Budgeting Tips

How many times in the past have you been strapped for cash during the holidays? Do holidays always seem to come at the worst times, when you have a month of unexpected expenses or cash emergencies? Have you repeatedly wished that you could turn back the clock and plan ahead for the extra costs related to gifts and holidays? Managing the extra expenses is totally achievable. Here are some ideas to consider for smart ways to budget for gifts and holidays.

Be Aware of Developing Situations

This strategy isn’t as ominous as it sounds. It simply means to be mindful of likely events coming up in the near future. Did your niece recently announce that she’s expecting? Start putting a few dollars away in an envelope now so you’re ready to buy a baby shower gift and/or outfit in the coming months. Has your granddaughter recently gotten engaged? A year from now you’ll be glad you started saving early so you could give her and her new husband a nice wedding gift. If you start early enough, the incremental amounts you need to put in won't be much, and you’ll hardly notice a difference in your daily/monthly budget.

Be Ready For Recurring Events

Birthdays come around every year. Thanksgiving is going to come again this year, just like clockwork. The twelve days of Christmas are rolling around sooner than you think, and your boss’s son’s Bar Mitzvah party is certain, as soon as the boy turns 13 years old in eight months. One of the easiest ways to budget for recurring events is to simply keep a calendar and set reminders. New Year’s Day doesn’t “sneak up on you” at all. It’s been in the same place for eons. You’re the one who wasn't watching the calendar. So right now, set up your calendar with the holidays that are important to you. It doesn’t matter if you use an online calendar, your computer software calendar or a paper calendar hanging in your kitchen. Decide how much you want to have available to spend for the holiday or event. Count backward the number of days you have left to save. Have your budget handy and determine—realistically—how much you can afford to save every day/week or month for those special days. When the day arrives, you’ll be so grateful that you took steps early.

Set a Limit and Stick to It

You’re not alone. When the holiday season comes along, it’s so hard not to get caught up in the spirit of the season. Whether you’re celebrating Chinese New Year, Hanukkah, Christmas, Thanksgiving, it’s often impossible to quell the urge to spend. The trouble is, these urges can quickly wreak havoc with your budget. And, wonderful as holidays are, they aren’t worth going into debt for. The temptation is to just pull out the credit card and hope for the best come January when the bill rolls in. You can avoid that sinking feeling of opening up your first credit card statement after the New Year by setting hard spending limits for yourself. Everyone will have a different comfort threshold for spending during the holidays. But that limit must fit easily into what you can afford. And, of course, once you set that limit, stick to it.

Don’t Be Enchanted by the Sparkly

If you go into any store post-Thanksgiving, you’ll be surrounded by shiny, sparkling things that would look beautiful in your home. You want to make your home look as full of holiday cheer as your favorite holiday movies, your favorite stores and your idealized images of what the holidays are all about. It’s okay to succumb to a few new baubles each year. Just don’t let yourself become so enchanted that you bring home a bunch of “stuff” that you’ll regret buying later. If you want to buy a set of cute plastic poinsettia candle rings, go right ahead. Just stop and think about where you’re going to store them after the holidays and whether your holiday will be any less cheery if you didn’t buy them. One smart way to stay within your means during holidays is to visit stores more often. Enjoy all the sparkle. Immerse yourself in it. Then walk away and leave the sparkle at the store. Come home and feel great knowing that you didn’t overspend and you have enough to pay your bills and put money into your savings account.

Avoid the Abundance Trap

Not everyone struggles to pay for gifts and holidays. These days, with so many affluent “influencers” and crypto millionaires, a lot of people have plenty of money to spend on the things they desire, including non-essentials and luxury goods. But this is another kind of trap to avoid. Knowing that you have “plenty” can make you spend like a drunken sailor, so to speak. The sky’s the limit, right? If you see something you like, you buy it. But that’s not smart fiscal spending. If you talked to your CPA, they could think of all kinds of different ways to make that extra money work for you. Imagine having a lifetime of financial security instead of spending a bunch of money on things that will just collect dust? You don’t have to “top” what you did last year during the holidays. No one’s expecting a live band at your annual Christmas party. Certainly, no one’s expecting Miley Cyrus to sing at your daughter’s birthday party. If you are fortunate to have abundance, try using those resources for something more long-lasting than the most extravagant holiday party of the year.

If you keep all these things in mind during the gift-giving and holiday events throughout the year, your special times will be all the more sweet. Financial security is worth more than all the frosted ornaments and gilded presents in the world. For help keeping your finances in control, consult with your CPA.

If you have been fortunate enough to receive a cash windfall, you may be tempted to do something frivolous with your new riches, such as take an exotic vacation or splurge on new clothes. While these things are great, the fact is you will not be putting your money to excellent use by choosing these options. If you want to make the most of your cash windfall, here are some possibilities you should be discussing with your CPA.

Start Your Own Business

If you have always wanted to be your own boss, coming into some cash may now make your dream a reality. Whether it is only a few thousand dollars or much more, you may now be able to follow your desire to become a successful entrepreneur. Should you want to pursue this path, consult with your CPA to learn about taxes and other areas of finance you'll need to know before starting your business.

Pay Off Debt

While it doesn't sound like the most fun thing you could do with your cash windfall, you and your CPA will probably agree that paying off credit card and perhaps student loan debt will help improve your financial picture in a big way over the months and years ahead. If you do this, the frown you have on your face now will turn into a smile when you realize you now either have very little debt or are in fact debt-free.

Buy a Home

Rather than continue to pay rent to your landlord month after month, you may want to take your windfall and become a homeowner. Even though interest rates have gone up in recent months, there are still plenty of people who are eager to sell their homes. By having a large amount of money you can use as your down payment, this will make you a very attractive buyer to lots of sellers. By working closely with your CPA and a real estate agent, you can be in the driver's seat to get your dream home at a very affordable price.

Open a Retirement Account

Even if you are still decades away from retirement, taking your cash windfall and opening a retirement account will bring you plenty of peace of mind as the years go by. You may want to open a Roth IRA, which could help you keep much of your money tax-free. Should you work for an employer who offers you a 401(k) account, consider putting most if not all of your windfall into this account. If your employer is one who matches your contribution, this will be even better.

Buy a New Car

If you have been spending money right and left on car repairs because you haven't had the money needed to buy a new vehicle, your problem may have been solved thanks to your cash windfall. Even though a new vehicle will begin to depreciate the minute you drive it off the dealer's lot, you can still come out way ahead by not having to pay for one expensive repair after another on a regular basis. Should you decide to do this, talk to your CPA about how to get the best financing and how a car payment, insurance, and other costs may impact your budget.

Open a 529 Plan

If you are a parent of a small child, you probably worry about having enough money available to pay for your child's college education. Rather than stay awake at night worrying about this problem, take your cash windfall and open a 529 Plan. Once you talk this over with your CPA, you will discover you will not only earn interest on this money, but that it will also be tax-deferred.

Purchase Life Insurance

Should you be the primary breadwinner for your family, taking some or all of your cash windfall to purchase life insurance will be a wonderful way to give you and your family tremendous peace of mind. Even if you are older, there are many life insurance options available to meet your needs. Before deciding on a policy and paying any premiums, let your CPA look over the policy's fine print.

Start an Emergency Fund

Unfortunately, the vast majority of people have little if any money set aside for emergencies, such as losing a job, a car or home repair, or a medical emergency. Now that you have your cash windfall, this may be the perfect time to start your emergency fund. When you speak to your CPA about this, you will probably be told to have an amount in your emergency fund that is equal to about six months' worth of expenses. Even if your windfall is not for that full amount, putting aside as much as you can will be a smart decision.

Fix Up Your Home
Since your home is likely the biggest investment you will make in your lifetime, take advantage of your sudden wealth and use the money for some much-needed home repairs. This can be a new roof, an updated electrical system, buying some new appliances, or perhaps remodeling your kitchen or bathroom. By doing so, you will add to the value of your home, which can benefit you should you decide to sell at some point down the road.

Donate to Charity
If there is a cause that is near and dear to your heart, you can take your cash windfall and make a charitable donation. Along with the money being much-appreciated by whatever organization you support, you may be able to write off the donation come tax time. However, to do this, the charity will need to be a qualifying organization. Therefore, talk to your CPA about this before you try doing something for a good cause.

Since you have so many options regarding what to do with your cash windfall, do all you can to make a smart decision. By talking over various ideas you have with your CPA, you'll put your cash windfall to excellent use.

Gas prices across the nation have surged almost 50% this year. The “award” for highest price for gas in the nation goes to Mendocino, California, where it hit a record-setting $9.60 per gallon. State averages for regular gas prices are $5.26 in Alaska, $5.55 in Hawaii and $5.18 in Nevada.

Recently, gas prices have cooled down a bit, partially because the White House administration requested a gas tax holiday for three months. So far, six states (and counting) have suspended state gas taxes. After that three months is up, you can reasonably expect gas prices to go back up, too.

Many individuals online have spoken out about the need to stop complaining about the price of gas. They’ve said that it’s a first world problem, that it’s a small price to pay for peace in the Ukraine, that it’s not that big of a deal. But it is a big deal to many people, including those whose very livelihoods depend on being profitable, and gas expense cuts into those profits.

For the average working individual who needs to commute to work, exorbitant gas prices cut straight into the family budget. There are other people and companies that are even more directly affected by high gas prices.

Landscapers (both companies and individuals) who use up a lot of gasoline on a daily basis, running mowers and power tools.

Commercial truckers and trucking companies, who either need to keep fuel in their owner-operated rigs, or who need to keep a fleet of commercial trucks on the highways in order to stay in business.

Farmers and agricultural enterprises, where fueling irrigators, combines, tractors and the like is essential to realizing profits down the line.

Saving money on gas is important for everyone in this economic climate. Following are some tips for saving money at the pump:

Use Gas Reward Cards

Gas rewards credit cards are a simple way to earn cashback on gas purchases. Chase and American Express each offer cards like this. Be sure to use them for your business fuel purchases as well as personal, to maximize savings.

Sign up For Loyalty Programs

Speedway, Spinx and many other gas station outlets operate loyalty programs where all you need to do is enter your phone number at the pump to get 5 cents off per gallon. Five cents isn’t a lot, even if you’re filling up, but over a week or month, the savings does add up. Most of these programs give customers even higher reward points when you buy items from inside the store, like coffee, pizza, snacks and grocery products.

Use GasBuddy

GasBuddy is an app for Android and iOs where you can enter your zip code and it will tell you where the cheapest gas is that’s near you. You’ll also get a list of all the gas station prices, as reported by users. It’s free to use on your PC or phone and you can also contribute your own reports of the latest gas prices that you see in town to help out others.

Sign up For Grocery Store Rewards

Grocery store chains such as Kroger offer up to10 cents off each gallon of gas once you reach a certain level of points. Points are given based on your grocery store receipts. Considering the high price of food these days, it’s pretty easy to quickly rack up enough points for that 10 cents off reward.

Don’t Travel For Gas

As much as you may dislike actually stopping for gas, this is a better strategy than traveling solely for the purpose of buying gas. Make gas stops on your way to and from other errands so you aren’t wasting money on gas just to fuel your tank.

Fill up on the Best Days

Did you know that gas is historically lower on some days than others? It has to do with when the fuel tanks come in to fill gas station tanks. According to GasBuddy, the cheapest days to get gas are on Mondays and Fridays. However, this statistic is based on national trend data, so your local gas stations might vary from that. Consider just asking at the counter of your favorite gas station. They have to buy gas too, so they’ll understand your desire to know when is the cheapest day to fuel up.

Get a Tune-up

If your vehicle isn’t running efficiently, saving money on gas is going to be more difficult. A tune-up will help make sure your vehicle is burning gas efficiently and not wasting gas every time you drive.

Consider Home Deliveries

When you order groceries and other items online, you save on gas by not driving. Instacart offers grocery delivery at affordable prices, although keep in mind that you might pay slightly higher prices this way. Just be sure to give the shopper your grocery loyalty card number so you still get your fuel rewards points, even though you’re not shopping in person.

Turn Off Engine While Waiting

When you visit food drive-throughs, ATMs, or are just waiting inside your car for something, turn off the engine. Idling wastes gas. According to fuel efficiency experts, up to a quarter gallon to half a gallon of gas is burned per hour just by idling.

Pay Cash

If you don’t have a fuel rewards credit card, it’s worth it to pay cash at the pump in order to get the lowest possible price. Some gas stations, such as Valero, give customers a price break if they pay with cash. The inconvenience of having to pay inside is often worth it.

Drive Better

Being a “smoother” driver helps to conserve the gas in your tank. Sporadic fits and stops burn up more fuel than when you’re driving along smoothly.

Use Waze

Finally, Waze is a driving app that allows you to plan routes in the most direct way possible. By not double-backing, you’ll end up saving gas. Download it for Android or iOs phone devices online.

No matter who you are or what line of work you’re in, these tips for saving money on gas should be of help. As always, contact your CPA for more helpful tips on money management.

In today's world, it sometimes seems as if everyone is in debt to some degree. Between car payments, mortgage payments, credit cards, student loans, and other types of debt, it's easy to see why the average person is nearly $90,000 in debt. If you are determined to put debt behind you in 2022, the good news is that you've got plenty of viable options at your fingertips. As you begin discussions with your CPA as to the best ways to tackle your debt, keep the following tips in mind.

Pay More than the Minimum

If you really want to see your debt disappear very quickly, your CPA will agree that paying more than the minimum due on credit cards each month is an effective strategy. Of course, you'll need to plan your budget very carefully to ensure you can manage the extra bit of expense. Otherwise, you could be creating a new problem while tackling an old one. Along with ridding yourself of debt, your CPA will also remind you that you will likely save thousands of dollars in interest along the way. If credit cards are your main debt issue, this is a smart strategy to use.

The Debt Snowball

While you probably have some large debt, chances are you also have debt amounts that are relatively small. If so, you can use the debt snowball method to your advantage. With this strategy, you focus first on paying off your smaller debts, then work your way up to the larger ones. Along with getting rid of some debt in a short period of time, this strategy also gives you early success in your battle against debt, helping to keep you motivated as you tackle larger amounts.

Pay Off Title or Payday Loans Immediately

If some of your total debt includes payday loans or title loans, your CPA will emphasize that you pay off these loans as quickly as possible. While credit cards have high interest rates, remember that most payday or title loans have interest rates approaching a whopping 400 percent. In fact, it often makes sense to borrow money elsewhere—at a lower interest rate—and pay off higher interest titles and payday loans with it.

Refinance Your Debt

Refinancing your debt can also help you to ultimately eliminate your debt. You could refinance your auto loan, mortgage, student loan or personal loans. Though interest rates have risen over the past few months, you can still come away with interest rates that are lower than your existing debt, especially if you use a debt consolidation loan. Should you have credit card debt, take advantage of balance transfer offers. By doing so, you might be able to transfer debt to a card that will have a 0% APR for up to 18 months.

Get a Windfall? Apply it to Your Debt

If you happen to receive a windfall of money, such as a tax refund or maybe money from an inheritance, apply it toward paying off your debt. While you may be tempted to use your windfall to take a vacation or buy something you've had your eyes on for a while, using it to pay down your debt will benefit you far more in the future than any immediate satisfaction you may get from a purchase.

Negotiate a Settlement with Your Creditors

If you have a tremendous amount of debt that may be almost impossible to pay off through normal means, you may be talking with your CPA about filing bankruptcy. However, only do this as an absolute last resort. Instead, consider contacting your creditors and negotiating a settlement. Another possibility is to work with a third-party debt settlement company, although you will need to carefully select a company that is legitimate, charges nominal fees for its services, and has a verifiable track record of success with past clients.

Consider a Side Hustle

As more and more people grapple with debt, many are turning to a side hustle as a way to earn money to pay down debt. If you want to give this a try, you have lots of options, such as being a driver for such services as Uber or DoorDash. Also, you could take on a conventional part-time job at a local store, or even find online work opportunities you could do from home. Once you start looking around, you may be surprised at just what is available to help you earn extra money.

Take a Closer Look at Your Budget

Even if you have created a budget that you think is bare to the bone and have cut out all unnecessary expenses, take a closer look at your existing budget. When you do, you may find you can do a few things to help you save a few more dollars each month. For example, you may discover that you can cut your entertainment budget a bit more, or maybe opt for a monthly smartphone plan that is cheaper than what you currently pay.

Ask for a Raise

You may be able to tackle your debt problem by convincing your boss to give you a raise. As today's employers struggle to keep current workers and hire new ones, your boss may realize giving you a raise is much easier than trying to find someone who can fill your shoes five days per week. Just be sure to use any extra money to pay down debt, and don’t be tempted to spend more.

Stop Investing

If you currently contribute money to your 401(k) plan, stop doing so for a few months while you're trying to eliminate debt. Once you do, you'll find you may have enough money to get yourself debt-free much sooner than you expected. After you’re debt-free, be sure to resume saving, because this will give you financial security in the future.

While getting out of debt in 2022 can be challenging, it’s not impossible. By relying on the advice of a CPA you know and trust, it won't be long until you can kiss your debts goodbye.

When you invest in something, be it stocks, a business, or anything else, you of course want to make money, or have a return on your investment. To know if your investment has been successful, you will need to rely on the financial metric known as ROI, or Return on Investment. Excellent to use whether you are examining the return on only one investment or multiple investments, the ROI is a ratio that compares your investment's gain or loss to the cost of the investment itself. If you want to know how to calculate an ROI, its advantages and disadvantages, and much more, here is all you need to know.

Calculating Your ROI

To calculate your ROI, you begin by subtracting your investment's beginning value from its final value, which equals your net return. After doing this, your next step is to divide your net return by the cost of your investment, then multiply this number by 100. While it may sound a bit complicated, it's actually quite easy, and is in fact easy to understand, so much so that the ROI is used worldwide as the standardized measure of an investment's profitability.

An ROI Alternative

Along with calculating the ROI in the manner described above, there is an alternative method you can use to gauge your investment's profitability. To do so, you can subtract your investment's initial value from its final value, then divide the result by the investment's cost and multiply by 100. Since either method will yield you the same result, it matters little which one you prefer.

How to Interpret Your ROI

Now that you know how to calculate your ROI, it's equally important that you know how to interpret the results. In many cases, it's often a good idea to sit down with your CPA when doing this, since they may be able to point out things good or bad that you might be missing.

If you calculate your ROI and wind up with a positive number, your net returns will be referred to as being "in the black," meaning you made money because your total return was more than your total cost. However, if your ROI calculations result in a negative figure, you are now "in the red," meaning you lost money since your total costs were more than your total returns.

When you want the most accuracy when calculating an ROI, an annualized ROI works best, since this will let you and your CPA examine the total costs and total returns of multiple investments at once.

Leverage in Combination with ROI

In many cases when ROI is being calculated, individuals will also bring leverage into the equation, which can be both good and bad. On the one hand, if an investment was profitable, leverage will make the ROI look even better. However, if losses were sustained, leverage magnifies these as well, making an already bad situation look much worse. Almost always, ROI will look better if leverage is not included in the equation.

Unequal Cash Flows

If you are considering investing in a business that has an unequal cash flow, the ROI calculation will become more complicated, since the ROI is likely to fluctuate each year. When doing this type of calculation, you will need to use the internal rate of return (IRR) found in a typical spreadsheet.

In many cases where unequal cash flows exist, the ROI will be greater sooner rather than later, since larger cash inflows typically occur early on with most businesses. By having a positive impact on the IRR, this leads to a positive impact on the ROI.

ROI Advantages

The biggest advantage of an ROI is its simplicity in being able to be understood by investors. Since the basic ROI calculation is relatively simple, it is a metric that can be quickly determined and used to make business decisions on many levels. Whether it is an individual investor or a company that is considering making a multi-million dollar investment, the ROI is what is used when deciding whether to go all-in or look elsewhere.

ROI Disadvantages

While the ROI does have numerous advantages, it also comes with four disadvantages that you should talk over with your CPA so that you understand them.

First, an ROI will most often not take into account how long investments are held, which may create problems if you are wanting to compare various types of investment alternatives. However, if you use an annualized ROI, this problem can usually be solved.

Second, an ROI does not adjust for the risk associated with an investment. As you know, investment returns are directly linked to an investment's risk factor. Generally, if you wish to get extremely high returns on an investment, you are putting yourself at much greater risk of significant financial losses. Thus, as an investor, it is not recommended that you only use the ROI to determine if an investment is best for you. Instead, talk to your CPA and let them combine the ROI with other elements to help you make the best decision.

Third, ROI figures are sometimes exaggerated, especially if all costs are not included in its calculation. This often happens with real estate investments, since such expenses as maintenance costs, insurance, mortgage interest, and property taxes may be excluded by choice or by mistake.

Finally, an ROI only looks at the financial gains associated with an investment. In today's world, more and more investors are also concerned about the social or environmental impact associated with their investments. To calculate this, a new metric known as the Social Return on Investment (SROI) is being used to address these concerns.

ROI and Your CPA

While an ROI is simple in some ways, it does still leave the door open for many questions about how profitable your investments really are, how they are impacting the world around you, and so on. If you want your questions answered by a financial professional who can give you peace of mind, speak to your CPA.

Whether you are an individual or perhaps a business owner who used a credit card to get your business up and running, you know how convenient it is to have a card available for making purchases. Unfortunately, that convenience often leads to using the card more than you should, which in turn results in more debt than you can afford. To take full advantage of your credit card while at the same time keeping the debt at manageable levels, here are some tips you can use to control your credit card debt.

Pay Your Credit Card Bill On Time

If you want to see your credit card debt expand in a hurry, start paying your bill late month after month. If you do, you'll soon get hit with exorbitant late fees, increased interest rates, and possibly credit-limit reductions. To avoid this and keep your debt low, always pay your credit card bill on time each month.

Rely on Responsible Spending

When you have that piece of plastic in your hand, it's often way too easy to make one impulse buy after another. For example, if you are a business owner, you may decide on an impulse to buy that new computer with all the latest gadgets, although your existing computer works just fine. But whether it's something for a business or your personal life, be responsible when using your credit card. As a general rule for business owners and individuals, if you are wanting to put something on your credit card that you won't be able to pay off within three months, it's best to put the card back in your pocket.

Develop a Payment Strategy

One of the best ways you can control credit card debt is to develop a payment strategy and stick with it each month. For some people, they choose the debt snowball strategy. If you use this approach, you'll concentrate on paying off the smallest balances first, then work your way up to larger balances. If you opt for the debt avalanche strategy, you'll do the opposite and instead pay off the larger debts first. Whichever you choose, it may be best to get advice from your CPA before moving forward, especially if you are a business owner.

Automate Your Payments

For many people, setting up automatic payments each month is a fantastic way to keep their credit card debt to a minimum. By doing this, you can be sure of avoiding late fees, interest penalties, and bad reports about you being sent to credit monitoring agencies. However, if you opt for this, it will be crucial that you make sure you always have enough money in your bank account to cover the payments. If you don't, you'll not only get hit with penalties from credit card companies, but also overdraft fees from your bank.

Create an Emergency Fund

Whether you are a business owner who has experienced tough times due to the pandemic or an individual who maybe lost a job or had your hours reduced, creating an emergency fund can give you the money you may need to keep making credit card payments until things improve. If you can, try to build up an emergency fund that will be equal to six months of your typical expenses. An easy way to do this is by direct deposit, since this money will go directly to your bank account.

Pay More Than the Minimum

If you only make the minimum monthly payments on your credit cards, chances are you will be making payments on your cards for decades. To get out of credit card debt at a much faster pace, try to pay as much as you can over the minimum payment each month. If you do, you'll be surprised at just how quickly your credit card debt will disappear.

Consolidate Your Credit Card Debt

For many individuals and business owners, consolidating credit card debt through the use of a low-interest personal loan can work wonders. If you use this financial tool, you will get out of debt much faster, while only having one payment to make each month. Best of all, you'll be paying much less interest along the way, meaning more of your hard-earned money will remain in your pocket. Prior to pursuing any loan, consult with your CPA to make sure you can manage this payment, and also verify the debt consolidation company is reputable.

Work with Your Creditors

If you have been a customer of a credit card company for years, are in good standing, make at least the minimum monthly payment on time each month, and have not gone over your credit limit, you may be able to contact your creditors and work out a better deal for yourself. Since the last thing any credit card company wants to do is lose a customer, chances are having a conversation with them will result in the company lowering your interest rates.

Limit the Number of Authorized Users

One of the biggest problems that often happens in many businesses is that too many people have access to the company credit card. As a result, before you know it, thousands of dollars have been charged to the card without your knowledge. If this sounds like your business, limit the number of authorized users for your company credit card. This also works well for individuals, especially if you have a spouse who is prone to impulse buying.

Have Only One or Two Cards

The more cards you have available to you, the more tempting it is to use them on a regular basis. If you believe this is a major contributor to your increasing credit card debt, try having only one or two cards at your disposal. By doing so, you'll only be able to accumulate so much debt, making it more likely that you'll be able to pay it off each month.

By meeting regularly with your CPA and heeding their advice as to how to control your credit card debt, you'll find your financial life becomes much easier.

If you are an employer and want to gain instant popularity with your employees, hand out bonuses at the end of the year, or any other time, for that matter. Along with showing your appreciation for their hard work, bonuses also demonstrate that you are willing to share your company's success with all those who are making it happen. According to recent surveys, almost 80% of all businesses in the U.S. plan to give their employees some form of a bonus during a typical year. But before handing out employee bonuses, here are some things you and your employees should know.

Business Tax Deduction

First of all, remember that employee bonuses do have tax implications. For example, as an employer giving your employees a bonus, you are allowed to deduct this as a business expense on your tax returns, where they come under the category of "payments to employees." However, if you give out bonuses to some employees but not everyone, make sure you are able to explain your reasons for doing so. Otherwise, you could be hit with allegations of discrimination or favoritism.

Avoid Giving a Bonus to Yourself

While you may think you could provide a bonus to yourself, the IRS tends to think otherwise. In fact, bonuses are not considered to be deductible expenses if your business is a sole proprietorship, partnership, or an LLC. In essence, if you are considered to be self-employed by the IRS, Giving yourself a bonus isn’t the way to go.

Taxable Income for Employees

When it comes to your employees who receive the bonuses, they need to remember that the extra income you have given them is still considered by the IRS to be taxable income, no matter whether it is a signing bonus, year-end bonus, or another type of bonus. Because of this, any employee who gets a bonus is required to pay state and federal income taxes, as well as FICA taxes.

Bonuses and Employee Withholding

Should you decide to give your employees a bonus, it is only natural that they would want to keep as much of the money as possible. To help them do that, you as their employer can allow them the chance to change their withholding for their bonus check, then switch back to their usual withholding for their regular paychecks. Referred to as "grossing up" the bonus check, this lets your employees keep more of their bonus, even after they have paid income and FICA taxes.

Does a Bonus Always Have to be Cash?

While you and your employees usually think of bonuses as cold, hard cash, it doesn't always have to be this way. Actually, many employers give their employees many different types of bonuses. Technically, a bonus is defined as anything that is given or paid to someone that is over and above that which is actually due to them. Thus, your bonus to employees could take the form of a turkey for Thanksgiving, gift cards for local restaurants or other establishments, vacations, or anything else you may want to give. But no matter what type of bonuses you provide, always remember to deduct them as business expenses at tax time.

Performance Bonuses

At many companies, employers often prefer to structure their bonuses as performance bonuses, meaning they are linked directly to how productive their employees have been throughout the year. Generally, these bonuses are given to employees who meet sales quotas or complete an important project before a specified deadline.

Holiday Bonuses

In case you didn't know, over 90% of U.S. companies give out holiday bonuses to their employees each year. Since everyone tends to be in a good mood over the holiday season from Thanksgiving to Christmas, employers use this as a time when handing out bonuses builds up much goodwill. If you and your company are part of this group, continuing to do this each year not only gives your employees something to look forward to at year's-end, but also demonstrates you care about them and their families.

Year-End Bonuses

While holiday bonuses may happen regularly at the end of each year, they are not actually known as year-end bonuses. Rather, these types of bonuses are often given to employees after a company has had an exceptional year financially. Thus, if your company sailed past the competition and sold more products or services than you ever thought would be possible, sharing the wealth with your employees will give everyone incentive to do better and better.

Rewarding Loyalty and Seniority

If there is one excellent benefit bonuses provide to employees, it is rewarding them for their loyalty to a company. Thus, when considering how you want to structure your bonuses, you can take the approach of giving higher bonuses to those employees who have been with you for many years and have achieved high levels of seniority. By choosing this type of bonus structure, you will give your employees far more incentive to stick around for decades, rather than look for new employment opportunities.

Milestone Bonuses

In every person's life, various types of milestones take place. These can include birthdays, wedding anniversaries, the birth of a child, and so forth. For some employers, these important life events are seen as excellent times to hand out bonuses. For example, you can create a company policy stating that all employees will receive a $100 bonus on their birthday, or perhaps $200 when they welcome a new addition to their family. Since this type of bonus structure offers much flexibility and can apply to all employees in one way or another, it is a popular trend in today's business world.

Once you understand the various tax implications of employee bonuses, you will see the pros definitely outweigh the cons. To keep your company growing, it is vital you make sure employees from the top on down feel valued and appreciated each and every day while on the job. By giving out bonuses that are fair and equitable, you can accomplish that and much more. Be sure to talk with your CPA before giving out bonuses, to be sure you organize the transactions correctly.

As the COVID-19 pandemic has raged across the U.S. throughout much of 2020 and into 2021, small businesses have struggled to survive.  While many have not, others have used the federal government's Paycheck Protection Program (PPP) to obtain loans that are completely forgivable.  However, since there are deadlines to meet and other terms to ensure a loan will be forgiven, it is crucial for you as a business owner to know more about the process involved in applying for loan forgiveness.  To ensure that your PPP loan has the best odd of being forgiven, remember these key points along the way.

A Simplified Process

As a bit of good news, you will be glad to know the loan forgiveness application you will use has been greatly simplified since the program first began.  If you are a first-draw borrower who borrowed $150,000 or less, you won't need to submit any additional documentation.  Since nearly 90% of PPP loans issued during the first round that ended on August 8, 2020 were for $150,000 or less, chances are this will apply to your situation.

What are the Requirements for PPP Loan Forgiveness?

Whether you obtained a first-draw or second-draw PPP loan, the requirements for loan forgiveness are the same.  If you want your entire loan to be forgiven, it is required that you maintain both your staffing and compensation levels during your covered period.  

Also, the money you obtained from your PPP loan must have been spent only on eligible expenses during the covered period, with at least 60% of your money being spent on payroll costs alone.  If you received your loan in 2020, the covered period is 24 weeks after you obtained your loan.  However, if your loan was obtained in 2021, you can opt for either an eight-week period or the standard 24 week period.

What are Considered Eligible Expenses?

In the original PPP legislation, only payroll and the operating costs associated with your business were considered to be eligible expenses.  However, when the second round of relief was passed by Congress in 2020, the list of eligible expenses was expanded. As a result, eligible expenses now include not only payroll and operating costs, but also supplier costs, property damage, and money spent on worker protection.  Thus, if you had contracts in place with vendors before your covered period, suffered losses at your business due to looting, or had to purchase PPE for workers, install barriers, or expand your business to accommodate social distancing requirements, these expenses will be eligible for PPP loan forgiveness.  But remember, any costs associated with property damage that were covered by insurance will not be eligible for forgiveness. 

When Should I Apply for PPP Loan Forgiveness?

While you can apply for PPP loan forgiveness as soon as you have spent the funds from your loan or when your loan comes to maturity, it is extremely important to apply for forgiveness before your first loan payment would become due.  

No matter whether your covered period is for eight weeks or 24 weeks, payments on PPP loans are deferred for 10 months after your covered period ends.  Should you wait until after that deadline to apply for forgiveness, you'll be required to start making payments. 

Should you make the mistake of applying for forgiveness after your loan has already matured, you could be facing a financial disaster, since you won't be eligible for forgiveness.  Therefore, if your loan originated prior to June 5, 2020, your loan will mature two years following that date.  For loans received after June 5, 2020, these will mature five years after the date in which the loan was issued.  If you have questions about this aspect of PPP loan forgiveness, speak to your CPA.

How Do I Apply for PPP Loan Forgiveness? 

When you are ready to apply for PPP loan forgiveness, you should contact your PPP lender, who will then inform you of which loan forgiveness form you will need to use.  Since you may need to submit additional paperwork along with your form, especially if you are a second-draw loan recipient, keeping track of your paperwork along the way will make this process much easier.

As stated earlier, if you borrowed less than $150,000 on a first-draw loan, you will not be required to submit additional paperwork, and thus can use the simplified loan forgiveness form.  However, if you received a second-draw loan, you will be required to prove your revenue loss before the government will approve your loan forgiveness.

What Documentation Will I Need to Submit?

Along with completing the PPP loan forgiveness application, you may also need to submit various types of documentation to prove you spent the money from your loan in the required manner.  Remember that to be granted full forgiveness for your loan, you will need to show that at least 60% of your money was spent on payroll expenses, with the rest being spent on other eligible expenses discussed earlier. 

To prove your payroll costs, you may need to submit such paperwork as bank statements, third-party payroll reports, state and local quarterly financial reports, tax documents such as Form 1040 Schedule C or F, W-2 or W-3 forms, and perhaps other documents as well. 

As for your other costs, you will likely need to submit utility bills, purchase orders, canceled checks for such items as PPE, safety modifications, and repairs to your business, and anything else you feel may be relevant.  Since this process can be very time-consuming, complex, and frustrating, it is wise to work with your CPA along the way to make sure even the smallest of details are covered.

Since you put in the time needed to make sure you obtained a PPP loan to keep your business going during the pandemic, you should also put in just as much if not more time to make sure your loan is completely forgiven.  If you have questions about the process or require expert guidance on what types of documentation you need to submit, schedule a consultation with your CPA to make sure you don't miss critical deadlines.

Cash flow is one of the most common problems that all businesses face. It’s also one of the most crippling financial situations that business owners contend with. There are several steps you can take to reduce or eliminate your business cash flow issues. One or more of the following ideas will likely help your situation.

Invoice Immediately

Delays in invoicing cost businesses thousands of dollars every year. The biggest mistake that many in-house accounts receivables departments make is invoicing on a schedule. Some businesses are so busy that they may only send out invoices one a month. This is a huge obstacle to healthy cash flow. While other business transactions lend themselves best to schedules, your business should never make a practice of invoicing on a schedule. This ends up creating all kinds of cash flow issues. For example, what if you invoice every Tuesday and you render service to your highest paying client on Wednesday. Now you have to wait an entire seven days before you invoice for your largest future receivable? That adds seven days to the time they have to pay you, which doesn’t help your cash flow. As soon as you possibly can, send out your invoices for services or products rendered. Invoice immediately; ideally the same day that the service or product was delivered. Do this with all your clients and your cash flow problems should begin to disappear.

Make Payment Terms Shorter

One reason that you may have cash flow problems is that you’ve been too generous with payment terms. This is often the case with newer businesses that are eager to sign clients. Unseasoned business owners may not realize the impact that generous terms will have on their cash flow. Now that you do see the ramifications, it’s time to take a closer look at how long you’re giving your clients to pay invoices. For small business clients, your payment terms should be shorter; two weeks would be great, but 20-30 days is the norm. Larger companies often request a minimum of 45 days to pay, with 60 days being the norm. If you have a large corporation for a client or a government client, they may even insist on 90 days. It’s ironic that the larger the client—and presumably the larger their bank account—the longer they want to pay. In some cases, you do have to play by their rules, especially if it’s a corporation with blanket terms across all their vendors. It’s the price of doing business with them. But for small and medium sized business, you can definitely call the shots. Speak to the representative and tell them of your plan to reduce the payment due term. Then put the change in writing so their A/P department sees it. Finally, follow up to ensure that the shorter payment term is being adhered to. This small change in your invoicing practice will help to improve cash flow for your business.

Get on Retainer

One of the fastest and most effective ways to improve cash flow is to get on retainer with one or more of your clients. Retainer terms means that you’ll be paid the same amount on a regular basis. It’s income that you can count on when planning your budget. Most businesses that work on retainer rarely, if ever, have cash flow problems. If you have a business model that you don’t think would work on a retainer basis, consider this option: Ask one of your clients that routinely pays late if they’d be interested in paying in weekly installments toward their future invoices. This way, they aren’t hit with a large bill that they obviously have trouble paying, and you get the same kind of regular income that you’d get if you were on retainer. This way you are also helping to ensure that your invoices with this problematic client do get paid, albeit little by little.

Offer Multiple Payment Options

Another challenge for some of your clients might be the limited options you’re giving them to pay. If a client is cash poor, they may pay your invoices late, which gives you cash flow problems, too. You can help solve both of your problems by offering multiple payment options. For instance, you could offer payment by check, wire transfer or credit card. If you decide to offer payment by credit card, be sure to charge the client the extra 3% or so that the credit card processor will charge you. To implement this idea, print the new payment terms on the invoice itself, but also send out a separate letter or email to the client and to their A/P department so they’re aware of the additional payment options.

Don’t Procrastinate on Collections

The minute an invoice becomes overdue, don’t just “make a note of it” on your aging receivables report. Either you or someone in your bookkeeping department should contact the client and politely ask if the payment is on the way. Always be polite and understanding. Don’t alienate clients over collections. A late paying client is better than no client. Keep a friendly rapport so that the client will remain open and honest with you about any financial difficulties they’re having that are causing the late payment. Finally, be clear about collections laws. Collections regulations are very precise, and you always want to make sure you’re in compliance. If you aren’t comfortable making collection calls, you can outsource this type of thing to certain HR companies.

Cash flow problems can bring your business operations to a screeching halt. But these tips can help you keep money moving along the pipeline as it should. If you aren’t sure whether your company is facing cash flow problems, or which solution outlined above would work best for your business, consult with your CPA for insight.

The decision of when to draw social security benefits can have a lifelong impact on one’s ability to have sufficient enough funds to afford retirement. For too many retirees, an insufficient social security nest egg is all they have.

Waiting to collect social security benefits versus not waiting to collect social security benefits can be a difficult decision make. A number of factors need to be taken into account in order to make an intelligent and well-informed decision.

This article will highlight the impact of various situations on this decision.

US News makes the following case about whether or not it ever makes sense to take social security before the full retirement age:

While you’re eligible to start drawing Social Security at age 62, your monthly benefit is reduced by 25 percent from what you would receive at your full retirement age (66 or 67, depending on when you were born). If you wait until age 70, you can expect your monthly Social Security benefit to be 76 percent more than if you start drawing at 62.

In the article, Leann Sullivan, vice president at TFC Financial Management in Boston, makes this interesting point: “Probably the primary time is when there’s a health issue.”

Someone who can no longer work because of illness or who doesn’t expect to live very long would be smart to draw sooner rather than later, she says.

In addition, here are four situations in which it may make sense to take Social Security early, as US News also noted:

1. You can’t live without the money. For those who have no other source of income or not enough money to pay expenses, early Social Security may be necessary to put food on the table. “A lot of times it’s going to make sense for one of the spouses to collect a little bit earlier,” Lucey says. “There’s just a lot of cases where additional cash flow earlier in retirement makes a lot of sense.”

2. You don’t expect to live past age 80. According to the Social Security administration, a man turning 65 this year can expect to live to just over 84. For a woman, the expected age is 86 1/2. But people with terminal illnesses or serious health issues may know they won’t live that long, so taking Social Security early makes sense.

3. You can’t work but you aren’t eligible for disability benefits. Someone who had a physically demanding job may not be able to do that particular job anymore but isn’t considered disabled because he or she can do other kinds of work. For individuals who are otherwise in good health, seeking a new job at 62 may make sense. Others might be better off drawing Social Security.

4. You’re a widow or widower. Widows or widowers can draw from their former spouse’s benefits starting at age 60, and that does not affect their ability to draw their own benefits later. Divorced spouses or minor children may also be eligible for benefits.

This analysis looks at it from a similar but slightly different angle. The following five steps guide you on a methodical approach to evaluating this important decision:

Step #1 – Find Out Where You Stand

You need to know how much your benefits will be and when, exactly, you'll reach what the Social Security Administration (SSA) considers "full retirement age," the age at which you can receive those benefits without penalty. Your benefits are based on your lifetime earnings. If you're over 60 but not yet receiving benefits, you should receive a statement in the mail from the SSA reviewing your potential benefits at different retirement ages.

Step #2 – If you’re out of work or in financial trouble, take the money as soon as you can.

The earliest you can collect benefits is age 62. But you'll pay a penalty of 25% or more in your monthly benefits by filing before full retirement age. You also could lose more if you continue working while collecting a monthly Social Security check. Until the year you reach full retirement age, your benefits will be cut by $1 for every $2 you earn over a certain amount annually. That is why retirement experts generally suggest you wait until you reach full retirement age, or even older, before filing for benefits. But if you're unemployed and out of savings, or if you're only working part-time and finding it impossible to make ends meet, then none of the above is as important as your immediate need. The decision is really a no-brainer. Take the money as soon as you qualify.

Step #3 – If you’re working and in good health, wait at least until full retirement age.

If you're married, and you die before your spouse, he or she can often collect a survivor's benefit based on your earnings. But if you elect to take early benefits, your spouse will receive a reduced check after you're gone.

Step #4 – If you really like your job, wait even longer, but not beyond 70.

One of the oddities of Social Security is that full retirement age isn't the point at which you reach your maximum possible benefits. Keep working and paying into the system, and you can earn even more later.

Step #5 – Apply with Uncle Sam.

Once you've decided the time is right, applying is pretty simple. You can do it over the phone or online. The government says it can take as little as 15 minutes.

In conclusion, besides following the approaches outlined in the two reports above, we highly recommend you engage the services of a financial planner or other suitable professional should you have a desire to learn more about adding social security benefits to your portfolio.