Start Your Business With A Strong Financial Foundation

I came across an article today that I really wish I had written. In just a few paragraphs Siu Ling Hui sums up the first steps every new business owner must do to provide a strong financial foundations for their business.
She says in her article, Building a Sound Financial Foundation for Your Internet Business ,

I have seen many young fast growing businesses falling over because they didn’t have sound financial management practices in place. Ironically, it is when rapid business growth happens that the financial cracks emerge.

read the rest of the article

In her article she recommends three must dos:

1. Hire a good accountant or bookkeeper before you earn your first dollar.

I cannot stress this enough. Too many new business owners make costly mistakes because they just didn’t know. A good accountant will help you through the maze of government regulation and provide advice that will help your business be more profitable. Almost without exception a good accountant will save you money.

2. Separate your business and personal finances.

You must have a separate checking account and separate credit card for business. Doing so is more professional and will give you clarity in your finances. Also, if your business is ever audited, your personal finances will not be included in the audit.

3. Manage cash flow.

Cash is king. Cash is the lifeblood of your business. Without cash or available credit your business cannot function. Good cash flow planning will allow you to plan for the ups and downs in your business and insure that you will be able to sail through the inevitable downturns in your business.

These three simple steps will insure that your business has a strong financial foundation and go a long ways towards insuring the success of your business.

Make Money with Adsense and Get BackLinks for Free!

There are two things most bloggers I know are looking for. They want to know how they can make money with Adsense, and they want to know how they can get more backlinks to their blogs. The following sites allow you to do both. They are all revenue sharing sites where you can earn money by posting content. They also encourage you to link back to your own blogs, so by posting you also get some lovely do-follow links!

But don’t think these are places where you can just spam away. They all require good content that provides value to the reader.

Bukisa is a revenue sharing site where you are paid for page views. The amount you are paid per 1000 page views varies depending on your “Bukisa index”. They do not directly link to your Adsense account, rather, when you reach a minimum payout of $10 you are paid via PayPal. You are encouraged to post original content, however, you can re-post your own content.
Bukisa is a good place to start blogging for money because you don’t need an adsense account and you don’t even need your own blog. You can literally get started for free.

Xomba is a revenue sharing site where you can post original articles, or you can “bookmark” links to sites that you like. You do need your own Adsense account. With Xomba 50% of the time your articles and bookmarks are showing your Adsense ID and you get paid for the clicks, the other 50% of the time the Xomba gets paid for the clicks.

Hubpages is one of my favorites and one of my “hubs” (articles) has earned over $100. They are also a site where part of the time you get credit for the Adsense clicks, and part of the time Hubpages gets the credit. They have a nice 60/40 split so most of the time the clicks are yours! In addition to Adsense you can also earn commissions from Amazon and Ebay.

SheToldMe is another revenue sharing site where you need your own Adsense account. You can post original articles and “scoops”. A scoop is like a bookmark on Bukisa. It is a link to a site that you find interesting. You can scoop your own site or anyone elses. You do need to write a short, original paragraph about the scoop. What I really like about SheToldMe is that they place one adblock in your article or scoop that shows your Adsense ID 100% of the time. Your posts are always working for you! The other ads on the page go to SheToldMe.

YouSayToo is a revenue sharing site with both Adsense and Amazon. What I really like about this site is you can add your rss feeds and your new blogs posts will automatically be shown on the site. They have a 50/50 revenue share where 1/2 of the time the ads are yours and 1/2 of the time the add income goes to YouSayToo.

Blog Engage is a little different from the others in that you need to have your own blog where you create your posts and articles. You can then submit them to the site where other users can vote your posts up or down. Blog Engage is a 50/50 Adsense revenue site, but with a little effort there is a way where your posts can show your Adsense ID 100% of the time.

These are just 6 sites that I am using. I know there are more! Feel free to comment if you know of other revenue sharing sites.

The Home Buyer’s Tax Credits, Now The IRS Will Help You Buy A Home

Ranch style home in North Salinas, California
Image via Wikipedia

Once again the IRS has extended the First Time Home Buyer credit and now is a great time to buy a house!

What I find really exciting is now you don’t have to be a first time home buyer to get a modified version of the credit.

Here is the scoop. If you are a long time homeowner, defined as someone who has lived in their current home for at least 5 consecutive years, you can now qualify for the long time resident credit and get a tax credit of up to $6,500.

Here is how it works. For both the first time home buyer tax credit and the long time resident tax credit you must enter into a binding contract by April 30, 2010 and have closed escrow by June 30, 2010. Miss the deadlines by even a day, and you miss the credit.

You can claim the credit when you file your 2009 or 2010 tax return, or if you don’t want to wait, for homes purchased in 2009 you can amend your 2008 tax return.

The credit is 10% of the purchase price of the home, up to $8,000 for the first time homebuyers credit and $6,500 for the long term resident credit. The new home must be your principal residence for 3 years, or you have to pay back the entire credit.

There are some limits, the purchase price of the home must be less than $800,000 and a taxpayers modified adjusted gross income must be under certain limits. Just how much depends on when you purchase the home. For homes purchased before November 7, the credit starts to phase out at $75,000 MAGI, $150,000 for joint filers, and no credit is allowed for persons with Magi of over $95,000 or $170,000 for joint.
For homes purchased after November 6 the full credit is available for persons with MAGI of up to $125,000 ($225,000 for joint) and no credit is allowed for taxpayers with MAGI of over $145,000 ($245,000).
Find out all the details on the Home Buyers Tax Credits at the IRS site.

Now here is where I think it gets really interesting.

Make Tax Free Income From Your Personal Residence

Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and the Middle Class Do Not!
Robert Kiyosaki, of the Rich Dad, Poor Dad fame, said in his books that your home is not an asset. However, that was before the IRS made owning a home so attractive. Using a combination of the Home Buyers Tax Credits, Mortgage and Real Estate Tax Deductions, and the Tax Free capital gains from selling your home, it is possible to make large sums of tax free income from your home. Here is an example of how it might work.

You, as a first time homebuyer, buy a home for $80,000 on January 1, of 2010. You put 10% down ($8,000) and take out a 30 year fixed rate mortgage for $72,000 at 5%. Your monthly mortgage payments will be $386.51.

The first year, when you file your tax return, you get the $8,000 tax credit, in other words, the IRS just paid your down payment. You will have paid around $3,300 in interest, and maybe another $1,000 in taxes, giving you a tax savings of about $1,000. ( I am using round numbers here just to make it easy.) That is a total of $9,000 you didn’t need to earn, and $9,000 you don’t need to pay taxes on.

Years two and three are not very exciting, you still get the tax deductions and save around $1,000 per year.

After 3 years you decide to sell your home. Let’s assume the market has made a recovery (which is not an unreasonable assumption for 3 years out) and your home has increased in value 25%, to $105,000. Let’s play with the numbers.

First lets see how much cash it took to live in your home. (I don’t include insurance here, because even if you are renting your should be paying for insurance, and renter’s insurance and homeowner’s insurance cost about the same.)

Cash Out

If we add up the down payment ($8,000), the total monthly mortgage payments ($14,000) and the estimated property taxes ($2,400) we come to a total of $24,400 cash out of pocket to live in our home. But then we get to subtract the tax credit ($8,000) and tax savings ($3,000) to come up with a net out of pocket cost of $13,000. Not bad for three years of housing!

Now let’s see how the cash flows when you sell the home.

We sell the home for $105,000, but we have to pay the costs of selling the home ($8,400) and we have to pay off the mortgage ($68,000). That leaves us with cash in pocket of $28,600. Nice! Subtract from that the $13,000 cash out and you are left with $15,600 your don’t have to pay taxes on. Working a job and paying income taxes and social security taxes you would have to earn almost $20,000 to have the same amount of cash.

So by using the tax laws to your advantage you have lived in your house for free for 3 years and gained over $5,000 per year in cash flow.

In my book, that makes my home an asset!

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Why Now Is The Time To Start A Business

I started my first business during a recession, and now, during this recession I am starting another one.
I think recessions are the best times to start a new business, especially a service business, and I am going to quickly tell you why.

#1. Rents are cheap.
You can tell yourself all you like that your clients don’t mind that you work out of your home, but I have found I get more respect, and more money from my clients when I have a professional business office. Right now commercial vacancies are high, and you can find good office space at bargain prices.

#2. Help is cheap.
Sometimes you just can’t do it alone. With unemployment at an all time high, it is easier than ever to find talented, qualified people to help you out. They are also willing to work on a temporary, contract basis, so when I don’t need them, I don’t need to pay them.

#3. It seems that everyone is willing to bargain.
I hate paying full price for anything. But often, vendors will say the price is the price. Recently I have been getting discounts on software and services just by asking. I try to give something back, and nothing talks like cash! My favorite line: Will you take $X for this if I pay you cash right now?

#4. You Have the time!
I was laid off from my job 3 months ago, and with unemployment over 11% where I live I probably won’t be getting a new job any time soon. It doesn’t take long to look and see that there are no new jobs I can apply for. So now I am using my considerable amount of spare time to get the new business rolling.

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Being a Millionaire, Not What it Used To Be

Everyone wants to be a millionaire, right? To join the ranks of that exclusive club, whose members have proved to the world that they have made it. Well, maybe not so exclusive. According to CNN.com the number of millionaires in the world has grown to over 10 million! And the worldwide number of super-rich, those with more than 30 million dollars in assets, has grown to over 100,000.

Most of the new millionaires are coming from countries with fast emerging economies, India, China and Brazil. But the United States is still home to the highest number of millionaires.

But of course, a million dollars isn’t what it used to be. Thanks to inflation, a million dollars today is only equal to $783,000 in 1998 dollars, and a pitiful $568,000 in 1988 dollars.

It is interesting to look at where the millionaires are putting their money today. For the most part they are not investing in Forex, Real Estate, or other fast money schemes. With today’s economy millionairs are putting 40% of their assets in those “save and boring” investments, money market funds, bonds, and preferred stocks.

Would you like to join the millionaire club? You are most likely to get there not by winning the lottery or finding the perfect get rich quick scheme. The best way to get there, make saving a priority, spend less than you earn, own your home, and avoid consumer debt.