Watch out for these early warning signs from credit customers

It is difficult to run a business and not extend credit. Putting together a policy to follow will help with consistency and disclosing that policy to your customers before any services or goods have been exchanged is a great habit to acquire.
Once you have extended credit to a customer, you have a stake in continuing the relationship even if you suspect trouble is brewing. You don’t want to crack down on a good customer too hard too soon; yet you don’t want to be “taken” by a debtor who has become unable or unwilling to pay. The problem is distinguishing between slow payers and no-payers.

What you need is an early warning system to detect a credit problem in the making so you can stop additional sales to that customer and begin collection procedures in earnest. Here are some telltale signs of an account that is turning sour.

● The debtor has begun paying erratically, settling up on smaller invoices while larger ones get older.

● The debtor fails to return your phone calls or shows unusual annoyance at your inquiries.

● Your requests for information, such as updated financial statements, are ignored.

● The debtor places jumbo orders and presses you for a higher credit limit.

● Despite the problems you are having, the debtor tries to coax you into providing a good credit report to another supplier.

Any one of these hints of trouble can mean it’s time to turn up the heat on your collection efforts with this debtor, and make no more sales unless they’re cash on delivery. Contact us for more tips.
(817) 405-3374

Designate beneficiaries to avoid unintended consequences

I was preparing a tax return when I noticed the beneficiary on the IRA was the ex-spouse. I called to inquire if this was what was intended. It was not, but had been overlooked. This is a very easy item to overlook.
After your death, the disposition of retirement accounts, life insurance policies, annuities, and accounts at financial institutions are governed by beneficiary designations. If those designations are outdated, unspecific, or wrong, your assets may not be distributed the way you would like. Here are items to consider.

Be specific and stay current. When you name a beneficiary, your assets can pass directly to that person or entity without going through a legal process called probate. Update the designations for life events such as divorce, remarriage, births, deaths, job changes, and retirement account conversions.

Think about unexpected outcomes. Be alert for the effect of taxes and unintended consequences. For example, if the money in your accounts is distributed directly to your heirs, they may be stuck with a large unexpected tax bill. For wealthier heirs, estate tax may also play a role. In 2016, the estate tax exclusion is $5.45 million and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries is disabled, government benefits may be reduced or eliminated by the transfer of assets. You may want to consult an attorney to establish a special needs trust to ensure your loved one is not adversely affected.

Name contingent beneficiaries. If your primary beneficiary dies or is incapacitated, having a backup, or contingent, selection will ensure that your assets are properly distributed. In some cases, a primary beneficiary may choose to disclaim, or waive, the right to the assets. In that case, contingent beneficiaries can step up to primary position.

Practice good recordkeeping. Keep your beneficiary designation forms in a safe location, and maintain current copies with your financial institution, attorney, or advisor.

Beneficiary designations are an important part of estate planning. Contact us for more information.
(817) 405-3374

Returning home as an adult

How can you make moving back home a workable solution for everyone – the key is good communication of everyone’s expectations? Not only from a financial standpoint, but a division of household labor. This transition could be beneficial to everyone.
Are you thinking of returning to your childhood home to live with your parents? Although heading home after graduation or a divorce may feel like a setback, a temporary return to living with your parents can present opportunities to improve your financial situation.
For example, living with your parents means you can share the cost of rent, utilities, and food, resulting in reduced expenses. By establishing a realistic budget, you can make the most of these lower costs, and repay student loans or other debt more quickly. You can also build up savings for emergencies and long-term goals, such as buying a home of your own. A sound plan is to avoid additional debt while you’re working toward your financial independence. You also might consider paying expenses in cash to reduce your reliance on credit and help you stick to your budget.
For best results, establish clear expectations for both you and your parents before you move in together. Consider a written agreement that outlines the financial responsibilities of everyone in the household, and what the consequences will be for not living up to your promises. In addition, determine specific milestones you want to reach before you move out, and communicate them clearly. Goals could include accumulating $5,000 in savings, or reaching a six-month work anniversary at your job.
Contact us for suggestions about how to create an achievable financial plan. (817) 405-3374

What’s the difference between a credit card and a debit card?

Choosing the right type of card to use for you or your children can make a lot of difference. What features do you need or want? What works better for your lifestyle or habits?
When you pay for clothes in a store or dinner at a restaurant, you might use either a credit card or a debit card. In your mind, they may be the same. But there are differences to be aware of.

For example, with a credit card, the money is not immediately withdrawn from your bank account. As long as you pay back the issuer within the stated period, you won’t be charged interest on the money you owe. But you don’t want to make a late payment – interest can build up quickly on credit cards.

In contrast, debit cards are linked to your personal bank account, so you’re using your own money and the charges are automatically deducted from your account. Because you don’t carry a balance on the card, you’re more likely to stick with your budget and not overspend. However, you might be charged extra fees on top of interest for any overdrafts.

Another consideration: Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.

Which card is best for you? Generally, a mix of the two is a good compromise. You can use a credit card judiciously to bolster your credit, while still paying for everyday purchases with a debit card. Contact us for answers to your financial questions. We’re here to help.

Work-related education costs may be deductible

There may be some help available from Uncle Sam in advancing your career through education. Are you missing these deductions? Do you know what the rules for deducting these expenses? Did you miss this deduction for last year or the year before – there could be a refund in your future!
Are you going to school this fall to earn an advanced degree or to brush up on your work skills? If so, you might be able to deduct what you pay for tuition, books, and other supplies.

If you’re self-employed or working for someone else, you may be able to claim a deduction for out-of-pocket educational costs if the training is necessary to maintain your skills or is required by your employer.

Just remember that even when the education meets those two tests, if you’re qualified to work in a new trade or business when you’ve completed the course, your expenses are personal and nondeductible. That’s true even if you do not get a job in the new trade or business.

Work-related education expenses are an itemized deduction when you’re an employee and a business expense when you’re self-employed. You may also be eligible for other tax benefits, such as the lifetime learning credit.

For more information, please contact our office.
(817) 405-3374

Prepaid debit cards offer benefits and drawbacks

We have a lot of choices when it comes to the type of plastic we use for our spending, but are you paying hidden costs? Is it really the best option for you? What are the benefits that you enjoy and what is the cost of those benefits? Are you still happy with the benefits after you know the costs?

Prepaid debit cards, also known as stored-value cards, can be useful when you lack a traditional checking account. In an increasingly plastic-dependent world, these cards can be substituted for cash, and you can use them to pay for airline tickets, hotel stays, electronics, and groceries. Money is transferred, or “loaded,” to the card and is yours to spend until the card runs out of funds or is reloaded.

Prepaid cards have several advantages over traditional credit and debit cards. For example, if you’re traveling and the card is stolen, losses are limited to the amount on the card. In addition, because your personal banking information isn’t on the card, thieves and con artists can’t extract that data to steal your identity. Another use: Teaching kids how to budget. Some issuers offer instant alerts that monitor card activity, which is a great way for parents to see what their teens are purchasing in real time. If you’re the one who’s prone to overspending, prepaid cards offer a built-in safety net: you can’t spend more than the amount that’s loaded onto the card.

But be aware of the lack of regulatory constraints on the cards. Issuers have great latitude over fees and prepaid cards can get expensive. Depending on the card issuer, you might be charged a fee to activate the card, use it at an ATM machine, check your balance, add more money, or talk to customer support. You might be charged a monthly maintenance fee as well. Before you buy, read the fine print.

 

Follow these suggestions for better pricing decisions

If price was not a concern, what would your customers pay? We all wish we knew the answer to that question as it would make pricing our goods and services much easier to get right!

The prices you set for your products and services affect every aspect of your business, including long-term viability, short-term profits, market share, and customer loyalty. While the guidebook or financial guru who can provide the perfect answer to this important decision doesn’t exist, tried-and-true principles can help. Here are three suggestions to arrive at reasonable pricing for your market and industry.

Cover costs. The price you charge for a particular product must at least equal the cost of producing that product. Depending on your industry, production costs might include raw materials, storage, salaries, advertising, delivery, rent, equipment, taxes, and insurance. Some of these will be categorized on your income statement as “cost of goods sold.” Others will be overhead. Some, such as rent and utilities, are relatively fixed. Others are variable, such as shipping and stocking fees. Adding the amount of profit you want to earn as a percentage (called the cost-plus pricing method) is one way to arrive at an appropriate price.

Know your market. Some businesses hire research firms to develop detailed reports on competitors, markets, and forecasts for a particular region or industry. But you may be able to get a handle on your market by using surveys and other methods of ferreting out customer perceptions about your product and service quality, the effectiveness of your advertising, and the reasonableness of your prices as compared to your competition.

Monitor regularly. Product pricing is not a one-time event. Instead, you’ll want to monitor the impact of price fluctuations on sales revenue over time. Overpricing – charging more than a reasonable buyer can be expected to pay – may limit sales. Underpricing may create the perception of poor quality or lead to unsustainably low profit margins.

Contact us for more tips and techniques that can help you manage your company profitably.

Financial tips to follow when a spouse dies

No one needs more grief, frustration, or issues to deal with when a loved one has passed away. This is especially true when it is the death of a spouse. There is always so much to do and it is very easy to miss something. There are times that this oversight could provide an opportunity for identity theft. Identity theft is extremely time consuming and frustrating, but you add the emotional devastation of the death of a spouse and this becomes so much harder.

The death of a spouse is emotionally and financially devastating. Making decisions of any kind is difficult when you’re vulnerable and grieving, but having a plan to follow may help. Here are suggestions for dealing with financial tasks.

  • Wait to make major decisions. Put off selling your house, moving in with your grown children, giving everything away, liquidating your investments, or buying new financial products.
  • Get expert help. Ask your attorney to interpret and explain the will and/or applicable law and implement the estate settlement. Talk to your accountant about financial moves and necessary tax documents. Call on your insurance company to help with filing and collecting death benefits.
  • Assemble paperwork. Documents you’ll need include your spouse’s birth certificate, social security card, insurance policies, loan and lease agreements, investment statements, mortgages and deeds, retirement plan information, credit cards and credit card statements, employment and partnership agreements, divorce agreements, funeral directives, safe deposit box information, tax returns, and the death certificate.
  • Determine who must be paid, and when. You’ll need to notify creditors and continue paying mortgages, car loans, credit cards, utilities, and insurance premiums. Notify health insurance companies and the Social Security Administration, and cancel your spouse’s memberships and subscriptions.
  • Alert credit reporting agencies. Request the addition of a “deceased notice” and a “do not issue credit” statement to the decedent’s file. Order credit reports, which will provide a complete record of your spouse’s open credit cards.
  • Determine what payments are due to you, such as insurance proceeds, social security or veteran’s benefits, and pension payouts. File claims where needed.

Keep track of summer rental income

Is renting your home considered a business similar to rental property? What are the rules and how will it affect your tax situation? Knowing these answers before you rent your property will help you make a better decision.
Are you thinking of signing up with one of those websites that link travelers to property owners with space to spare? If you plan to offer for rent all or part of your main home, establishing sound recordkeeping procedures from day one is a good idea.
In addition to a bookkeeping system to track the income and expenses related to your rental, a calendar detailing the days your home was rented will be useful at tax time. The reason? Deductible expenses may be limited when rented property is also your personal residence. Having a written record helps determine which tax-reporting rules apply.
For example, say you rent your primary home to a vacationer for 15 days or more during a year. All of the rental income is taxable. However, expenses such as interest, property taxes, utility costs, and depreciation are split between the time your property was rented for a fair rental price and the days you used it personally. The portion related to the rental is deductible up to the amount of your rental income.
What if you have rental expenses in excess of your rental income? You may be able to carry them forward to next year.
Different rules apply when your home is rented for less than 15 days, and when the property you offer for rent is your vacation home or timeshare. Please contact our office. We’ll help you plan a tax-efficient rental program.

Is this insurance missing from your financial plan?

What would happen to your family if you became disabled? Are you the main provider for your family? Having the correct insurance could help you sleep better knowing you and your family have the correct coverage. Have you considered long term health care coverage?
What springs to mind when you hear “insurance?” Most likely, you think about auto, health, home, and life. But what if an illness or accident were to deprive you of your income? Even a temporary setback could create havoc with your finances. And statistics show that your chances of being disabled for three months or longer between ages 35 and 65 are almost twice those of dying during the same period.
Yet you may overlook disability insurance as part of your financial planning. Here’s how to fill that gap and get the right coverage to protect your financial well-being.
● Scrutinize key policy terms. First, ask how “disability” is defined. Some policies use “any occupation” to determine if you are fit for work following an illness or accident. A better definition is “own occupation.” That way you receive benefits when you cannot perform the job you held at the time you became disabled.
● Check the benefit period. Ideally, you want your policy to cover disabilities until you’ll be eligible for Medicare and social security.
● Determine how much coverage you need. Tally the after-tax income you would have from all sources during a period of disability and subtract this sum from your minimum needs.
● Decide what you can afford. Disability insurance can be expensive. You may opt to forego adding riders and options that boost premiums significantly. If your budget won’t support the ideal benefit payment, consider lengthening the elimination period. Just be sure that accumulated sick leave and savings will carry you until the benefits kick in.