Steer clear of these 5 retirement plan mistakes

Participating in a 401(k) or similar retirement plan is a tax-advantaged way to save for retirement. If you have the option of participating in a 401(k) plan, avoid these five common mistakes:

• Not taking full advantage. Too many employees opt out of the plan or don’t contribute as much as they can afford. At a minimum, try to set aside enough to receive the full employer-matching contribution.
• Investing too much in company stock. Try not to put all your eggs into one basket when it comes to company stock. Even if the company is doing well now, things can change. If you lose your job, you don’t want to lose your retirement savings, too.

If your employer uses company stock for the matching contribution, you may have no choice. But at least you can select other investments for your own contributions.

• Borrowing from your plan. Take a loan from the plan only as a last resort. Remember, these savings are for your retirement, not to fund everyday needs. When you borrow from the plan, you’re losing the tax-deferred growth on those funds.
• Withdrawing your savings if you change jobs. It’s tempting to cash out your savings if you change jobs. But if you do, you’ll owe taxes and probably a penalty. More importantly, you’ll lose the future tax-favored growth that you might need in retirement. Instead, talk to your financial advisor about a rollover into an IRA or your new employer’s plan.

Not sure if the retirement planning you’ve done so far will be enough? Schedule a time to talk with us at www.bas-pc.com/schedule and we’d be more than happy to discuss your specific situation and give advice on how to maximize your funds leading up to retirement.

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College and Credit Cards: A Good Mix?

If you’ve gone back and forth about whether or not it’s a good idea to send your child to college with a credit card, you aren’t alone. Opinions are divided, both among parents and financial advisors. The outcome depends on the kids and the parents.

On one hand, there’s a potential that everyone will benefit. If your child uses the card for budgeted expenses and then pays off the balance each month, they’ll start to build good credit history. You’ll sleep better knowing your child has a credit source in case of emergencies.

On the other hand, if your child isn’t used to managing money or living within a budget, they might fail to make payments on time and end up with bad credit history. Worse, you may have to step in to bail your kid out.

Here are some tips to help minimize the risk of your child’s credit card experience going south:

• Set ground rules. Agree on what the credit card may and may not be used for while at college. Put the agreement in writing and have your child sign off.

• Establish a budget. Talk regularly about how your kid is managing their expenses within the budget.

• Consider alternatives to a credit card, at least for freshman year.Consider using a prepaid credit card, or set up a checking account with a debit card. This may allow your child to gain experience managing expenses within a budget.

Finally, remember you may have no say in the matter. Students are bombarded with credit card offers as soon as they enroll. Credit card companies are usually happy to issue a card to any student over age 18 in his or her own name.

For more ideas on getting your student across the finish-line of college (and beyond) with good credit, give us a call. We’re here to help in any way we can!

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3 Debt-Destroying Habits Everyone Should Follow

Staying out of debt is simple, but it’s not easy. It requires resilience — forgoing impulsive purchases in exchange for long-term financial freedom.

Personal debt can be categorized as necessary or unnecessary. Necessary debt can generally be linked to assets such as your home mortgage, a basic car for getting to work, or a college degree. Unnecessary debt, on the other hand, might include routine credit card charges or installment loans for items that rapidly decline in value.

If your goal is long-term financial freedom, avoiding unnecessary debt is crucial. These simple habits can help you achieve this goal:

• 1. Live below your means.Living below your means requires that you discover what those “means” are. This could entail tracking your income and expenses over a period of time to learn where your money comes from and how it’s spent. You might be surprised. By spending less on the little items that add up quick (like daily coffee shop lattes), you’ll be able to save for the future and develop long-term wealth.

• Save for emergencies.By setting aside money in easily accessible accounts, you avoid racking up credit card bills when unexpected expenses occur. Such expenses could include trips to the emergency room, replacing the water pump on the family car, or patching a hole in the roof. A reserve fund can also help you survive periods of unemployment without incurring additional debt.

• Go into debt for a good reason. If you decide to incur debt, know what you’re doing. Think about how valuable the item or service will seem three months from today. Also, ask yourself whether you can pay off these new charges out of next month’s income.

Staying out of debt isn’t always exciting, but the long-term benefits are substantial. Give us a call if you’d like to learn more on how you can save by reducing your tax obligations.

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How to Get Your Customers to Pay Up

Your customer is satisfied — but a month has gone by, and your invoice is still outstanding. You’d like to work with the customer in the future. So how do you get your money without losing the customer? Here are two strategies that may help:

1. Make it a habit to clearly and promptly communicate with your customers.

On the day after the due date, send an email with your original invoice attached, or fax a copy. Then call to make sure the duplicate was received. While you’re talking, ask whether the customer has all necessary documentation and find out why payment is delayed. If the customer is happy with your performance, mention that you won’t be able to complete new contracts until past invoices are cleared up. Make sure to request payment by a specific date.

1. Be willing to negotiate with your customers.

When customers fall on hard times, you may still be able to find a solution that will work for both of you. Some options include:

• Ask for a portion of the outstanding balance.
• Request that a specific invoice be paid immediately, with the remainder due at staggered intervals.
• Establish a short-term payment schedule for a series of smaller checks.
• Offer to convert the receivable into a formal note with an amortization schedule and interest rate.

Setting credit terms, limiting the amount of credit you’ll extend, checking ratings and requiring down payments can prevent collection difficulties. If you’d like help establishing procedures for receivables management in your business, give us a call.

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Want to retire someday? Here’s how to save more now:

Need to save more for retirement? Here are some questions to ask yourself to help you get started and stay on track: 

• How much money do you need? The number of years you have before retirement will help determine how much you will need to invest each month to reach your financial goal.

• Is your retirement savings goal realistic?Make sure that your savings goal is realistic. If your goal works out to 10 percent to 15 percent of your monthly income, it should be achievable. But you may need to cut expenses to free up savings.

• Are you saving enough from each paycheck for your own retirement? Try to treat your savings as your most important monthly bill. Write a check to savings first, or have your savings automatically deducted from your checking account or paycheck.

• Are you tracking your expenses?Another way to maximize savings is to track your expenses for a few months. This is a great way to spot unnecessary or wasteful spending; it doesn’t take much work to see potential cutbacks.

• Do you feel in control of your savings? When it comes to saving, think “control.” For example, control the use of your credit cards. The amount you pay each month in finance charges could go to savings instead. Also, control the use of your ATM card. Get in the habit of giving yourself a regular cash allowance and try to live with it.

The key to having enough money for a comfortable retirement is to become a serious saver. Start saving early, commit to saving regularly and save as much as you can.

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Switching jobs this summer? Don’t forget about your taxes!

As you look forward to starting your new job, it’s important to keep in mind how your employment change will affect your taxes.  Here are three tax-smart tips that’ll put you in the best position come tax season:

1. Roll over your retirement plan.

You may be tempted to cash out the balance in an employer-sponsored plan such as a 401(k). But remember that distributions from these plans are generally taxable. Instead, ask your plan administrator to make a direct rollover to your IRA or another qualified plan. This avoids the additional 10 percent penalty on early distributions you would face if you’re under age 59½. Your retirement money will continue to grow tax-deferred.

2. Adjust your withholding. 

Assess your overall tax situation before you complete a Form W-4 for your new employer. Did you receive severance pay, unemployment compensation or other taxable income? You might need to increase your withholding to avoid an unexpected tax bill when you file your return.

3. Don’t expect to deduct job-related moving expenses.

Unless you are a member of the U.S. Armed Forces, you can no longer deduct moving expenses related to your employment.

More tax issues to consider when you change jobs include stock options, employment-related educational expenses and the sale of your home. Give us a call. We’ll be happy to help you with your new employment tax updates.

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5 questions to ask before starting a home-based business

A lot of people consider self-employment because they’ve lost their seemingly stable jobs in the corporate world. Others just dream of making it on their own. As online marketing becomes easier and more accessible, and employees discover the advantages of telecommuting, home-based work alternatives are becoming increasingly attractive.

If running a business out of your home sounds good to you, don’t quit your day job just yet. Take time to fully investigate the pluses, minuses and ramifications of starting your own home-based business. Here are five questions to consider:

• Is there a market for your product or service? Just because your coworkers or relatives rave about your new business idea, don’t assume that everyone shares their enthusiasm. You’ll need to rely on a variety of marketing tactics to get the word out about your business, especially if you won’t have a brick-and-mortar location that will naturally pique customer interest in your community.

• Are you excited about your business idea? To be successful, you’ll need to dedicate yourself to your business day in and day out. If you aren’t enthusiastic deep down about your firm’s product or service, you may find it difficult to weather the storms that confront every business.

• Is it a good fit for you? If you don’t like working with the public, a retail business probably doesn’t make sense for you. Or perhaps your business will require hours in front of a computer. If your forte is face-to-face interaction with people and not holing up in your house for hours, you may need to rethink your strategy.

• How will you allocate time for the business? For many people, a home-based business is convenient and often begins as a part-time venture. Do you have the discipline to stick to a work schedule when your TV is staring at you from the living room? Allocating a specific room for business (with a door!) will help you compartmentalize work life and home life.

• How will you finance startup costs? As a general rule, you should have funds set aside to cover at least six months of your home-based operating expenses. Without an adequate financial buffer, you may spend many unproductive hours just trying to keep the business afloat.

For those willing to take the plunge, a home-based business can provide great satisfaction. But as with any business venture, it pays to do your homework. If you would like to discuss issues related to starting a business, give us a call.

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