Figuring out Where Money Goes

The first step to creating a budget that works is to sit down with the past two to three months of bills. Going through each line item and determining where money is spent is crucial in understanding spending habits. There are usually several categories that must be included in any budget:

• Housing expenses, which typically include mortgage or rent payment, homeowner’s association fees, and homeowner’s or renter’s insurance policies
• Personal care, such as clothing, health and beauty items, grooming and maintenance
• Groceries
• Utilities
• Entertainment, such as television, cable, going out, and travel costs
• Transportation, including auto insurance, gasoline, car loan payment, and maintenance
• Gifts
• Savings
• Other loan payments, if applicable
• Pet expenses, if applicable
• Taxes, if applicable

Organization

After determining how much is usually spent in each category, individuals can compare the total of expenditures against the amount of income that is received each month. Those creating a budget can then organize their lists in order of most important to least important. This way, bills are paid on time, and individuals can save their money to put toward expenses such as travel, entertainment, and other more enjoyable ways to spend.

Methods of Tracking

Some people prefer a handwritten budget, while others like to use free websites, which can pull transaction records from credit card and banking websites. Some like to use Microsoft Excel or QuickBooks, which produce logs for tracking each expense and category. Determining how much goes to each necessity is usually the final step in creating a budget that will work. It must be doable; for example, a person who drives 30 miles to work every day cannot budget for one tank of gas per month. All members of the family need to be on the same page about the expenses, so that each will stick to the amounts budgeted in all categories.

Emergency Funds

When an unexpected emergency arises, such as a medical bill or a large home or car repair that must be completed, even the most prepared budgeter can be caught off guard. In such cases, a loan can be obtained from plaingreenloans.com. This allows for a lump sum to be borrowed in order to pay for a sudden expense.

Preparing for the Financial Future

Creating a budget is a great way to keep closer track of monthly expenses. This will allow those using the budget to feel much less financial strain when bills are due each month, and will provide feelings of calm when thinking about the financial future. What are other methods of tracking spending each month?

Check out this infographic that details the top 7 cities to find finance jobs, along with a breakdown for what’s in demand and the skills, profiles of local candidates, and percentage change in salaries. Many thanks to Accounting Principals for conducting this study.

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<br /> <a href="http://www.businesspundit.com/the-top-7-cities-to-find-finance-jobs/"><img src="http://www.businesspundit.com/wp-content/uploads/2011/06/Finance-citiesB2.3-012.png" width="400" height="1696" title="The Top 7 Cities to Find Finance Careers"></a><br />Source:<a href="http://www.accountingprincipals.com/Pages/default.aspx">Top Cities For Finance Jobs – Accounting Principles</a><br />

Surety bonds are an important tool for US small business owners. But they often get overlooked, unless they’re required by law.

That’s unfortunate. Entrepreneurs stand to reap significant benefits from the protection and credibility that stem from proper bonding.

Surety Bonds: A Quick Primer

Surety bonds are risk-mitigation and management tools more like a form of credit than insurance. They’re required to secure state licensing for scores of industries. They’ve also become a key component of the construction field, helping to ensure projects are completed, subcontractors are paid and contracts and regulations are followed. Surety bonds are basically three-way agreements among a principal (the company or person doing the work), the obligee (the entity receiving the work or issuing the license) and the surety company.

The bond ensures that work or services are provided as spelled out by regulation, contract or law. They also provide consumers and other stakeholders with a way to recoup funds in the event they’re harmed by the bonded business. For example, surety companies can step in and make sure construction projects are completed or developers are compensated.

But they’re equally important for small business owners and entrepreneurs. In some cases, business owners can’t obtain a state operating license until they have proper bonding. Some of those industries include:

-Notaries public

-Mortgage brokers

-Health clubs

-Auto dealers

-Durable Medical Equipment providers (DMEPOS)

-Telemarketers

-Title agencies

Bonds can also be crucial for entrepreneurs who aren’t mandated by law to purchase them. Fidelity bonds and Employee Theft Bonds protect business owners from harm if their employees break the law or harm consumers.

Entrepreneurs can also use surety bonds as a competitive advantage — they help boost consumer confidence and showcase a business’ desire to protect consumers and its ability to qualify for a bond. Surety bonds can help set a business apart.

How to Purchase Surety Bonds

A surety bond can be obtained from insurance companies and independent surety companies. Applicants have to provide financial information and credit documents. Some bonds are easy to obtain and require little in the way of underwriting. Others take more time and require a much more detailed analysis.

Bond costs will vary depending on a host of factors, including the bond type and the applicant. In general, premiums tend to range from 1 to 3 percent of the bond’s value. There are cases where an applicant’s credit or financial standing bumps them into a high-risk category, which will lead to higher rates and premiums. Another factor affecting cost is the state the bond is purchased for. For example, the cost of a Missouri surety bond for auto dealers may be different from the cost of an equivalent bond in another state.

For everyday entrepreneurs, securing a surety bond can take just a matter of minutes at a minimum cost. In turn, that bond can generate significant peace of mind among prospective consumers.

This is a guest post from Matt Bruns of SuretyBonds.com, a nationwide surety bonds company, as part of their surety bond education program.

The Sarbanes Oxley Act (Sarbox)has created a new world of burdens and risks for US companies. Created in response to a number of highly public accounting scandals, the Sarbanes Oxley Act aims to ensure accurate financial reporting for public companies through the maintenance of internal controls that identify material weaknesses and significant deficiencies.

Image credit: avdgaag

Compliance administration can be complex and costly, but the risks associated with non-compliance can prove costlier for those responsible for certifying the accuracy of financial data.

For many companies, fixed assets comprise a significant portion of the balance sheet. These are tangible assets owned by a company which cannot be simply liquidized (turned into cash), including things like machinery and equipment, vehicles and property. Fixed assets are considered a “material” item for SOX compliance requiring the documentation of internal controls and business processes used within an organization, as would be the case for any financial matter that is considered material.

The AICPA defines “material” as being based on the assumption that a reasonable investor would not be influenced in investment decisions by a fluctuation in net income less than or equal to 5% and that “rule” remains the basis for working materiality estimates.

It is estimated that more than 65% of fixed asset data within US business audit trails is typically misclassified, unrecorded or floating in limbo in corporate financial records.

Clearly, poor data quality represents a major potential Sarbox disclosure risk. In the case of manufacturing companies, fixed assets constitute a major chunk of the total. But even service organizations like hotels, banks or financial institutions have to invest heavily in furnishings, equipment, and technology to attract and retain customers. Fixed assets therefore matter a great deal when it comes to Sarbox compliance. Without an accurate method of keeping track of those assets, it would be very easy for a company to lose control of them.

It is possible that an evaluation of internal controls will meet Sarbanes-Oxley compliance requirements, but that will not fix bad data from previous reporting periods. Instituting process improvements of internal controls alone does not ensure a material weakness has been repaired.

Conducting a physical inventory and instituting improved business processes, if needed, is the only way to accomplish the quantitative and qualitative requirements to meet Sarbanes-Oxley compliance.

Tom is a blogger currently working for a company specializing in asset tracking and inventory management software. He enjoys picking through issues of money and economics and figuring out what it means for businesses and people.

This is a guest post by Manny Davis of Back Taxes Help.

In 2009, many tax credits were augmented and created. Tax credits can help you lower your total tax bill and increase your chances for a tax refund. Below are some of this year’s most important tax credits. Some are new, some changed, and some became part of the American Recovery and Reinvestment Act (ARRA).

For those of you who are unsure of the difference between a tax credit and a tax deduction, a tax credit lowers your total tax bill directly, whereas a tax deduction lowers your taxable income (indirectly taxes dollar for dollar), sometimes placing you in a different income tax bracket.

Consumer Energy Tax Credit
This tax credit is a good one. If you have made repairs to your home (non-business) to improve energy efficiency you will be able to get up to 30% back from that investment but no more than $1,500. This would include better insulation through the installation of more efficient windows, doors, roofing and even the installation of water heaters, solar thermal technologies, natural and oil furnaces and so on. If you are unsure whether your recent energy efficiency investment qualifies, contact a CPA or the IRS directly.

American Opportunity Tax Credit
The old Hope Tax Credit was expanded for 2009 with the new American Opportunity Tax Credit. As a parent, for each student in college now, you can save up to $2,500 in taxes. There are income limitations with this credit though. Once you start to make over $80k as a single parent (or $160k for married couples), the credit begins to phase out. Realize though that you cannot claim the Hope Tax Credit and this credit in the same year for one student.

Home Buyer Tax Credit
This credit applies to new home buyers and even existing home buyers that meet certain guidelines. First time home buyers who purchased after January 1st, 2009 and before April 30th, 2010 can take up to $8,000 ($4,000 if married and filing separately) off of their tax bill. This tax credit is completely phased out once you make over $145k (individual) or $245k (for a married couple).

For existing home owners, who moved primary residences, the credit is $6,500 (individual) or $3,250 (if filing jointly) but you must have lived in the home for five consecutive years. Furthermore, it only applies for homes purchased after November 6th, 2009.

Making Work Pay Tax Credit
With this credit, you can claim up to 6.2% on earned income from wages but no more than $400 for individuals or $800 for married couples filing jointly. However, this really only applies to those that are self-employed as your employer should have reduced withholding for this during the year. Realize that does not apply to those receiving a pension, or unemployment.

Electric Motor Vehicle and Electric Plug-In Vehicle Tax Credits
These tax credits differ slightly in a few different ways if you went “green” in 2009.
* The Electric Motor Vehicle tax credit ranges from $2,500 to $15,000 depending on the capacity of the battery and how heavy the vehicle is.
* The Electric Plug-In Tax Credit is 10% of the vehicle cost capped out at $2,500. To take advantage of this your vehicle had to go into service after February 17th, 2009.

Adoption Tax Credit
This tax credit increased to $12,150 for 2009 but the tax credit is only applicable if the adoption expenses were paid this year (unless they are a special needs child).

Government Retiree Credit
This tax credit is $250 ($500 if filing jointly) for 2009 if you received a government pension payment or annuity in 2009. Realize though this credit becomes invalidated for you if you took an economic recovery payment.

Earned Income Tax Credit
This credit applies to low-wage earners and it had a few changes in 2009. One change is that the credit increased for individuals with 3 children or more and for married couples filing together. Also the income limit to qualify for this credit has increased as well.

For more details on any credit, visit IRS.gov.

Bonus: Use Your Tax Refund To Buy US Series I Savings Bonds
By utilizing some of these tax credits above you can increase your refund or your chances of getting a refund. Starting this year, the IRS is you purchase US Savings Bonds with your refund. Although these US bonds offer low rates of return during these economic times, they are great investments.

The IRS for this year’s filing will allow you to take up to $5,000 of your tax refund to buy U.S. Series I Savings Bonds in multiples of $50 by selecting this on Form 8888.

If you purchase more than $250, the denominations of the bonds should get larger. Anything over $5k or that be divided by a multiple of $50 will need to be deposited into a savings/checking account.

With the Federal government spending at all time highs, and with my belief that inflation is on the horizon, US savings bonds can be a very attractive hedge against inflation. Taxes on these bonds are due when redeemed but you will not be responsible for state or local taxes with these bonds. One drawback to these bonds is the fact that they cannot be redeemed until a year has passed from their issuance so be sure to check with your investment adviser.

Manny Davis is a partner and tax accountant at Back Taxes Help. He helps taxpayers with IRS and state back taxes and the problems that arise from having them. His firm especially focuses on major IRS problems including tax levies (IRS wage garnishment, bank account garnishment), tax liens, penalties, tax audits and more.

At the risk of losing half of you at the mere mention of accounting, I’m going to do it anyway. Accounting can be confusing, but wrapping your mind around a few key concepts can put you far ahead of your competition.

What is Accrual Accounting?

A lot of the confusion in formal accounting comes from the difference between accrual basis accounting and cash basis accounting. Cash basis accounting is what a ‘normal’ person would consider a rational method of tracking things. Accrual basis accounting is what the accountants use.

Under the accrual basis accounting, revenues are reported on the income statement when they are earned. Under the cash basis accounting, revenues are reported on the income statement when cash is received.

Same goes for expenses:

Accrual basis accounting matches expenses with the related revenues when the expense occurs.
And in cash accouting? You guessed it – expenses are booked when the cash is paid.

What Were They Thinking?

The reasoning behind accrual accounting is that it creates an a more realistic income statement (in terms of profitability) during a specific time period. Of course, cash is always KING, and you’ll die without it. But with the income statement we’re looking at a company’s ability to earn a profit.

Accrual Acconnting and the Income Statement

Accrual vs. cash accounting first hits the income statement. Here’s an example:

I start a cat sitting service in June and provide $1,000 of cat sitting services in June, but I don’t get paid until I bill in July. And let’s just say for argument I go on vacation in July and provide no services. There will be a difference in the income statements for June and July under the accrual and cash bases of accounting.

Under the accrual basis, my income statements will show $1,000 of revenues in June and $0 in July. Under the cash basis, it’s just the opposite because cash basis is concerned with when I receive funds, not when I perform services. My June income statement would show no revenues, and I’d have $1,000 in July.

Accrual Accounting and the Balance Sheet

The balance sheet is also affected. Under accrual basis, the June balance sheet will show accounts receivable of $1,000, but under cash basis the $1,000 of accounts receivable will not be reported as an asset until July. (Actually, under cash accounting you wouldn’t have accounts receivable. You either have the cash, or you don’t.)

To extend the example to expenses assume that I buy cat litter for my kitty sitter service business in bulk. Under accrual basis accounting, I would create an asset for the entire amount of litter when I purchase it and expense it out over time as I perform services. This matches the expense to the revenue. Under cash basis accounting, I would expense the entire amount of litter when I purchased it.

Which Method Should You Use?

It depends. The accrual method must be used to match revenues and expenses for financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). However, most small businesses can choose whichever method suits their business (and record keeping!) needs best.

Image Credit: jekertgwapo, Flickr

First Wells Fargo, then Goldman. Now, Chase. All three are reporting healthy profits. Record sales. That kind of thing. Yet the economy isn’t picking up. What gives?

There’s something decidedly fishy about banks reporting record numbers after the government sucks off their toxic gunk. Not that the balance sheets aren’t real, they’re just…creative. Bloomberg’s Jonathan Weil describes how a combination of opaque bookkeeping and rapidly changing government regulations allowed Wells Fargo to report sky-high earnings earlier this month. I gather Wells’ case is akin to how Goldman and JP Morgan Chase explain their success:

1. Wells carried over a $7.5 billion loan-loss allowance from Wachovia’s balance sheet onto its own books. Once it took control of the reserve from Wachovia, Wells was free to start dipping into it to absorb new credit losses on all sorts of loans, including loans Wells had originated itself…this may help explain Wells’s surprisingly small loan losses. For the first quarter, Wells said net charge-offs were $3.3 billion, compared with $6.1 billion at Wells and Wachovia combined for the fourth quarter.

4. One week before Wells’s earnings news, the FASB caved to pressure by the banking industry and passed new rules that let companies ignore large, long-term losses on the debt securities they own when reporting net income. Wells didn’t say what its first-quarter earnings would have been without the rule change, which companies can apply to their latest quarterly results.

Read the entire article here.

Many U.S. taxpayers are eagerly anticipating a quick influx of cash from their states as they file income tax returns ahead of the April 15 deadline, but for some, the refund check may not be in the mail.

“We can’t send refunds out if we don’t have the money,” said Ted Farnen, a spokesman for the Missouri Department of Revenue.

Ouch.

Worried about the state of your 401K? We all are. But there’s no need to panic. Chances are, you don’t need to use all of your 401K savings at once. If you take the right steps, your 401K investments will have a chance to recover. Below are five simple steps to help you rescue your 401K:

If you are close to retirement:

1. Delay your retirement. If you’re close to retirement, see if you can put in a few more years of work. This is especially important if your employer matches your 401K contributions.

If you retire in a declining market, you’re withdrawing money from an ever-shrinking 401K coffer. Your previous (bull market) payout calculations won’t work anymore, meaning that you risk ending up with very little very late in life.

2. Recalibrate your 401K withdrawal plan. If you have no choice but to retire, recalibrate your monthly expenses so that you don’t withdraw a larger percentage of your total 401K savings. Live off less for a while, then adjust when the market goes back up.

Everyone should:

3. Keep contributing. It pays to rack up investments, even when the market is losing. When the market goes back up—historically, it always has—the investments you put in during hard times will work in your favor. If your employer matches your contributions, max them out. The tax deduction will also come in handy.

4. Don’t cash out. If the heavy tax penalties don’t make you think twice, the upcoming bull market—whether it takes two years or two months to arrive—will leave you empty-handed. Moreover, the funds are creditor-proof, and can’t be confiscated if you file bankruptcy.

5. Revise your portfolio. If you need the money soon, put is somewhere safe, like a money market fund. If you have a while until you retire, consider diverting your funds into traditional safe bets, like mutual funds or corporate stocks in stable industries. Consult your financial advisor for specific advice. Take an active role in diversifying and/or rebalancing your portfolio. It won’t adjust itself for hard times.

Bonus tip: IRAs can offer more flexibility and fewer fees than 401Ks, depending on your lifestyle needs. A Roth IRA, for example, allows you to take out contributions without taxes or penalties. Further research or financial advice will help you determine with 401K/IRA combination suits you best.

Credit concerns got you down? If you’re worried about your credit score, rest assured there are easy ways to improve it. Try these five tips to boost your credit score:

1. Use credit cards. No credit history is just as bad as a horrible credit history. If credit cards make you nervous, only use yours to pay off a monthly bill, or when you go out to eat. Manageable debt is better than not having a credit score at all.

2. Keep your balances small to nonexistent. Don’t max out your cards unless you can pay them back down quickly. Use half or less of the full balance on each card when you make purchases. Keeping balances near the maximum will negatively affect your credit score.

3. Avoid late payments. Serial late payments can trash your credit score. Pay down the minimum amount each month, if not more. (Note: Many credit card companies will wipe your first late payment off your records if you say it was an accident. After that, you’re on your own.)

4. Avoid acquiring too many credit cards. Not only does this complicate your debt life, but it reflects badly on your credit score. There’s no ideal number of credit cards, but try to keep it below six (including store cards).

5. Do not open more than one credit card at a time (this lowers your accounts’ average age), or close too many credit cards (resulting in less credit available). Both actions reflect poorly on your credit rating.

Honorable mention: Don’t declare bankruptcy–it will ruin your credit for up to a decade.