Home Budget 102: The Little Things that Save You Big

A while back, I wrote Home Budget 101: The Little Things That Cost You Big. This time, I'd like to introduce you to a few tips and tricks that you may not be aware of to help you save.

Pay In Cash

We’ve all heard that saying, “Cash Is King”, but there are more reasons for this than you may know.  

First, if you pay for something with a credit card, you’re likely going to pay interest on it. Compounding interest is a dangerous beast (which I plan to write an entire entry on at a later date), but it really boils down to this: many people end up paying interest on the interest, and can never dig themselves out of the hole. If you buy something on credit, and then only pay the minimums, you’re going to be paying for that item for a really long time and will likely pay far more than you would have if you had just paid cash in the first place.

Another reason to use cash is that some places offer discounts for doing so, which they typically don’t advertise. Many doctor’s offices will give you a discount for paying cash at the time of your appointment, but they won’t tell you about it unless you ask. According to bankrate.com, asking for cash discounts can also be effective at Gas Stations, Restaurants, Jewelers and Computer Repair shops. A lot of small business owners consider cash-in-hand now to be more valuable than the promise of payment later. 

The Bottom Line: Cash discounts aren’t typically advertised, but a lot of places have them. If you have cash-in-hand, ask if you can get a discount for using it. I don't mean debit instead of credit, I mean bills instead of plastic. 

Buy Used

We’ve all heard the old adage that you shouldn’t buy a new car because it will be worth half of what you paid for it as soon as you drive off the lot. Many people see the value and savings that can come from purchasing a gently used car instead of a new one.

However, most people don’t employ the same money saving philosophy when they make other purchases. There are a ton of things you can buy used at substantially less than the price of the same product brand new. 

One of my favorite stores in town is Tradesmart, where you can buy and trade used media. Their selection of both new and used merchandise is huge, and they frequently run sales like “Buy One Get One for $1” on used movies or “5 Used Books for $20”. I’ve only had one incident where a used movie I purchased there wouldn’t play properly, and they exchanged it for me without any problems. As long as that place is around, I will likely never buy a new book or movie again. 

If you are looking for something specific, and you know what you want, check out websites such as craigslist and ebay for those items before going to the store to buy them new. These websites are basically huge online garage sales, and you can find everything from tools, cars, instruments, furniture and basically anything else you might be looking for. Often times these items are priced well below retail (or even free) because people just want someone to come pick the stuff up so they can be rid of it. People buy too much tile for their remodeling project, or just don’t play their guitar anymore, or don’t like those huge planter pots in their yard anymore, and you can reap the benefits.

However, use caution and your best judgement when you’re buying from these places. Buyer beware doesn’t really cover it, in my opinion. Make sure you know what you’re buying. I stay away from items like upholstered furniture or mattresses through these sites (bugs are gross). Also, for items like tools or instruments, make sure the seller is alright with you inspecting the item before you purchase it to make sure it works properly.

Finally, be really careful when and where you meet up with strangers to buy their stuff. One helpful suggestion is to arrange to meet the seller in a police department parking lot for the exchange. That location is going to be safer than just about anywhere else, plus if the person is trying to scam you by selling you something that is stolen or doesn’t work, it seems unlikely to me that they would be willing to conduct the transaction right in front of the PD.

The Bottom Line: You can save a lot of money by buying used, but be careful and exercise good judgement. Your safety is more important than any bargain. 

Buy Off Season

If you can strategically time when you buy things, you can save HUGE. This takes planning ahead, because you likely need to purchase things long before you need them or wait until the most opportune time.

For cars, there are a couple of things to keep in mind. First, as the new model year starts to roll out, many dealerships will be looking to get rid of their excess inventory on the previous year’s models, so they mark them down or are more willing to negotiate on the price. Also, there are certain times that salesmen are going to be hungrier for your business than others. If you’re looking at a car on the last day of the month or fiscal quarter, your salesman (and potentially his manager) is going to be a lot more eager to get you into a car because their sales goals are in the forefront of their minds.

For other items, think about when everyone else is going to be buying them vs. when almost nobody is going to be buying them, and try to make your purchases in alignment with the latter. Buy summer items such as new patio furniture, BBQs, lawn mowers and swimsuits in the fall when all the stores are putting these items on clearance to make room for the new seasonal items. Christmas decorations are typically 75-80% off on December 26^th.  Fitness memberships and equipment can be quite the bargain around March and April because many of the New Year’s Resolutions have worn off. Check out the prices on TVs the week after the Super Bowl.

The Bottom Line: Purchasing something the week or month after everyone else does can save you substantial money.

Bargaining

You can bargain and negotiate on more things that you think. I recently purchased a new accent chair, which was already on sale, and was able to negotiate an extra 20% because I was purchasing the floor model. There was absolutely nothing wrong with the chair, but I knew that the manager had the discretion to issue me the discount, so I asked for it.

Bargaining is not just for garage sales. You can get discounts for buying floor models or purchasing items with damaged packing, even when there is nothing wrong with the actual product. Lots of places will price match their competitors, which include online retailers, with some places going as far as offering 10% lower than their competition. Some places will give you a discount if you seem super interested, but imply that the item you're considering is a bit more than you were thinking to spend.

Alternatively, sometimes instead of bargaining for a discount it can be more effective to bargain for add-ons and upgrades. For example, car dealers will sometimes throw in an extended warranty or maintenance agreement if it seems like you’re on the fence about purchasing a vehicle.

The Bottom Line: There are a lot of deals out there for which you need to explicitly ask.

Be Nice

Seriously. Being nice will get you really far. I have worked in a number of customer service positions, and when a customer was really pleasant to work with, I would usually look for ways to make their experience more enjoyable. In general, people like to reciprocate kindness.

Often we don’t know the power that customer service reps have within their organization, but they are more likely to use any authority they have to help someone they like rather than someone that has made them hate their job. If you’re nice to the sales clerk, she might magically find a coupon behind the register that applies to your purchase. If you’re nice to the ticket seller, he might suddenly find a better seat and upgrade you.

This can be particularly challenging in situations where you’re talking to a customer service representative because you’ve already had a bad experience, however it’s often these situations where you stand to gain the most from being cordial. Sometimes we want to take out our frustrations with a company on their customer service representatives, even when the experience we are having is not their fault. In my experience, it’s beneficial to be mindful of the fact that they likely had no hand in your current frustration and that they hate taking calls from dissatisfied customers just as much you hate being a dissatisfied customer. Since so many of the customers they talk to are ticked-off and being jerks about it, they are quick to notice when someone is cool, calm and easy to deal with. 

I recently had a less than desirable auto repair experience at a dealership. Eventually, I paid $20 for $150 worth of auto parts because I was nice to the dealership service representative for the entire 3 days that it took to iron out the issue. It required a lot of patience on my part, but being patient is worth $130 in my book. Plus, I never like to be the person that ruins someone else’s day.

The Bottom Line: Treat everyone like they are your friend, and you’ll find many of them reciprocating. 

Keep in mind, you’re not entitled to a discount. Just because you ask for a discount doesn’t mean that you are going to get it. However, there are many discounts that you’re never going to get if you don’t ask. When you do ask, make sure you ask nicely. 

I’d like to thank my lovely Aunt Elane for her contributions to this blog post; she has always been incredible at saving, bargaining, and finding the best deals. 

Paperwork - What to Keep and What to Shred

During tax season, I had a client come into my office with a mountain of paperwork. I knew that her taxes are pretty simple, so I was confused as to why this would be the case. She looked at me and said, “This is everything for the whole year. How much of this do I need to keep?”

It’s a perfectly reasonable question, and for most of us the answer is: not as much as you do.

Many of us have a tendency to hold on to most of the paperwork that anyone ever gives us, thinking that someday we might need it for one reason or another. Though we know to recycle our junk mail and that we don’t need old newspapers, often times there are forms or receipts that are provided that we’re not sure about, so we hang on to it just in case. Here’s a quick rundown of a few items you should hold onto and for how long, plus a few that it’s alright to eliminate from your file drawer.

Keep These:

Receipts and invoices for medical expenses

How long: 7 years

A lot of medical expenses are tax-deductible, especially if you paid for them out of your own pocket. Even your prescriptions can likely be written off. Keep track of all medical and dental related expenses, and jot a note on the receipts that indicates whether you paid for them yourself, insurance covered them, or you used a flex-spending account or Health Savings account to cover the costs. If you wrote these items off on your taxes, you’ll want to keep the receipts and invoices with your tax returns for 7 years.

Long story short: If a doctor prescribed it or charged you for it, keep the receipt. 

Pay-stubs

How long: 1 year

First, you should check your paystubs to make sure that everything looks correct each pay period. I can’t believe how many people I encounter that don’t do this. Make sure that you’re getting the right number of hours, that you’re being paid at the correct rate, and that the correct withholding is being taken out of your check.

Come tax time, compare your paystubs with the tax documents that you receive such as W-2s and retirement account statements. If everything matches up, you can go ahead and shred those paystubs.

Long story short: Take a few minutes to make sure you're being paid correctly, and keep the pay-stubs until tax time. 

Vehicle maintenance records

How long: As long as you have the vehicle

Having proof that you did the oil changes and scheduled maintenance on your car (especially if it was on time, every time) can really help you out when it comes time to trade your car in or sell it.

Not-so-Long story short: Nobody likes a lemon, so keep the proof that your car isn't one. 

Tax Returns and Supporting Documents

How Long: 7 years

Some people will tell you that you only need to keep tax returns for 3 year, but I disagree because the IRS can go back as far as 7 for audits if they believe that you have dramatically understated your income. Since they don’t take up too much space, I would recommend keeping them for the full 7 years.

This also means that you should keep any documentation that was used to prepare your tax returns for both income and deductions. Income documents can include W-2s, 1099s and K-1s. Deduction information may be in the form of receipts, statements for mortgage or student loan interest, child care statements or other documents that support items that you deducted. Make sure to hold on to absolutely all of these.

Long story short: You'll be much happier if you have these documents should the IRS ever ask to see them. 

Evidence for Pending Litigation

How Long: Until it’s over (or longer)

We've all seen that episode of Judge Judy where the plaintiff is suing for $XXX but doesn't have any documentation to correspond with their claim. Don’t be that guy.

If you are suing someone, or you are being sued, make sure to keep all of your documentation related to the lawsuit as organized as possible.

Long story short: If there is a pending investigation or legal matter, keep all related documents until everything is completely settled. If you have questions, ask a lawyer.  

Records Relating to Properties You No Longer Own

How Long: 7 years

When you sold your property, there were aspects of the sale that should have been included in your taxes for calculating capital gains. Therefore, keep those documents (mortgage statements, property tax statements, closing documents) as long as you would any other tax documents.

However, there are quite a few documents from that old property that you don’t need anymore. There’s no need to hang on to the utility bills that you paid or insurance policies that you no longer have.

Long story short: Same rules as tax returns. 

Marriage Licenses, Birth/Death Certificates, Wills, Social Security Cards

How Long: Permanently

In case you didn’t know, you’ll need these things on an ongoing basis, forever. Don’t get rid of them, and keep them somewhere very safe and secure such as a safe deposit box or a fire-safe in your home.

Long story short: If you needed me to tell you not to get rid of these... we might have bigger problems. 

Ditch These:

IMPORTANT: Make sure you shred anything that has your name, address, phone number, social security number or bank account information on it.

Veterinary bills and pet related receipts:

Unless you’re a farmer or are in a trade where you make money off of your animals, chances are you don’t need to hang on to all the receipts for your dog’s prescriptions, food, toys and check-ups. As I stated above, if you’re suing someone over these vet bills (or if there is any pending investigation or litigation in relation to these bills), you’ll want to hang on to them. Otherwise, don’t bother.

Long story short: Nobody cares how much you spent on Fluffy's root canal. 

Expired credit cards:

I can’t think of any reason why you would need these. Shred them.

Long story short: Expired credit cards = shredder fodder. 

Expired Warranties:

Raise your hand if you throw warranty information in a drawer and forget about it forever. Yeah, me too.

Here’s a tip on this one: When you purchase an item that comes with a warranty, before you file that information away, tape a bright colored note on it where you have written both the date that you purchased the item and the date that the warranty expires. Once a year, go through your files and get rid of the ones that are expired.

Long story short: Expired anything is pretty much shredder fodder. 

Telephone books and newspapers:

Chances are, if you’re reading this right now, you don’t even use a phone book. You don’t need to keep them around if you’re not using them, and you might even consider calling the company and opting out of delivery to try and save some trees.

Long story short: Even your Grandma knows how to Google. 

Home Budget 101: The Little Things That Cost You Big

This summer, Canavan Financial Group is developing a new service to help our clients track and analyze where their money is going. Our intention is to create a product that will help our clients achieve their personal financial goals, whatever those may be; taking a vacation, paying off debt, or buying a new home, for example. As part of this, I'll be writing a series of blogs (starting with this one) aimed to help you start to take control of your personal finances. 

There are many different philosophies that people employ when it comes to managing their money. Some people (like myself) prefer to stash every penny away for a rainy day, because we know that someday it's going to rain and we don't want to be caught without a financial umbrella. Others subscribe to the philosophy that we work hard for our money so that we can enjoy it, and that we should spend it when we have it. There's nothing inherently wrong with either of these philosophies, however I believe that it is important to make deliberate choices about how we budget and spend our money in order to ensure that our actions are in alignment with our short and long-term goals. 

Regardless of what your financial philosophy is, or what your goals are, below are just a few things that I find people are often spending more money on than they think. If you're trying to change the way you handle your money, you might want to take a look at the following items: 

Dining Out

Whether we're talking about a fancy night out on the town, or hitting the dollar menu for lunch, dining out if one of the first places I recommend that people cut their spending. In my experience, almost everyone under-estimates how much money they are spending each month on going out to eat. While you may think it's just $8 here and $15 there, the combined total you spend at restaurants can quickly and easily add up to HUNDREDS of dollars each month. 

Budgeting Tip: Take a month to track how many times you pay for food other than at the grocery store, whether it be going out for a sit down meal or pulling through the drive through for a quick bite. Next month, try to cut that number in half. You'll find that you don't feel totally deprived because you're still going out occasionally, but I'd be willing to bet you'll see a difference in your bank account as well. 

Late Fees

We've all been there; you're super busy and you forget that you haven't made your credit card payment yet. It happens to the best of us. Problem is, almost everyone that you have an account with will charge you a fee for paying late, and over time those can really stack up. Unlike going out to eat, it's rarely the case that these fees are going to cost you hundreds of dollars a month, but over the course of year they can be quite a bit. Additionally, sometimes paying late can mean more than just a one time fee; paying late on some accounts can cause your interest rates to increase, which will cost you more than you think. 

Budgeting Tip: Most accounts have the option for you to setup automatic payments with a credit card of your bank account. If you know that you are going to have the cash available come bill time, setting up automatic payments will save you on fees and take one item off your to-do list every month. 

Buying A Lot When You Need A Little

Don't worry, I'm not talking about buying in bulk. I have no problem with the savings that come along with buying 900 rolls of toilet paper. I'm referring to your three disc-at-a-time DVD rental subscription, your unlimited everything cell phone plan, or the 15 magazines you get each month.  

If you really do sit down frequently and plow through all three of those movies in one day, keep your rental subscription the way it is. I've got a bad habit of binge watching shows on streaming and letting the discs they've mailed me gather dust, and if that's true of your habits too then you might consider cutting your plan down to one disc at a time. Also, when was the last time you looked at how many cell phone minutes you're actually using, or how much data you're actually pulling down each month? It's entirely possible that you can cut back on that unlimited plan because your needs just aren't that robust. 

When we sign up for services like this, often times the company providing the service points out that a higher priced plan offers the "best value" because you get more bang for your buck. Things is, though, what if you don't actually us all the bang? If you're only watching two movies a month on disc, it doesn't matter that paying for 3 at a time is the best value... it's just costing you more than you need to be spending. 

Budgeting Tip: Keep track of how much you're actually using the things that you subscribe to each month. Do you actually read those magazines? Are you actually watching those movies? If not, cancel the subscription or cut back to a less expensive plan.

Bars and Nightclubs

Go ahead, call me Captain Buzzkill. I know you want to, because I'm picking on the things that you enjoy. Trust me, I'm used to it. I've already told you that you go out to eat too much, and now I am gunning for your bar tab. 

On this one, I am going to be quite direct; if you go to the bar or club more than once a week, you're spending a ton of money there. 

Fact of the matter is, most bars charge the same for one beer as a liquor store charges for a six pack of the exact same beverage. I totally understand going out occasionally to see your favorite band or have a karaoke night. On the flip side, if you're going to the bar as just something to do when you're bored, for the love of your wallet, go to the liquor store and invite your friends over instead. 

Budgeting Tip: If you just love the social scene of going to the bar, I have two words for you: Happy Hour. 

Buying Stuff You Don't Really Need... Or Even Want

If you need new shoes, buy new shoes. If you need new dishes, or a few new scented candles because you went through all of the ones you have and you really enjoy them, go ahead, get them. I'm certainly not suggesting that you deprive yourself or your family from necessities or the occasional luxury. 

Have you ever found yourself at a friend's house for a "party" that's actually a sales pitch for over priced makeup or jewelry? You don't really need or want anything, but you feel the pressure of the social situation so you buy a couple of things? Stop it. 

What about when you just stopped in to a store to pick up one thing, but the sales clerk points out that if you spend another $25 then you get the free gift with purchase, so you go for it? Stop. It. 

Succumbing to social pressures to purchase things that you don't want or need is understandable, but at what cost? Personally, I would rather go on vacation than get that free gift at the cosmetic counter. Most of the time it's not even anything I want anyway. 

Budgeting Tip: Remind yourself that it's alright to say "no" when someone offers you a deal. As a former salesperson, I can assure you they are used to it and you're not hurting their feelings. 

In summary...

Changing your spending habits is hard, especially when your money philosophies have been the same for a long time. My recommendation would be to spend some time thinking about your long-term goals, so that when you're tempted to spend more than you should you can remind yourself what you're sacrificing for. 

Also, don't try to change everything at once. If you're used to going to the bars twice a week, don't say to yourself "as of today, I'm never going to the bar again." Instead, set some short-term, achievable goals for yourself and reward yourself when you attain them. For example, cut down from twice a week to three times a month. That's a huge step, but not quite as dramatic cutting out the bar entirely. 

Finally, it can be helpful to communicate with your friends and family why your habits are changing so that they can be supportive of your new goals. If your friends are used to going out for dinner with you all the time, they might look at you sideways when you ask if they'd like to come to your place for dinner instead. Simply saying, "I'm trying to save up to pay off some debt" can help change your loved ones from bad influences into big supporters. 

Do you have tips and tricks for saving money? We want to hear them! Comment below to keep the conversation going, or email me at kcanavan@canavanfinancial.com. 

   

7 Deadly Business Sins & Tips for Avoiding Them

There are many different ways to run a business; that's why a lot of us went into business for ourselves. It's liberating to be the one calling the shots, to be in control of your professional relationships, and to learn from your experiences along the way. Whether you have decades of experience under your belt, or are fresh to the world of self-employment, it's important to avoid committing the professional missteps listed below, as they can be detrimental to the success of your company and your professional reputation. 

1. Biting off more (debt) than you can chew.

One of the biggest challenges in business is finding the capital to make investments and work towards growth. Items like equipment, software and marketing can all be necessary expenses when you're starting up, and it's tempting to take on debt to help get things up and running. 

I'm not saying that debt is inherently bad, or that you shouldn't use it to get what you need for your business. However, if you're not careful, before you know it you've spent all of your borrowed capital on items that don't actually help you generate revenue, and now you have a monthly payment to your creditor along with all of your other monthly expenses, which hurts your bottom line.  

Instead...

If you're going to use a loan or a credit card to help you when starting your business, be very conservative with what you use that money for. If you're considering buying an item, think about whether or not it is critical for your business and whether it will help you generate revenue. Also, consider if there may be a more cost effective option that will meet your needs (both quality and budgetary). 

Pro Tip: When you're considering buying something on credit, look at your current interest rate and consider how long it will take you to pay off that debt. Calculate the total cost (price+interest) before making your buying decision. 

2. Failing to deliver on your promises.

There are always going to be clients that have unrealistic expectations, however as a business owner, do your best to ensure that these expectations are not as a result of promises that you have made. If you cannot complete a project by the deadline that your client desires, don't tell them that you can. If you're not qualified to tackle a task that your client is asking for, you'll be much better served to be transparent about this up front. 

If your client has expectations that are unreasonable, then there is likely no way to please them. However, if you fail to deliver on a deadline that you have committed to, or compromise quality because of your competencies, then it's not that unreasonable for your client to be angry. 

Instead...

When a client asks you if you can complete a task, ask yourself a couple of questions before you respond to them: Are you qualified to complete the work? Can you do it in the amount of time that your client is expecting, or for the budget that the client expects? If the answer to any of these questions is "no", you'll benefit from being candid with your clients from the start. This doesn't mean that you may not be the right person for the job, but you should be honest with your clients about your reservations so that everyone is on the same page as the project progresses. 

Pro Tip: I try to always add a "buffer" when I make promises to clients. For example, if I think that I can have a project completed by Wednesday, I tell them that I will have it for them by Friday afternoon. By doing this, I save myself stress and the client irritation when unforeseen challenges make the project take longer than anticipated.  

3. Not keeping up with your taxes. 

Depending on the industry you are in, it's possible that you have sales, excise or other tax responsibilities associated with your revenue. If you're an employer, then you have state, federal, Social Security and Medicare taxes to pay. If you plan for these taxes properly, then they are easy to stay on top of and be in compliance with. However, if you get behind on any of these responsibilities, it can be very difficult to catch up and you will likely be subject to penalties and interest. Suddenly a small tax liability has become a big tax liability, and that can put you out of business. 

Instead...

Consult with an accountant about your reporting responsibilities. It's possible that your business sales taxes or employment taxes are simple enough that you can take care of them yourself, but you will want to make sure that you have a complete understanding of what those responsibilities are so that you don't end up in hot water. Once you know what you are dealing with, you can decide if you want to do DIY it or hire a professional. 

Pro Tip: If you collect sales tax or withhold taxes from your employees, consider setting up a separate bank account to transfer that money to on a regular basis. If you total your sales tax figures once a week, for example, and transfer that money out of your operational account, then you know you will have it when it's time to file your sales tax return. If you leave in the operational account, it can be easier to spend and come up short come tax time. 

4. Hiring someone you can't afford to pay. 

You want to do things right. Because of that, you've hired a freelance web-designer, a lawyer and an accountant. Bummer is, they completed their work before you've generated enough revenue to cover the costs, and now you can't afford to pay them. 

An alternative, but equally sinful scenario is hiring staff to help you run your business but not having the money to pay their wages and your employer portion of the taxes on payday. 

Just like you rely on your income to pay your bills, the people that you have hired need their pay to make their ends meet. When you hire someone and reach an agreement about a price or rate, they work under the assumption that you are going to pay them on time according to that agreement. If you're not paying your employees, you're taking food off their table. If you're not paying a business that you have been a customer of, you're taking food off the table of their employees. Neither scenario is fair to the people who worked for you. 

Instead...

Negotiate up front. If your web-designer quoted you $2,000 for your website, but your budget only allows $800, ask him if he is willing and able to work within your budget. Remember that he has overheads and costs associated with his business too, so don't assume that his price should be whatever you're willing to pay. He may tell you that he cannot complete the work for that price -or- he may be willing to compromise in order to get your business. However, if he said the website would be $2,000 and you agreed, don't try to negotiate it down to $800 once he has completed the work. 

Pro Tip: Treat your word as your bond. If you committed to paying something or someone, as a business owner you may need to compromise your own pay to meet your obligations. It's one of the drawbacks of going into business, but meeting your obligations in a timely manner will help you to grow your professional network as well as your positive reputation. It works the same in the inverse; if you refuse to pay your web-designer, he might tell his network not to do business with you. The bottom line here is if you can't afford them, don't hire them in the first place. 

5. Losing Focus or Motivation.

Sometimes, inspiration can get the best of us. It's great to always be thinking of ways that you can innovate and change the game, strategies that will set you apart from your competition, and new products or services that can help you expand your brand. However, if you're not careful, these ideas can become butterflies, and chasing them can distract you from the task at hand. 

Alternatively, there are times as a business owner where it can feel like all work and no play, or that all of your hard work is not paying off. This can make you stagnant, and distract you from what you need to be working on. 

Instead...

Have a notebook or document where you keep track of your ideas and business goals on a regular basis. Then, create a strategy for when you can realistically commit time to working on these goals, and follow that plan once you have it. This will keep you focused on what is in front of you, meanwhile keeping you motivated because you're reminding yourself of your goals on a regular basis. 

Pro Tip: Regularly designate time in your schedule for goal setting and development. At my firm, we have a Monday morning meeting that I like to call Marketing Monday. While we have our morning coffee and click back into work mode, we discuss any and all marketing or development ideas that anyone has had in the last week. Even if the ideas don't make it into the business plans, it keeps the creativity flowing and communication open. 

6. Not admitting when you're not the best person for the job. 

Most businesses have a ton of different needs; advertising and marketing, accounting, legal, design work, sales, etc. As people, we all have strengths and weaknesses. As business owners, it's important to be realistic with yourself about what your strengths and weaknesses are. For example, if you decided you wanted to own a bar, but have never worked at a bar before, it's in your best interest to hire an experienced bar manager to help you learn the industry. I like to think I am a pretty good accountant, but I know enough to know I need to outsource my IT support. 

Instead...

Take some time to consider the needs of your business. Then, consider whether you are qualified to meet that need, and if you're the best person to meet that need. Yeah, I could probably spend an entire day of my time researching the various IT solutions for my business needs, but my time is better spent elsewhere (generating revenue or building business). If you think you can maybe meet the need, maybe not, you should put some serious thought into hiring an expert. 

Pro Tip: Every industry is different. If you are entering an industry you have never worked in before, find a consultant or a mentor that has been in the industry long enough to know the pitfalls and unique challenges. This can be the difference between building a profitable business, or having a very expensive hobby. 

7. Stop Learning.

No matter how long you are in business, it's important to stay in touch with the changing times. If you're not keeping track of what everyone else is doing in your industry, someone could change the game completely without you noticing, which could lead to your company's demise. Don't believe me? Ask Blockbuster. 

Instead...

Find a way to stay connected with your industry; subscribe to industry magazines or journals, join networking groups within your industry and keep tabs on websites that pertain to your competition and your customers. You don't have to be watching 24/7, but you should try to keep your hand on the pulse of your industry. 

Pro Tip: Professional networking sites such as Linkedin have excellent communities set up where you can talk to your peers about what they are experiencing. It's quick, easy, and can be participated in and monitored whenever you have time.

Kaleigh Canavan is the President

and owner of Canavan Financial Group.

www.canavanfinancial.com

Preparing for Tax Time - Self-Employed Individuals

The Taxman: that guy that everybody loves to hate. Whether he is taking too much out of your paychecks before payday, or raking you over the coals in April, it seems as though everyone thinks their tax treatment is unfair.

Over the coming weeks, I’ll be blogging about various tax issues that may or may not be pertinent to your tax situation. The fact is, you can’t avoid the The Taxman. He’s like the dentist; the longer you wait to talk to him, the more it’s going to hurt. Similarly, if you plan ahead you can minimize the discomfort in either scenario.

Tax planning can mean a lot of things, but today I am going to focus on tax planning for self-employed individuals. Self-employed may mean that you intentionally set out to own your own business, or that you worked for someone else that considered you to be an “independent contractor” and because of that they did not withhold taxes from your check. Either way, there are major tax consequences that you should be aware of so that you are not shell-shocked come April.

“Why are self-employed individuals subject to a different tax rate?”

This is the most common question I get from those new to self-employment. The short answer is this: When you’re working a job where your wages are being withheld, you and your employer both bear the burden of your Social Security and Medicare taxes. Your employer is responsible for a certain percentage of that tax, and you are responsible for the remainder, which is withheld from your checks and remitted to the IRS on a regular basis. When you’re self-employed, you are responsible for the entire amount. The combination of Social Security and Medicare that self-employed individuals must pay is commonly referred to as Self-Employment Tax, or SE Tax.

“I’m self-employed. What should I do to plan ahead?”

Since taxes are not being withheld from your checks and remitted to the IRS on a regular basis, it’s a good idea for self-employed individuals to utilize certain strategies to get ahead of the ball on their annual tax liability. There are many strategies that can be used, and you should consult a tax professional on the best way to plan ahead for your particular situation, but here are a few suggestions to help you get started.

1.       Save a portion of each check

The easiest way to not get upset about how much of “your money” The Taxman takes each year is to not think of it as “your money” in the first place. I recommend that my self-employed clients put a certain percentage of each check they bring home directly into a savings account, or other account that they plan not to touch until tax time. Essentially, this is the government’s money, they just haven’t come for it yet. Put it somewhere you know you won’t spend it until it’s time to hand it over to The Taxman, and you might even earn a little bit of interest on it in the meantime.

2.       Track those expenses

Frequently, my clients who are new to the self-employment game haven’t adequately tracked all of the expenses that they could be writing off. If you’re self-employed, don’t forget to keep track of things like your mileage, cell phones bills and how much you’re spending on supplies. Those items, combined with many other expenses you may be eligible to include, will have an effect on your tax liability that is typically advantageous for the self-employed.

3.       Make estimated payments

If you’re concerned about your tax situation because of the amount of money you’ve earned from self-employment, you may want to consult a tax professional about making estimated payments to the IRS. Your estimated payments will vary depending on how much you’ve earned, your marital status, and whether or not you work another job that is subject to withholding (just to name a few facets of the calculation). By making estimated payments you can avoid penalties and interest that you may be subject to for underpayment. Additionally, you won’t be tempted to spend that money that has to go to The Taxman, because you’ve already sent it.

There are many blessings and burdens of self-employment. To maximize the blessings and minimize the burdens, self-employed individuals can see tremendous benefit from employing a Bookkeeper and Tax Professional. Let Canavan Financial be your one-stop shop to meet those needs. If you’re not already a client, contact us today to set up a complimentary consultation to discuss how we can help you with your business needs. Call 303-284-1096 or email me directly at kcanavan@canavanfinancial.com.

5 Things You Didn't Know You Could Write Off - Personal Income Taxes

"I normally just use (insert generic tax software here)." This is the typical response I receive when I ask someone who they have doing their taxes. For some, this is perfectly fine; If your wages have already had taxes withheld, you have no dependents and nothing to itemize, you're probably receiving the best refund you can from that generic tax software. However, if your tax situation is not that simple, you might be missing out on valuable deductions because you're not utilizing the expertise of a Tax Professional. The following are just a few of the many deductions that you may not be aware you could be writing off (and generic tax software probably won't tell you about). 

1. Hobby Related Expenses 

So, you're crafty, and it turns out you're pretty good at it. You decide to sell your wares on Etsy, or maybe just to some friends and acquaintances. If you have generated revenue from your hobbies, you may be eligible to deduct the cost of those hobbies on your taxes. This deduction is for taxpayers that are generating money from their hobby, but do not consider their hobby to be a business. The IRS has special rules and qualifications to distinguish businesses from hobbies that a Tax Professional can interview you about to determine just how much of your crafting materials you can write off. 

2.  Casualty or Theft Losses

According to Rain Hughes, CFP EA, "A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual." While it may seem obvious that there are going to be accommodations made for someone who experienced a loss due to a tornado or earthquake, what about when that punk kid from across the street vandalizes your garage? If the incident meets certain criteria, you can write off the cost of cleaning it up. A Tax Professional can help you to understand what you can write off, and to what extent. 

3. Donations

You know when you take all that old stuff to Goodwill and they ask you if you want a receipt? That's because technically, you relinquishing your old junk to them counts as a charitable donation, which you can write off. The same is true for donations to your church, or other charities that you may give cash or non-cash donations to throughout the year. As with all deductions, there are limitations to the benefit you can take, but a Tax Professional can help you understand how to maximize the benefits of donations you were going to make anyway. 

4. Job Search Expenses

If your job search aligns with certain rules, you can write off costs associated with that job search. Examples of these types of expenses include fees paid to an agency to assist you in finding a job, or the price of sending out your resume, and are not contingent on you being hired. 

5. Tax Preparation Fees

Many people believe that Tax Professional fees are too expensive to be beneficial, but what they may not know is the fees you pay can be deducted from your taxes. 

This is just a small sampling of the items that you may be eligible to deduct from your taxes, which could have a significant impact on your tax liability. Most consumer use software for tax preparation does not ask you, the taxpayer, enough questions to fully understand the deductions that you are eligible for. However, a Tax Professional knows the laws, knows the rules, and knows how they can benefit their clients. 

Is it time to ditch your software for a real, live Tax Professional? Canavan Financial Group is always accepting new clients. Call 303-284-1096 or email kcanavan@canavanfinancial.com to schedule an appointment. 

Now Hiring! Part-time Administrative Assistant.

Great news! Canavan Financial is ready to expand our team. 

Have you always wanted to work in the fast-paced and exciting field of part-time data entry? Do you long to find satisfaction in spending hours looking at bank statements? Do words like "taxes" and "journal entries" inspire you? Do Boston Terriers in bow-ties make you happy? Well then... you're kind of weird. Also, you should probably come work with us. 

Canavan Financial Group is a bookkeeping firm currently based out of Englewood, CO. We service a variety of client bookkeeping and accounting needs, as well as general business consulting.

The available position is currently flexible part-time, with the possibility of expanding to full-time in the future. Candidates should anticipate working 10-20 hours per week initially. 

Candidates should be:

- punctual and reliable

- enthusiastic

- attentive to detail, especially redundancy  

- enthusiastic

- innovative 

- able to endure monotony without complaint

- open-minded, level-headed, reasonable

Job Requirements:

- Customer Service Skills 

- Computer Proficiency

- Organizational Prowess 

Additional Desired (but not required) Skills:
- Business Education

- Accounting Education and/or Experience

- Sales Background

- Ten Key/Adding Machine

- Quickbooks Experience

- Excel Experience

- Drake Software Experience 
- Income Tax Preparation Background

- Marketing Skills (social media experience, strong professional network, innovative marketing ideas that don't involve Groupon, etc). 

- Understanding of why Comic Sans is not an appropriate font for anything

Compensation includes base-pay, incentives for new client referrals and unlimited cuddles from our company mascot. 

Interested candidates should email their current resume, a cover letter and their salary requirements to Kaleigh at Kcanavan@canavanfinancial.com no later than Monday, July 28th. Please include the word LilLeilou in your subject line to identify your message as non-spam. 

Please Note: Canavan Financial reserves the right to conduct a criminal background check on all applicants.

Canavan Financial Group is an equal opportunity employer.