Center for Excellent Living
Holistic Living: Family & Finance Coaching and Quality LifestyleCelebrate Financial Literacy Month!
April! Today is the first day of Financial Literacy Month! It’s also April Fool’s Day, so let’s start there. Who is a fool?
You’ve heard, “A fool and his money are soon parted.” A Bible verse backs this up with, “There is precious treasure and oil in the dwelling of the wise, But a foolish man swallows it up (Prov. 21:30).
A fool spends his money as it comes in, saving nothing for the guaranteed emergencies in life, and saving nothing for a later age, when work is less feasible. This puts the fool in the position of burdening others.
Who is the fool? The fool has to ask parents, friends, and banks for bailouts. Who is the fool? The fool assumes others will take care of them during hard times. Who is the fool? The fool is the one who thinks adult life includes “do-overs” or says, “I deserve it!” or “I need it!”
Don’t get me wrong, we all experience times when we need to lean on others, and we all know of exceptional cases; major accidents or illnesses that literally take every dime from the victim. These are the people we need to support and serve. These are the ones we were created to serve. But a fool is one in good body and mind who expects the same treatment as a real victim, often feigning sorrows (even if those sorrows are real in their own mind).
Thus enters the next thought (Prov. 22:7): The borrower is servant to the lender.
A borrower becomes indebted to a lender. After all, the borrower is using the lender’s money for his/her own pleasures. Get it out of your mind that borrowed money is your own money. It’s not! The payment of interest proves this. If it were your own money, you wouldn’t be paying to use it. Borrowing puts a person into a position of risk—the lender can now decide what, when and how the borrower uses money he/she has earned by taking it away from the borrower as repayment, and taking more for interest. Interest is money you will NEVER be able to use. Interest is money used by lenders to convince fools that they NEED to borrow more money to get the stuff that they NEED.
Besides, “No servant can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.” (Luke 16:13)
The fool is the person who thinks that money will buy them out of trouble. Quite the contrary. Trouble teaches us wisdom, and wisdom produces wealth. If you’re thoughts say, “If I can win the lottery, life will be good,” it’s time to start rethinking your values and philosophy. Start telling yourself, “If I can learn how to manage money wisely, I won’t need a lottery to be a success!” Then start looking for that wisdom. Ask God to help you, not the banks.
As a parent, the best thing we can do for our kids is to teach them to own their own loads, carry their own responsibilities, and endure a certain amount of hardship because that’s what life holds and what strengthens us. Who helps us through our struggles? God. How? By helping us learn better ways and by giving us other people to help us. Teach your kids to ask for help when they need it (not when they want it); so others will receive the blessing of helping them.
As givers, the best thing we can do for family and friends is to NOT bail them out unless their load has become a burden. Don’t allow them to be harmed, but it’s OK if they hurt. Why be a contributor to a fool? Why interfere with God’s lesson for that person? Just remember the old adage, “A lack of planning on your part, does not constitute an emergency on my part.”
6 reasons NOT to use credit cards
I just read an article on MSN Money titled, 6 reasons to keep using credit cards. I almost hate to share the link, but I will so you can reference it. While everyone has a right to their own opinion, I’d like to propose an alternate view to the six given points made. Here’s the site. Now on to the debate…
Credit cards help your credit scores
If you never use debt, you don’t need a credit score (FICO score). FICO is simply a mathematical algorithm that tells bankers whether you’re a good money risk for THEM. It simply means they can make more money off of you than someone else. It’s like marking an elk as an easy target.
Sadly the FICO is now being used for some jobs and for apartment rentals. You can have $5 million in savings & be considered a bad risk because you have a low FICO score. Don’t fall for the FICO scheme. Be prepared to proudly explain why you have no FICO identity. The cost of debt is always greater than the rare cost of a low or non-existent FICO score.
Credit cards offer consumer protections
So do VISA debit cards. As long as you have a VISA debit card, you have all the same protection as a credit card. ‘nuff said.
Credit cards offer safer automatic bill payment
No, they don’t. Automatic bill payments can be made straight from your checking account. Granted, if you have concerns about venders pulling straight from your account, you can schedule your payments monthly. It’s always safer to schedule a payment yourself than to do auto payments anyway. Or, if you really like the convenience, you can set the automatic payments up with your VISA debit card & receive all the perks mentioned in the article.
Credit cards offer protection against identity theft
Credit cards actually increase your risk for identity theft. The more cards you carry, the higher the risk for identity theft. What the article is describing is protection from loss on credit cards, not identity theft. This loss protection is received AFTER your card number has been stolen. Again, VISA debit cards offer the same protection.
Credit cards can help in an emergency
How horribly sad that this was recommended. An emergency is something that isn’t planned. Very rarely do we have emergencies, but very often we have poor planning. For example, all cars break down eventually, so car repairs should be planned. A flat tire might be an emergency if it happens after the warranty and before a planned replacement, but this should be covered by an emergency savings fund. An auto accident or sudden illness might be an emergency, but with proper planning we should have enough money set aside to carry us in event of lost income and medical expenses. What we don’t have covered in savings, we buy insurance to cover. The more we can cover ourselves, the less insurance is needed. NEVER use debt to cover an emergency because it sets you up for greater harm should you lose income.
Credit cards reward savvy users
The author was correct here, people spend more using a credit card than when they pay cash. But she goes on to say that savvy users don’t spend more, don’t carry balances on their credit cards, and get the perks. Well, most people deceive themselves if they think they’re not spending more. Even if you spend only 2% more, you’re only receiving 1% back. And that 1% is often in the form of goods and services that you might not use normally. Do your math carefully before buying into this and be totally honest with yourself. There’s a reason they offer the rewards…it’s because they make more money. It’s like an older brother saying to his younger brother, “If you buy me this candy bar, I’ll give you a piece!”
Entrepreneurialism Pt 5–Licenses and Registration
Licenses & Permits
When starting a business, you must know what regulatory agencies oversee your business, and what licenses and permits are required. There are three primary levels of government that regulate business. They are the Federal, the State, and the local (city and county) governments. If you’re working from home, you may also need to consider your HOA regulations as well. If your business involves international commerce, you may also need to research information relating to the countries you’re doing business in, and any treaty that may impact that business.
Each level of government has its own set of regulations, and regulations are replete with license and permits. On the U.S. Federal level, these are the agencies you may need to get licensed with or get permits from:
Federal Licenses and Permits
The U.S. Department of Agriculture (USDA)
Permit
If you import or transport plants or animals between states.
Alcohol and Tobacco Tax and Trade Bureau (TTB)
Permit & taxes
If you manufacture or sell alcohol or tobacco
FAA
Licenses and certifications
If you fly or work in aircraft mechanics
Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)
Licenses and permits
If you manufacture, import, sell or firearms or ammunition, or use explosives.
U.S. Fish and Wildlife Service
Permits
If you import/export wildlife and derivative products, or fish or raise fish
U.S. Department of the Interior , Minerals Management Service (MMS)
Permit
If you mine or drill for any mineral resources on federal lands
The U.S. Nuclear Regulatory Commission
License
If you create, cycle, distribute or dispose of nuclear waste.
The Federal Communications Commission (FCC)
License
If you broadcast information by radio, television, wire, satellite or cable
National System of Interstate and Defense Highways
Permit
Regulates transportation weights
This page of the U.S. Small Business Administration website gives more details about each of these regulatory agencies.
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State Licenses and Permits
Scroll to the bottom of the page listed above, and you’ll find links to every state. Every state has its own set of regulations. Study your State’s website and find out specifically what is required. Common requirements include:
State Department of Revenue
Sales licence
This may be called a transaction privilege tax (TPT) license, a sales and use tax certificate of registration, or any other name. It allows you to resell goods. If, and only if you are selling products, you’ll need this for every location.
Professional Licensing Agencies
Licenses and Permits
Specific Professions have regulating agencies. These may include the State’s Department of Public Safety, Department of Agriculture, Registrar of Contractors, Corporate Commission, and many others.
If, and only if you are selling products, you need a sales & use tax Certificate of Registration for each business location is needed from the State Dept of Revenue.
It’s a good idea to register your business name with the state. This makes your business name “official,” and also allows you to open business bank accounts. Registration is usually around $20.
You do NOT need an EIN if you don’t have any employees other than yourself. The EIN is for employers and used for employee payroll taxes. Until you have employees, don’t worry about this one.
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Local Licenses and Permits
Again, every local jurisdiction has its own laws and regulations. Most cities, counties, and other localities require at least a business license, which allows you to open a bank account in your business name & file taxes with the county. They vary in price, but usually run around $20 or so. Do your research to find out what is permitted in your locality and, if you work from home, within your neighborhood!
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Links
US Small Business Administration
Scripture
Romans 13:1-7
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An Excellent Life is a Healthy Life!
** Friday is Healthy Living Day **
My husband and I have always enjoyed growing our own food. We’ve been blessed with enough land in an area where we can raise our own beef, pork, and eggs. Our freezers are full of meat right now, the chickens went to a friend when we were doing some home construction, and during that time the garden went dormant.
This year were revitalizing everything. Without livestock, the pasture has to be mown, so were consider
ing sheep in the spring to maintain the pasture. The original chicken coop had turned into a garden shed, so we’ve just finished building a new one is mobile. (Move it around and fertilize the lawn for free!) The garden has turned into a Square Foot Garden and has doubled in size. Finally, we’ve just taken on the project of building a “barrelponic” system; a surprisingly simple process for creating a self-contained ecosystem that provides fresh fish to eat and uses the fish water to hydroponically and aquaponically grow garden vegetables.
All hail the garden!
The benefits of raising your own food can’t be understated. While the cost is not much different than that of the grocery store after you consider labor, materials, and supplies; the flavor and quality are unsurpassed. We don’t fear salmonella, E. coli or over-processing. We know what a tomato really tastes like. We know that our food is organic and as nutritious as food can be.
While most people can’t and probably shouldn’t raise their own cattle or pigs, most people with a yard can grow food in the garden. A basic barrelponic system takes less than six feet square (36sf) and can provide all the fish and your primary vegetables, without having to worry about fertilizer, soil, or weeds. Put it inside of a simple tarp greenhouse, and it can sustain you all year. The cost can run less than $100 if you’re good scavenger, and $200 if you buy the materials to build it yourself. Of course you can spend more for pre-built systems, if you want.
Are you wanting something simpler to start with? Start a traditional garden. I strongly recommend raised beds using the Square Foot Garden technique. While more expensive to start up, it’s nearly cost and maintenance free. A basic square foot garden takes only four feet square (16sf)!
Excuses, excuses!
I’ve heard many people say that they barely have time to go to the grocery store let alone garden. Yet they spend much of their time and money running children to sports and enrichment programs. Quite often they spend many hours in front of the TV. Consider this: a wholesome life feeds children well, both physically and environmentally, and most of what’s on TV does quite the opposite! Even the educational programs use passive learning, which is always inferior to active (participatory) learning. Gardening build skills, teaches children that successes come after failures, teaches them patience, and creates permanent memories of success for your children. Oh, by the way, it does the same for adults!
Get a move on!
It’s winter now and here in the Arizona desert the weather’s wonderful and we have an active garden growing. But in most parts of the states it’s anything but gardening season. This is the perfect time to plan for spring! Research options, decide what’s best for you and your family, and take on the challenge! Grow your own and enjoy the fruits of your labor, literally!
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Links
Hydroponics (growing plants in water)
Aquaponics (growing plants in water, using fish water for nutrients)
Barrelponics (an aquaponic system using 55 gal barrels)
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Verses
Ecclesiastes 5:18 Behold, what I have seen to be good and fitting is to eat and drink and find enjoyment in all the toil with which one toils under the sun the few days of his life that God has given him, for this is his lot (reward).
Consider this: There’s a reason the metaphor about bearing fruit is so prevalent in the Bible. A garden is a great way to teach children about God’s desire for our lives.
Square Foot Gardening
Whole Life vs Term Life Insurance
Life insurance is confusing!
We know we should have life insurance because we want our dependents to be protected should we die. We get inundated with ads for special insurance programs telling us how we must, as responsible people, insure ourselves. We hear terms like, “whole life,” “term life,”and “cash value life.” What does it all mean, and what choice is best? 
Whole life, aka cash value, is a low-interest savings account. It continues until you die or cash out. If you die, it pays out a set amount to your beneficiaries, sometimes with a little interest, and you lose your investment. If you cash out, you get your principle back plus a little interest. I say “a little interest” because these policies typically pay interest that is less than the inflation rate.
Term life is far less expensive and it has a specific duration. Your premiums are not refundable, and if you die, it pays out a set amount to your beneficiaries. You can’t cash out term life; it’s like auto insurance. On the surface it sounds worse than whole life, but here’s the catch:
Term life premiums are a fraction of the cost of whole life, so this policy frees up funds for investment. Since you only need life insurance for a set amount of time, it’s not a good idea to throw money into a low interest rate policy once your financially stable enough to be self-insured (meaning you can cover the cost of emergencies through savings), or when you’re older and need the money that’s going to premiums each month.
Here’s an example: A friend wants life insurance for the next 20 years, after which his house will be paid off, he’ll be totally out of debt, his kids will be grown and his investments will cover all needs for himself & his dependents.
He is able to get a whole life policy for $500/month that would give him a
$500,000 settlement should he die. If he waited 20 years and then cashed out, he’d have about $132,000. Sounds nice, doesn’t it?
He could also choose a 20-year, $1,000,000 term life policy for $100/month. This would allow him to put the $400 difference in monthly premiums ($500 for whole life vs. $100 for term life) into mutual funds, and earn 12% interest, which is reasonable for long-term investments. In 20 years his policy would end and there would be no cash value…but his mutual fund investment would be worth just under $400,000! He’s a winner! He can double the coverage for 20 years, and he can receive three times the final cash-in-hand if he survives! If he dies, his beneficiaries receive both the settlement and the investment–nearly three times that received through whole life!
Which would you choose?
Entrepreneurialism-Pt 4: Insurance
Insurance protects you from major emergencies. When considering insurance, it’s very important to rationally (without emotion) evaluate what is needed–not too much, not too little. Many people under-insure themselves and their businesses because “it won’t happen to me.” Or they over-insure out of fear. Here are some questions you should ask:
- What types of events could occur that may justify insurance?
This should be anything that would impact your ability to perform your business substantially enough to cause you damage. Typically, losing a day’s wages would not be significant enough, but losing a month’s wages would. - What are the chances of that event occuring?
The higher the chance, the higher the insurance rates. - How would it affect your business?
- Can you continue in business in most situations, or is your business sensitive to certain events?
- What financial needs would you have to stay afloat and move forward?
Do you have a payroll that has to continue? How about regular expenses, like rent, internet service, and auto registrations? - Would a it require a catastrophe to put you out of business, or would it only take a small health problem?
Consider not just the cost of the problem, but all associated costs as well. For example, if you have a manufacturing business in a flood zone, and a flood could destroy your equipment, you want your equipment to be covered. But you shouldn’t stop there. You also have to survive until new equipment is installed. Do you need to rent equipment? Outsource the work? Eat?
Every business is different & has different needs. It would be wisest to talk to people already in the business or in similar businesses to see what they do. Talk to insurance companies as well, but remember that they are in the business of selling insurance, so don’t be sold on anything you aren’t absolutely sure about! Question everything they suggest and get multiple opinions.
This is a list of the types of insurance you should consider:
- Liability (general, product, and professional) – to protect you from lawsuits
- Commercial property insurance – If you lease or own property for your business
- Home-based business – If you run your business out of your home
- Fire – only needed if you have a building
- Auto – if you have any form of private transportation
- Life – if you want to provide this through your company. Offer term life, not whole life. Have enough to cover expenses for the family should you die
- Disability – particularly if your business has physical risks for you or your employees
Becoming Self Insured
The ideal situation would be to have enough money in savings to support yourself and your business for an extended period of time. In a family budget, we recommend enough money to cover 3-6 months of expenses. More if you are self-employed. For a business, you should have enough to cover “normal emergencies.” “Normal emergencies” would include a fleet truck engine throwing a rod, a chemical tank leaking, a server crashing, or an essential employee being out sick for two months. If you put aside that money in a relatively liquid account, you will be able to cover nearly any issue that comes your way.
We attended a church for a time that was hard hit by the economic downturn. They had an amount in savings that sounded pretty large on a personal scale, but when compared to their monthly expenses, it was only enough to survive for a few weeks. Had they planned wisely and “saved for a rainy day,” instead of spending nearly all the funds that came in, they would have had six-month’s to prepare for hard times. Instead, needless to say, they went through some pretty frantic hard times before the adjusted to the decreased giving.
With a proper emergency fund, businesses only need insurance for catastrophic emergencies, like floods and fires. Some businesses may need to be concerned with lawsuits. (These businesses should be incorporated, too.) By limiting your insurance to catastrophic insurance, you reduce the cost of insurance significantly. Even in a business, it pays to save!
Entrepreneurialism Pt 3: Taxes
We’ve been talking about Entrepreneurialism–starting your own business–and the steps to do so successfully. In the first blog I looked at the characteristics needed to be a successful entrepreneur. My second blog talked about the different forms of business. It’s very important to understand the regulations that affect your new business, so in this third blog, I’m going to discuss the taxes that you may need to be paying when your business starts to make money.
Here is a brief rundown of taxes. This list may not be comprehensive, so you must do research to learn specifics about taxes in your area. If you have an accountant, be sure to discuss these things with him/her. If you don’t, consider getting one. They can protect you from a lot of headaches in the future!
1. Local taxes (county & city)
This is usually a small tax of about 1/16th to 1/8th of 1% annually, and the first year includes a recording fee (usually around $20)
2. State & federal unemployment tax
This is only paid if you have employees other than yourself. It runs .05% to 10% of first $7,000 of wages per employee. New business are usually around 2.7%, and it goes up or down depending on the number of claims your business files.
Financially, it’s best to avoid hiring labor in startup companies. Outsource as much as possible until you are firmly established and you see a net financial and growth benefit to having direct employees. Outsourcing may seem to be expensive, but when you consider the regulations, liability and cost of employees, it is less expensive in the long run & risk is avoided. If you outsource to an individual and they meet certain criteria, they could be considered employees and you may be liable employment taxes. Criteria include how many hours they work for you and for how long, as well as whether you provide their work tools (computers, location, etc.) If you’re outsourcing to an individual, make certain they have their own business established so that they can qualify as a consultant rather than an employee.
3. Property tax
If you have business property, the cost of property tax is dependent on the property assessment, typically about 40% of fair market value.
4. State & county sales tax:
With the sales & use certificate, you can buy wholesale from providers, but then you must collect & pay taxes when you resell those goods. Usually taxes are paid quarterly. Some products are exempt. Do research for specific information, but in general, they include:
- Medical equipment sold to handicapped
- 501-C (non-profit) & some educational sales
- Services
- Some products provided as part of services
- Out of state sales
- Internet sales, except in the state the business is operating in
5. Social security & Income tax withholding
Social Security (FICA) is currently 7.65% on the fist $61,200 of an employee’s wages, and 1.45% thereafter. Employers must pay an equal amount in addition to this.
g about Entrepreneurialism–starting your own business–and the steps to do so successfully. In the first blog I looked at the characteristics needed to be a successful entrepreneur. My second blog talked about the different forms of business. It’s very important to understand the regulations that affect your new business, so in this third blog, I’m going to discuss the taxes that you may need to be paying when your business starts to make money.
Here is a brief rundown of taxes. This list may not be comprehensive, so you must do research to learn specifics about taxes in your area. If you have an accountant, be sure to discuss these things with him/her. If you don’t, consider getting one. They can protect you from a lot of headaches in the future!
1. Local taxes are with the county & city
This is usually a small tax of about 1/16th to 1/8th of 1% annually, and the first year includes a recording fee (usually around $20)
2. State & federal unemployment tax
This is only paid if you have employees other than yourself. It runs .05% to 10% of first $7,000 of wages per employee. New business are usually around 2.7%, and it goes up or down depending on the number of claims your business files.
Financially, it’s best to avoid hiring labor in startup companies. Outsource as much as possible until you are firmly established and you see a net financial and growth benefit to having direct employees. Outsourcing may seem to be expensive, but when you consider the regulations, liability and cost of employees, it is less expensive in the long run & risk is avoided. If you outsource to an individual and they meet certain criteria, they could be considered employees and you may be liable employment taxes. Criteria include how many hours they work for you and for how long, as well as whether you provide their work tools (computers, location, etc.) If you’re outsourcing to an individual, make certain they have their own business established so that they can qualify as a consultant rather than an employee.
3. Property tax
If you have business property, the cost of property tax is dependent on the property assessment, typically about 40% of fair market value.
4. State & county sales tax:
With the sales & use certificate, you can buy wholesale from providers, but then you must collect & pay taxes when you resell those goods. Usually taxes are paid quarterly. Some products are exempt. Do research for specific information, but in general, they include:
- Medical equipment sold to handicapped
- 501-C (non-profit) & some educational sales
We’ve been talking about Entrepreneurialism–starting your own business–and the steps to do so successfully. In the first blog I looked at the characteristics needed to be a successful entrepreneur. My second blog talked about the different forms of business. It’s very important to understand the regulations that affect your new business, so in this third blog, I’m going to discuss the taxes that you may need to be paying when your business starts to make money.
Here is a brief rundown of taxes. This list may not be comprehensive, so you must do research to learn specifics about taxes in your area. If you have an accountant, be sure to discuss these things with him/her. If you don’t, consider getting one. They can protect you from a lot of headaches in the future!
1. Local taxes are with the county & city
This is usually a small tax of about 1/16th to 1/8th of 1% annually, and the first year includes a recording fee (usually around $20)
2. State & federal unemployment tax
This is only paid if you have employees other than yourself. It runs .05% to 10% of first $7,000 of wages per employee. New business are usually around 2.7%, and it goes up or down depending on the number of claims your business files.
Financially, it’s best to avoid hiring labor in startup companies. Outsource as much as possible until you are firmly established and you see a net financial and growth benefit to having direct employees. Outsourcing may seem to be expensive, but when you consider the regulations, liability and cost of employees, it is less expensive in the long run & risk is avoided. If you outsource to an individual and they meet certain criteria, they could be considered employees and you may be liable employment taxes. Criteria include how many hours they work for you and for how long, as well as whether you provide their work tools (computers, location, etc.) If you’re outsourcing to an individual, make certain they have their own business established so that they can qualify as a consultant rather than an employee.
3. Property tax
If you have business property, the cost of property tax is dependent on the property assessment, typically about 40% of fair market value.
4. State & county sales tax:
With the sales & use certificate, you can buy wholesale from providers, but then you must collect & pay taxes when you resell those goods. Usually taxes are paid quarterly. Some products are exempt. Do research for specific information, but in general, they include:
- Medical equipment sold to handicapped
- 501-C (non-profit) & some educational sales
- Services
- Some products provided as part of services
- Out of state sales
- Internet sales, except in the state the business is operating in
5. Social security & Income tax withholding
Social Security (FICA) is currently 7.65% on the fist $61,200 of an employee’s wages, and 1.45% thereafter. Employers must pay an equal amount in addition to this.
- Services
- Some products provided as part of services
- Out of state sales
- Internet sales, except in the state the business is operating in
5. Social security & Income tax withholding
Social Security (FICA) is currently 7.65% on the fist $61,200 of an employee’s wages, and 1.45% thereafter. Employers must pay an equal amount in addition to this.
