The Money Mom – A SIMPLE plan

Affordable Care Act – A Real SIMPLE Plan

I have tried to read through the Affordable Care Act and well, I need a flood chart!  You know, the kind that says if you do this, then go here.  I did find that the SIMPLE plan for small business is simple.

A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers great advantages for businesses that meet two basic criteria. First, your business must have 100 or fewer employees (who earned $5,000 or more during the preceding calendar year). In addition, you cannot currently have another retirement plan.

You may be eligible for a tax credit of up to $500 per year for each of the first 3 years for the cost of starting a SIMPLE IRA plan. (IRS Form 8881, Credit for Small Employer Pension Plan Startup Costs).

Your choice of the employees covered will be set out in your selected plan document. You can choose to cover all employees without restriction. Alternatively, you can limit the employees covered to those who received at least $5,000 in compensation during any 2 years prior to the current calendar year and who are reasonably expected to receive at least $5,000 during the current calendar year.

ESTABLISHING THE PLAN

Step 1: Contact a retirement plan professional or a representative of a financial institution that offers retirement plans. Many financial institutions will probably have a pre-approved SIMPLE IRA plan form that you can review.

Step 2: Choosing a financial institution to maintain employees’ SIMPLE IRAs is one of the most important decisions you will make, since that entity becomes a trustee to the plan. (Alternatively, you can decide to let employees choose the financial institution that will receive their contributions.) Regardless of who makes the choice, only the following institutions can be designated as trustees of SIMPLE IRA plans: banks, mutual funds, insurance companies that issue annuity contracts, and certain other financial institutions that have been approved by the IRS. Trustees agree to receive and invest contributions, and provide the employer with a summary description of the plan features each year.

Step 3: Choose a model form or other plan document offered by your financial institution. If your financial institution offers a model SIMPLE IRA plan document, you will have a choice of two forms to use:

❑ IRS Form 5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) — Not for Use With a Designated Financial Institution, or

❑ IRS Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) — for Use With a Designated Financial Institution.

I like the SIMPLE plan.  It helps me offer a benefit for my employees to help in retention and it is easy to administer.  You know, the simple stuff! For more information, go to www.irs.gov to publication 4334.

 The Money Mom

The Money Mom: New Credit Card Regs

The Federal Reserve’s new rules for credit card companies mean new credit card protections for you. Here are some changes from your credit card company that began this year.

When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can increase your interest rate; change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or make other significant changes to the terms of your card. So if the company does this, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations. For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).

How long it will take to pay off your balance. Your monthly credit card bill includes information on how long it will take you to pay off your balance if you only make minimum payments. It also tells you how much you would need to pay each month in order to pay off your balance in three years.

No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. If your card has a variable interest rate tied to an index though; your rate can go up whenever the index goes up. If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card. If you are more than 60 days late in paying your bill, your rate can go up. If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.

Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.

Over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.

Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account. If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

Standard payment dates and times. You must get your credit card bill at least 21 days before your payment is due and your due date should be the same date each month. The payment cut-off time cannot be earlier than 5 p.m. on the due date. If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay

These new changes should help you manage your credit card balance and help you understand how to get these balances reduced. 

 The Money Mom

The Money Mom: The Gift Tax

The first thing to know about the federal gift tax is that gift givers, not gift recipients, have to pay it. Thankfully, you won’t owe the tax until you’ve given away more than $1 million in cash or other assets during your lifetime. If you’re married, your spouse is entitled to a separate $1 million exemption. But you may still have to file gift tax returns even though you don’t owe any tax. So please keep reading.

 The annual exclusion allows you to give away up to $13,000 in 2010 to as many people as you wish without those gifts counting against your $1 million lifetime exemption. Say you give two children $20,000 each in 2010 and give another relative $10,000. The $20,000 gifts are called taxable gifts because they exceed the $13,000 annual exclusion. But you won’t actually owe any gift tax unless you’ve gifted your $1 million lifetime exemption. O if not, the two taxable gifts simply reduce your lifetime exemption by $14,000 [($20,000 - $13,000) x 2 = $14,000]. The $10,000 gift is ignored, because it’s below the $13,000 annual exclusion. If you started off 2010 with the full $1 million lifetime exemption, you’ll still have an exemption of $986,000 left at the end of the year ($1 million – $14,000 = $986,000).

Contributions to a 529 college savings plan are gifts to a future student. However, special rules allows you to make a lump-sum contribution and spread it over five years for gift tax purposes. For example, you can contribute $65,000 in 2010 to jump-start a 529 college savings account for your child. If you’re married, your spouse can do the same. You can spread the gift over 2010-2014 without incurring any gift tax and without reducing your $1 million lifetime gift tax exemption. Your spouse can spread his or her $65,000 gift over five years as well. The only caveat: You can’t make any additional gifts to the same recipient during those years without using part of your $1 million exemption.

Some types of gifts are exempt from the federal gift tax so you can make unlimited gifts in these categories without any gift tax or estate tax consequences and without having to file gift tax returns: Gifts to IRS-approved charities Gifts to your spouse (assuming he or she is a U.S. citizen) Gifts covering another person’s medical expenses and you make the payments directly to medical service providers Gifts covering another person’s tuition expenses, and you make payments directly to the school. (Payments for room and board, books, and supplies don’t qualify for this exception, but you can cover those costs by making a direct gift to the student under the annual exclusion.)

If you make a taxable gift (one in excess of the annual exclusion), you must file Form 709: U.S. Gift Tax Return. The return is required even if you don’t actually owe any gift tax because of the $1 million lifetime exemption. The return is due by April 15 of the year after you make the gift—the same deadline as Form 1040. If you extend your 1040 to October 15, the extended due date applies to your gift tax return too. For more information, see IRS Publication 950: Introduction to Estate and Gift Taxes. You can find these documents on the IRS website at www.irs.gov.

 The Money Mom

The Money Mom: Cut Your Taxes

Don’t wait until April 2011 to start thinking of ways to save on your tax bill. What you do now could determine the kind of tax year you have in 2010. There are still various tax benefits, but they are set to expire this year. Turbo Tax has some great ideas for you to cut this year’s income tax bill.

1. Keep your W-4 up-to-date

The Making Work Pay tax credit is the credit you have been receiving in your paychecks through reduced withholding. Unless it’s renewed by Congress, the credit will expire on December 31, 2010.  Revisit your W-4s twice this year to ensure that the right amount of tax is withheld—once to increase your withholding and again at year’s end to reinstate prior withholding after the credit expires. Proper withholding will prevent you from being surprised by an unexpected tax bill come April 15.

2. Take advantage of all possible deductions

There are many deductions overlooked. People who don’t itemize their deductions often wrongly assume they don’t qualify for any. Actually, there are some deductions available even to people who take the standard deduction. The overlooked deductions are out-of-pocket expenses incurred while doing charity work, moving expenses for a new job (you don’t need to itemize to get this deduction), and the real estate tax deductions for taxpayers who don’t itemize their deductions. Now, some deductions will expire, like the $4,000 deduction for college tuition. Check the 2010 rules now to make sure the deduction you’re counting on is still available.

 3. Make your home energy-efficient

This is a good time to invest in energy-efficient upgrades. If you install approved water heaters, windows, roofing or heating and cooling systems that reduce energy use, you can get a tax credit of up to 30% of the costs, up to a maximum of $1,500. However, tax credits for some purchases are only available in 2010. If you just can’t pay for an upgrade this year, don’t worry. Tax credits for some additional energy-efficient improvements will still be available from 2011 to 2016.

6. Convert to a Roth IRA

There’s never been a better time to consider converting to a Roth IRA. New rules allow people with any amount of income to convert a traditional IRA, 401(k) or other plan to the popular tax-free retirement plan. It’s best if you have a source other than your retirement plan to pay the tax that will be due and sufficient years before you need to take withdrawals from the account. To encourage conversions, the IRS is offering a special incentive this year only. It will allow you to spread payment of the tax generated by the conversion over a 3-year period.

7. Consider taking some profits

Consider selling some of your stocks that show a profit. The rate reductions on long-term capital gains that went into effect in 2003 are set to expire in 2010.  The rates are currently 15% for the upper four tax brackets and will revert to their 2008 level of 20% after December 31. If you’re in the two lowest income brackets, your new rate will be 15%, up from the 0% it’s been since 2008. 

The best tip of all is to stay informed on the ever-changing tax laws. New credits and deductions are introduced all the time. For more information on these tax tips and to stay up to date on all of the latest tax laws, visit Turbotax – Tax Tips & Calculators page.

The Money Mom

The Money Mom: Listen to me!

Listen to me!!!

When my son was five someone asked him what his mother was like.  He said, “I can be her.”  Oh, go ahead, the person said.  He proceeded to walk around with his arms flailing and yelling, “Just a minute, just a minute!”  Right then I learned I must slow down and start listening. Are you a good listener? Listeners can be great leaders because they have gathered the information that no one else has bothered to notice.

Most of the time, listeners aren’t recognized because they are not standing in front of large groups of people making speeches. Instead, they are having intimate conversations with their friends, coworkers, and employees, asking them questions about what they know, and getting an understanding about their goals, problems, and dreams. It’s this information that is gathered and used to solve problems, spread ideas, and just get things done.

Here are some ways listeners get ahead:

Solve a problem. Because you have listened to others’ concerns and complaints, you have a great opportunity to weigh the pros and cons of a particular problem.  This may make it easier to sort through these dilemmas, recommend solutions, and have the background information to actually change or solve the problem.

Take on a project that no one else wants. The project might seem overwhelming, controversial, or just plain boring. Part of being a leader is choosing projects carefully. But just because no one else is interested doesn’t mean the project (or program or problem) isn’t worthy of your attention. If you’re trying to establish yourself as a leader and can’t get the right opportunities, then taking on a challenge can be a great way to earn recognition.

Match personnel to the right job. Learn about other people’s strengths and weaknesses by asking questions, listening to responses, and identifying preferences. This way you are not assigning people to random tasks; leaders who listen can easily locate and call on the right people for expertise, support, and cooperation. Make sure to open the discussions with everyone. Sometimes a quiet listener will come forward!

I find myself not wanting to take the time to listen to everyone’s ideas, but you must.  You just never know when that next great idea will come around.

The Money Mom

The Money Mom: Zsa Zsa Gabor, the feminist?

Hungarian actress Zsa Zsa Gabor, is in critical condition and has asked for her last rights.  She is 93 years old and is an inspiration to many people. She was married nine times and mostly to very wealthy men.   She had a long acting career, but in some ways, she was a bit of a feminist.  She had outspoken views about how women should stand up for themselves financially.  Below are some quotes that should put a smile on your face.

“I learned in school that money isn’t everything. It’s happiness that counts. So Momma sent me to a different school.”

 “Thou shouldst not become presumptuous through much treasure and wealth; for in the end it is necessary for thee to leave all.”

  “Legal separation gives the husband time to hide his money.”

“I am a marvelous housekeeper. Every time I leave a man I keep his house.”

“There is nothing wrong with a woman welcoming all men’s advances as long as they are in cash.”

“I want a man who is kind and understanding. Is that too much to ask of a millionaire?”

Although it seems that Zsa Zsa could hold her own with men, she was not always a good judge of character.  It is reported that she may have lost more than $7,000,000 in invested funds to Bernard Madoff.

Personally, I prefer to be financially independent.  But she made it, didn’t she?

The Money Mom

The Money Mom: Family and Business

Family and Business

It is hard enough for you to manage your business, but add family to the mix and things can get hairy!  Here are some tips to make managing a family business less scary.

 1.   Create an organizational chart.  Some family members think they can run the business from day one, but they need to be taught the proper decision-making hierarchy.  Job descriptions should be set and they should be told what is expected from them.  Co-managing did not work for me.  When we had a difference of opinion, it was hard to determine which direction to take.

2.  Have a compensation plan.  You want to pay your family well because you are all helping in the success of the business.  But some one has to set the pay scales so that the business profits are not just going out the window in payroll.  I use an independent salary survey to determine what our peers in the banking industry are paying for each type of job duty and base salaries from there.  That way your family shouldn’t say you are playing favorites.

3.  Talk at work.  Hold your meetings at work so that the appropriate employees (including family) can attend and give input on business plans. This also shows your employees that you take your business seriously and encourage their input.

4.  Have a plan for hiring family.  When I started at the bank, there was not any formal introduction to the employees.  So there were a lot of questions of what my role was going to be.  As in tip one, determine the family member’s role and then communicate that to all employees.  It is also fun to have a welcome party or meeting (with snacks of course) for the family member so the employees can get to know the person better.

5.  Have a succession plan.  What happens if you are not able to manage the business anymore such as a sickness or an accident? (And the usual, when you retire)  Who will be next in line?  If there are several family members with experience, they will all expect to be the next manager.  I have written down everyone’s work experience, job knowledge, and sales ability.  Annually, each employee fills out a form for a job position they would want if the position becomes available.  Then these are discussed and prioritized.  No questions, every one knows who will fill in.

There are some great benefits for working with family. I really enjoyed working with my dad and learned some valuable business and social skills.  For family, I have aunts and uncles, a mother-in-law, husband, sister, daughter, and son that directly contribute to the success of the business in their own unique way.

The Money Mom

The Money Mom: A Clean Financial House

A Clean Financial House

For most people, buying a house can be a huge financial process. First you have to save a pile of cash for the down payment and closing costs. Then you must convince a bank to lend you the rest, generally 80 percent or more of the purchase price. So your first step, even before you start the actual hunt for a property, should be to get your financial house clean.

Start with your credit

Credit reports are issued by the three major credit agencies, Experian, Equifax, and TransUnion. The bank will look at your credit to see if you are able to make your current payments.  The report will show whether you are habitually late with payments and whether you have run into serious credit problems in the past. A credit score is a number calculated from a formula created by Fair Isaac based on the information in your credit report and each agency calculates their own. A low credit score may hurt your chances for getting the best interest rate, or getting financing at all. Usually a score over 620 can get you into the ring. So get a copy of your reports and know your credit scores. Go to www.bancroftstatebank.com then click on the Free Credit Report link on the right side.  Your credit report is free and you can check your report for accuracy. Errors are not uncommon. If you find any, you must contact the agencies directly to correct them, which can take two or three months to resolve. If the report is accurate but shows past problems, be prepared to explain them to a loan officer.

Know what you can afford

Next, you need to determine how much house you can afford. Ask to be pre-approved by a lender, who will look at your income, debt and credit to determine the kind of loan that’s in your league. The rule of thumb here is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

Lenders usually say that all your monthly payments including the new home payment plus a monthly payment for taxes and insurance should not exceed 36 percent of your gross monthly income. Of course, the more money you have to put towards the cost of the home will also determine how much you can afford.

Line up cash

If you haven’t already, you’ll need to come up with cash for your down payment and closing costs. Lenders like to see 20 percent of the home’s price as a down payment. If you can put down more than that, the lender may be willing to approve a larger loan. If you have less, you’ll need to find loans that can accommodate you.

Various private and public agencies like Fannie Mae, Wisconsin Housing, and the Department of Veterans Affairs provide low down payment mortgages through banks. If you qualify, it’s possible to pay as little as 3 percent up front. For more information, check out their Web sites at Fanniemae.com or wheda.com.

With a down payment under 20 percent, you can still get a loan but you will have to pay for private mortgage insurance (PMI), a safety net protecting the bank in case you fail to make payments. PMI adds about 0.5 percent of the total loan amount to your mortgage payments for the year. So if you finance $200,000, your PMI will cost $1,000 annually.

Once you’ve considered the down payment, make sure you’ve got enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney’s fees, inspection fees, and the cost of a title search. They can easily add up to more than $2,000. (Some brokers charge more that $5,000, so be careful and shop around)

If your available cash doesn’t cover your needs, you have several options. First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account, if you have one, though you must pay taxes on the amount. You can also receive a cash gift of up to $13,000 a year (the limit for 2010) from each of your parents without triggering a gift tax.

The giver, not the receiver, pays gift taxes. Also, some employers can help.  Some companies will chip in on the down payment or help you get a low-interest loan from selected lenders.

I like pre-approvals because you can discuss all the options up front and have a goal.  Then you can go right to house hunting.  Realtors usually have more time for customers that took the time to know what they can afford.  So clean your house and enjoy the shine of home ownership!

The Money Mom

The Money Mom: What do we really NEED?

What do you really NEED?

It’s become a national question. With jobs and money scarce, our priorities are to protect the essentials and toss the rest.  Some sacrifices hurt; others bring surprise benefits.

To gauge America’s changing priorities, US News and World Report gathered market research, business trends, economic data, and reports from consumers into a list of things that many people seem to be significantly cutting back on, or living without completely. Here are 21 of them.  To read more, click on this link.

[Slide Show: 21 Things We're Learning to Live Without.]

Monthly payments.  I can borrow to pay for it as long as I have enough income to cover the monthly payment. New mentality: I’ve already got too much debt.

Window shopping. We are just browsing, right? Consumers have discovered that window shopping encourages them to buy tons of stuff they don’t need.

Bells and whistles. The technology arms race is slowing, with consumers gravitating to simpler gizmos like e-books, prepaid cell phones, and older, used electronics.

Clutter. As Americans downsize, do more of their own cleaning, and look for stuff they can sell online, they’re discovering tons of things around the house they can get rid of. [Cable TV. Many people are cutting back on pay-TV services or canceling them altogether, which saves $50 to $100 a month.

A home phone. How many phones do you need, anyway?

Privacy. Got room on the couch? To save on rent or mortgage payments, roommates are doubling up and grown kids are moving back in with their parents.

Prepared foods. More people are cooking at home, and they’re doing it with fewer  sauces, marinades, dressings, and other ingredients.

Tupperware parties. Sales of Tupperware and other storage products are up, since people are cooking at home more and husbanding leftovers.

Packaged cigarettes. The average price of cigarettes is about $5 a pack or $45 a carton, which mounts quickly for regular puffers.

Lattes. The $5 daily coffee is always one of the first small luxuries to go. But more people are brewing at home.

Guilt. Keeping up with all the latest trends and technology takes an emotional toll.

Extra calories. Some Americans say they’re eating less to save money and drinking more water or doing other things to suppress their appetite.

Newspapers and magazines. It’s bad news for the publishing industry, but millions have canceled subscriptions to print periodicals and started getting free news and information. Healthcare. A forced reduction in healthcare coverage is probably one of the most crushing effects of a weak economy

New gifts. Re-gifting? There’s always room to refine your strategy.

New cars. Many buyers who have traded down to a used model are surprised at the quality of the merchandise.

Comfort. Thermostats all across America are going lower in winter, higher in summer.

A daily commute. Telecommuting increased during the recession as well, and more people say they’re riding bikes or walking more to save on gas costs—or a gym membership.

Fancy dates. Online dating services like Match.com are growing, but courtship is a bit of a comedown these days.

Debt. Who needs it?

You can sacrifice and enjoy it.  You know, water sometimes is more refreshing than soda!

 The Money Mom

The Money Mom: Social Networks

I just attended a seminar about social networks and how to incorporate these channels into our marketing strategies.  I thought I better, as everyone posts instead of emails.  My son said he just poked Grandma, and I said “WHAT?!” 

For some business, particularly business-to-business companies, getting into social networking might not seem like a productive way to spend limited time and resources. However, social networks can play an important role in increasing visibility and credibility as part of your strategy because they offer a new space for page referrals and interactive content.

Social networking has value because you can reach a variety of different audiences; young, old, professional, college bound. Did you know that the majority of Facebook users are between 25 and 45 years old?  Do you know what you could do with that?  You can reach different decision makers by getting to different communities, or the users of the products or solutions that you provide. As our sales potential spreads, this is just a different way to interact with new customers.

You can use Twitter and Facebook for free and can post your business material on the sites. But don’t just post your brochure make it interesting.  Regardless of whether you have new or recycled content on your social networking page, it will increase your chances of ranking highly on search queries and provide another chance to be discovered by potential customers. It also shows prospects that you are up to date and technology savvy. (Thank you Patrick Goodness)  However, assign some one to manage the pages so the wall stays fresh. Post specials, advice or new products.   

Like content creation planning, you need to find out which social networks your audience participates in so that your own participation in those networks can maximize your profits. There are so many social networks to choose from, it’s better to focus on two or three places than try to be everywhere. Additionally, when you post content to social networking sites, it’s important to provide ways your audience can link back to your corporate website. You don’t want them to spend too much time reading on the social networking site because your business site is where they will submit sales inquiries and get more detailed product information.

So tweet or post to get the word out about how wonderful you are.  You just might get poked!

The Money Mom