available credit you are using -- and could boost your score.

While you're on the phone, it can't hurt to ask for a rate reduction. The lower your interest rate, the faster you can blast balances.

Late fees

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Successful people don't get saddled with late fees that can chip away at their bank balances and credit scores. In 2016, credit card companies raked in $12 billion in penalty payments, including late fees, according to R.K. Hammer data as reported by The Motley Fool. Paying late can even cost people who pay off their balances every month. Just about every other monthly bill carries its own procrastination penalty as well.

Savvy spenders avoid late fees by automating everything. If you've ever asked yourself, "How can I get rich?" -- automating your payments so you don't get hit with high fees and penalty rates can help you hold on to more of your money.

Extended warranties

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Somewhere along the line -- say, if you bought a new 4K TV -- you were probably asked, "Would you like to purchase an extended warranty?" But according to Consumer Reports, a financially successful person has a simple answer to that question: "no."

Although people want the most value from purchased products, generally, extended warranties don't give you more bang for your buck. In fact, according to Consumer Reports, retailers keep 50 percent or more of what they charge for extended warranties. So extended warranties just aren't one of the things rich people buy.

So, what do rich people do? Their research -- and you should follow their lead. For instance, check your manufacturer's warranty before saying yes to an extended warranty. You might have more coverage than you initially thought.

Also, compare the cost of potential repairs versus the extended warranty. You'd typically be better off putting aside the money you'd spend on a souped-up warranty to cover future repairs yourself, according to Consumer Reports. So the next time a salesperson tries to sell you on that extended warranty, shut the conversation down fast.

Impulse buys

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Have you gone into a store intending to purchase one thing but come out with a cart full of stuff? Maybe it was BOGO at the grocery store, so you snagged a few extra items. Or perhaps it was a flash sale on your favorite clothing website and you bought designer shoes. Whatever the case might be, this isn't a shopping practice for the wealthy.

Successful people are planners, and impulse purchases tend not to mesh with this quality. If you want to emulate their behavior, be much more cautious with your money, said Leslie Tayne, author of Life and Debt. Tayne suggested going cash-only to curb your spending.

"Use the envelope system, bringing with you only a predetermined amount of money to spend at each store," she said. "This approach will help you stay on budget and curb any habits you might ordinarily have in impulse buying and overspending."

Low-interest savings accounts

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Do you like stashing cash in savings because it's secure and you can pull out money on a whim? Would you like to see more than pennies on your interest? If you answered "yes" to both, change your strategy to truly emulate a financial mogul.

Regular savings accounts don't earn a lot of interest. The national savings account rate is a meager 0.07 percent, as of June 25, 2018 -- a stark contrast from what you can expect from a high-yield savings account.

You can find high-yield savings accounts by looking beyond traditional brick-and-mortar banks. Online banks, for example, frequently offer the highest return rates because they have no or lower overhead costs. Credit unions also offer attractive rates. In fact, a GOBankingRates survey found the best savings account rates in the country tend to be at credit unions, where some rates top 7 percent APY.

If you're looking to boost your wealth by making wise decisions with money, explore your online savings account options. Furthermore, automating works as a smart savings strategy. David Bach, the author of The Automatic Millionaire, suggested diverting dollars directly to your high-interest savings account before you even see it. That way, you won't have the opportunity to second-guess or sabotage your savings plan.

High-end brands
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You might see a lot of designer labels on the red carpet, but many rich people don't choose designer labels for every purchase. Though they have the funds to splurge at luxury retailers, they understand that doesn't always mean they should.

"Financially successful people comparison shop and understand the importance of both quality and cost," said Tayne. "They may go for a cheaper item or buy the higher quality item from a cheaper store in order to make the wisest financial purchase."

What do rich people buy? The answer can depend on the day. For example, former first lady Michelle Obama donned her share of designer duds. But she was also seen boarding Air Force One and making press appearances while wearing dresses from Target during her husband's presidential tenure.

So, if you want to emulate the habits of rich people, stop and ask yourself if that $200 pair of designer jeans is really worth the investment -- or will $30 discount store denim do the trick? Always shop wisely, and keep your budget and financial goals in mind.

Bad real estate
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Billionaire investor Warren Buffett still lives in the Omaha, Neb., house he bought for $31,500 in 1958. He shelled out significantly more for his vacation getaway in Laguna Beach, Calif., purchasing the 3,588-square-foot home for $150,000 in 1971. He put that property on the market for $11 million in 2017, meaning he could turn a tidy $10.85 million profit if he gets his asking price.

Author and entrepreneur Tony Robbins advised millennials to look at property as an income engine rather than as a place to put down roots. The truth is few homeowners will be as lucky as Warren Buffett or hang on to homes for as long, and there's no guarantee a home's value will appreciate at all.

Robbins takes his own advice when it comes to his Fiji resort. Not only is the Namale Resort and Spa one of the millionaire's favorite places to vacation, it has the bank account-building bonus of commanding between $1,244 and $2,500 per night for all-inclusive accommodations for two.

Extravagant inheritances

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Financially successful families are often in a position to give the younger generation a helping hand when it comes to expenses like tuition and housing. According to a 2017 survey from online financial advisor Personal Capital, 18 percent of affluent parents -- those in households with investable assets of $500,000 or more -- planned to completely cover their children's rent, while 14 percent planned to pay for their kids' homes.

But, for the most part, supporting their kids for life is just not one of the things rich people do. Many millionaires -- and billionaires -- have publicly announced plans to leave a big bundle to charitable causes rather than keeping it all in the family.

For example, Bill Gates has said he plans to donate the bulk of his billions to the Bill and Melinda Gates Foundation rather than leaving it to his three children. And Facebook founder Mark Zuckerberg and his wife Priscilla Chan, who have two daughters, have pledged to donate 99 percent of their Facebook shares to charitable causes during their lifetimes.

Tons of TV channels and video games
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Financially successful people spend significantly less time glued to screens of all kinds than their lower-income peers. That's especially true when it comes to TV and video games, according to 2015 data from Nielsen.

Adults in households with annual incomes below $25,000 spent 42.22 minutes monthly using video game consoles, compared with 17.58 minutes whiled away by adults in households with annual incomes over $75,000. And adults in the lowest-income households spent 211.14 minutes monthly watching live or recorded television, compared with 113.41 minutes for adults in the highest-income group.

That's more than three episodes of "The Big Bang Theory" -- including commercial breaks -- that wealthier people spent doing something different with their time. So try turning off the tube if you want to see how highly effective people spend their Saturdays.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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