Spring Cleaning Your Finances

April is National Financial Literacy Month, a 30-day celebration of learning and sharing to promote financial literacy in America. Okay, that sounds good, but what is financial literacy?

Financial literacy is having the ability to understand and effectively use financial skills to manage the money you earn, budget expenses, and invest for the future. These are the basic building blocks of financial wellness and security and can be learned at any age.

Teaching financial skills to your children is as important as teaching a baby not to touch a hot stove, a pre-schooler how to tie a shoe, a grade-schooler how to have good manners, and a teen how to develop and distinguish meaningful personal relationships. Children with strong financial skills will lead happier, more stable lives. A child’s best teacher is your good example.

And have we mentioned that it is April? Yes, we have. And is April spring-cleaning month in Ohio? Yes it is! So we thought we’d share some ideas for spring cleaning your finances.

  1. Organize your financial files, whether paper or electronic. If paper, run through a document scanner; upload the electronic files to 2 separate external hard drives that you then store in separate places, in case you lose one. 
  2. Write down your short- and long-term financial goals. Check your aspirations against your emergency funds, rate of savings, investment returns, and other financial matters until you have a clear, honest appraisal of your financial future.
  3. Make a budget (I know it’s so hard; but it’s really important) and to make it easier, think of it as a “clever method of designing your lifestyle”.
  4. Review all your recurring expenses; include things you might lose track of, like club dues, subscriptions, and anything that you download to a device that resembles a phone, tablet, computer, or TV. Cancel what you don’t need and be sure what you must keep is correctly priced.
  5. Review your retirement planning. No one but you and your family care about this, so you have to take the initiative to verify that you’re on the right track for the future you visualize today.
  6. If you got a tax refund last year, or if you owed more than you were comfortable owing, now is the time to adjust your income tax withholding with your employer or with your tax professional.
  7. We hate to remind you, but you’re a year older and there may have been changes in your family and your health situations. Make sure your health insurance coverage is correct for this phase of your and your family’s life.
  8. Make saving automatic. If you don’t, there’s always a reason not to save (the baby needs new shoes, daddy needs new wheels, mom needs a kitchen makeover). 
  9. Call us if you need help. 

So what about teaching those kids? Forbes Advisor offers an excellent resource for adults who want to help teach kids about family budgets, saving accounts, good money habits, authorizing kids to use your credit card, and teaching teens about borrowing and paying back loans.

DLMoneyMatters wants you to spend more time doing the things you love while still having the basic building blocks of financial wellness and security in place. Let us know how we can help.

Tax Less – Give More

money umbrellaThe big gift under the Christmas tree for most Americans this year was the 2018 Tax Code for individuals and businesses. Santa has not delivered a gift this significant for U.S. taxpayers for over 30 years. Most of us are happy he made it down the chimney.

To explain in our blog what’s included in the bill, and how it is likely to affect you and your business, would be redundant. Plenty has been written in the press and online. An article that we found to be easy to understand comes from The Motley Fool. The impact of the Bill is explained in layman’s language and we especially like the tables. According to the Fool, a few interesting individual deductions will soon be history. These include theft losses (no need to fill out that pesky police report), unreimbursed employee expenses (no incentive to bring the boss a Starbucks latte), moving expenses (it now pays to stay in one place), and employer-subsidized parking (no problem for us whose office happens to be in the suburbs).

For corporations, the GOP-proposed Bill is exciting. Businesses can sell worldwide without double taxation, and if you’re one of the those businesses who made money overseas but couldn’t afford to bring money into the U.S. because of taxation, it’s good news.

Read the entire article (really, it’s a good one).

Of course, not everyone is happy. Parents who sacrificed so their kids could go to college won’t get the $2,500 tax credit and charities are all wondering whether the goodness of the average American wage earner will be “as good” if they aren’t able to deduct charitable donations. We believe that generosity and compassion, more than a tax deduction, drive American giving. Next year will be our litmus test. In the last election, according to Pew Research Center, 54% of us Americans voted, but 60% of us gave to charity.

Charitable giving, in all its forms, transcends politics. Giving is as American as apple pie and will remain that way regardless of our politics, tax rules, and financial forecasts.

Hidden Tax Deductions

Waiting until the end of the tax year to find, verify, and record potential tax deductions can take a toll on what otherwise could have been more productive time spent growing the business. To make life easier, you can hire a professional bookkeeper to do this for you or use an outside service, like us. For anyone just starting a new business, we’ve put together a list of a few of the most overlooked small-business tax deductions.

starbucks blog#1 Fees paid to your accountant, lawyer or business consultant
To run small business successfully, you need sound advice and a great accountant and bookkeeper. Fees paid to these professionals are “ordinary and necessary expenses directly related to operating your business” and are deductible in the tax year they were paid.

#2 Losses on bad debts
If you paid advance wages to hire a hot-shot “marketing expert” and she bailed on you 10 days into the job because your dress code was just a ‘bit too conservative’ for her, the IRS allows you to deduct those lost wages. You can claim a deduction for most bad business debt, but only if you included the amount owed to you in your gross income.

#3 Carryovers
Carryovers are overlooked deductions from previous years. These are not “carryouts” —so Starbucks to-go while driving to work is not deductible. What if, for example, you started a home-based business and your expenses in the first year were actually higher than your income? You can “carryover” the loss to a future year when you did earn income.

#4 Startup expenses
Start-up costs are out-of-pocket costs for both looking into buying a business and getting the business started. These might include analyzing the marketplace and buying capital equipment like trucks or computers. Then there’s domain name registration fees, website and advertising costs, wages for new employees, consultant fees, costs to secure goods or licensing—the list can be seem endless. It’s a critical time to stay focused on documenting every cost so your accountant can maximize your tax deductions.

The size of the business does matter in terms of complexity, but whether a small business or large enterprise, it pays to keep impeccable daily records. Or simply hire us to do that for you.