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Accounting - PATENTLYOBVIOUSBLOG.com

Archive for the ‘Accounting’ Category

PostHeaderIcon Tips for Financial Planning After Divorce

Divorce is about severing ties and starting over, at the same time. Having a financial plan can help secure your future and give you peace of mind, but this process isn’t without its challenges.

Related: ‘I’m Getting Divorced, and My Spouse Owns Part of My Company’.

“You have to reassess everything,” says chartered financial analyst Robert Stammers, director of investor education for the CFA Institute. “Everything you do is built on a set of future goals, and these change when you get divorced. Your future goals aren’t going to be the same; they’re no longer in connection with someone else.”.

While untangling your marital finances, then, think about how to fund the divorce along with your new life.

As Laura Pilz, financial advisor at Merrill Lynch Wealth Management, says, “One of the fundamental financial planning rules is that oftentimes, when people get divorced, they think they’re entitled to the life they’ve been living. What ‘divorce’ means is that you’ll get a life that’s 50/50. You’re not guaranteed that you’ll maintain the lifestyle that you’ve become accustomed to.”.

Separating emotions from financial decisions makes for smarter choices, too. “Marriage is about love, and divorce is about money,” says Gabrielle Clemens, vice president of investments at UBS Financial Services. “As you go through the process of divorce, everything comes down to the concept of money.”.

To deal with that concept, here are financial planning springwood strategies to consider.

  1. Review your financials and expenses.

“Many people get divorced and then they deal with the consequences,” says Pilz. “The people who do this most successfully think about their finances before they sign the divorce decree.”.

As you review your financial situation, look at your income sources, expenses, assets and tax situation. While every divorce is different, maintaining two separate households is more expensive than one. “In order for you to know what you have to spend after the divorce, you have to know what you were spending before the divorce,” says Tracy Stewart, a certified public accountant and personal financial specialist in College Station, Texas.

Start by reviewing your past year’s credit card and bank statements. Summarize expenses by category, and create separate columns for Mom, Dad and children. You’ll have a better idea of what you can afford going forward and can decide how to use that money after the divorce once you’ve tallied everything.

As you go through this process, if you’ve got children, be sure you can cover their costs, including potential future expenses like braces, cars, insurance and activities. Remember that this amount can go up as your income increases if child support is a part of your budget.

Related: Love Inc.: Startups Make Breaking Up Easier to Do.

  1. Budget for alimony.

The length of the marriage, the possibility that one partner didn’t work and for how long and the assets that that spouse will receive as part of the settlement all determine whether alimony is part of the settlement.

“In long-term marriages where someone hasn’t worked for a long period of time, someone might get permanent maintenance, but this doesn’t always mean ‘permanent,’ because people retire or may not be able to work,” says Brian Blitz, a principal at Berger Schatz. Alimony may also end if the recipient cohabits or remarries.

Alimony further impacts both people’s budgets and their tax situation. While nontaxable alimony is paid from after-tax dollars and is tax-free to the receiver, most people receive taxable alimony, which is tax-deductible to the payer and taxable to the receiver.

Those paying taxes on alimony need to budget carefully and pay taxes accordingly– $10,000 per month in alimony, for example, results in a net cash flow of $6,500 to $7,000 per month, depending on the tax bracket and deductions.

Sometimes, your settlement and alimony can be renegotiated, but don’t count on this. If a payer’s income goes down though, “Go back to court and get a reduction. Don’t wait,” says Randy Kessler, founding partner of Kessler & Solomiany. “Most states don’t have a statute of limitations, and you’ll have to pay it. You can’t go off the hook retroactively.”.

Alimony isn’t for forever, though, and recipients have to plan for when these payments will end. “This means you have to get back into the workforce and get training to do this, and get on a budget, so you can save money,” says Blitz.

  1. Plan your career.

Getting back into the workforce may seem daunting, but there are many benefits. Your salary will help with your financial plan, and your job will help with your self-confidence, happiness and social life; work is a great place to meet new people. “Think about the long-term projections and not being beholden to anyone else,” says Blitz. “All of those things will benefit you.”.

Those who have been out of the workforce for some time may need education or training to obtain marketable skills. “During the divorce, you should be thinking in terms of what you need to do to get a career,” says Stewart. “If you need a degree or training, you negotiate during the divorce for your spouse to pay for this. Often, in a collaborative divorce, your partner will want to see that you can make ends meet; and if you ask for help paying for your education or training, your partner may offer to help, but you have to ask.”.

Research the training you’ll need first, along with the cost for any tuition, books, parking, lab fees, printers or computers, as well as the duration for how long it will take.

  1. Consider downsizing your home.

People try not to disrupt their children’s lives after a divorce, by continuing to live in the family home. “That’s often the beginning of a very difficult situation because it costs a lot of money and the house is not liquid,” says Pilz.

Moving can be an emotional decision, but your family home is also an investment asset that’s part of your portfolio. Since you’ll have to pay for this home with one income, if your budget’s tight, moving to a less expensive home or renting may be a good option to consider. Factor into your decision how much utility the home provides you.

“If your home is a huge portion of your wealth, it might make sense to diversify your assets,” says Stammers. “You need to approach it as an investment asset, and you need to make decisions from that context as well.”.

  1. Don’t forget health insurance.

Health insurance could be a substantial expense if you used to be on your spouse’s policy. COBRA is an option but an expensive one, and it lasts for only 36 months. So begin to look for your own policy even before you’re divorced. “Part of the reason to work again is to help pay for your health benefits,” says Clemens.

Working again will also help bring in the income, professional connections and self-confidence you’ll need after a divorce, hopefully convincing you that there is, indeed, life and financial well-being, even after a divorce.

 

As Laura Pilz, financial advisor at Merrill Lynch Wealth Management, says, “One of the fundamental financial planning rules is that oftentimes, when people get divorced, they think they’re entitled to the life they’ve been living. What ‘divorce’ means is that you’ll get a life that’s 50/50. “Marriage is about love, and divorce is about money,” says Gabrielle Clemens, vice president of investments at UBS Financial Services. “In order for you to know what you have to spend after the divorce, you have to know what you were spending before the divorce,” says Tracy Stewart, a certified public accountant and personal financial specialist in College Station, Texas.

“During the divorce, you should be thinking in terms of what you need to do to get a career,” says Stewart.

PostHeaderIcon Accounting tips for entrepreneurs

Unless you’re an accountant, the word “accounting” probably strikes fear in your heart– or a little bit of nervousness, at least. For young entrepreneurs, the feeling is probably amplified. After all, poor bookkeeping out of the gate not only can set a project back in the short term, it can really come back to bite you over the long haul. Even young entrepreneurs get audited, you know.

That said, it is possible to avoid the ire of the IRS. Here are a four accounting tips to start your business by:

  1. Start off on the right foot. In the same way that you go through your email every morning, or in the same way that you do an inventory review each week, make your business accounting a habit. Set a recurring alarm on your calendar: “Review books!” The frequency is up to you, but you should carve out some accounting time at least once a month, if not more.

 

  1. Learn the lingo. The cumbersome terminology of accounting is sometimes the biggest hurdle. Chart of accounts? General ledger? Cash vs. accrual? Accounting lingo isn’t natural– and ignoring what’s what won’t help you. Take some time to understand the basics. The U.S. Small Business Administration’s Small Business Development Centers are a good place to start, as are accountancy groups like the American Institute of CPA’s and the Association of Chartered Certified Accountants.

 

  1. Find software that fits you. Find the accounting software that’s right for you. Don’t simply opt for what your friends use. If you’re always at a desk, a desktop solution, like QuickBooks Desktop might make sense. Something mobile like Xero may make more sense if you’re like most entrepreneurs and on the go 24/7. If you’re running your business from your iPad, go with a cloud-based accounting software package like Easy Books or Kashoo, which both offer iPad apps.

 

  1. Value good advice. Chances are, if you spend enough time trying to figure out an accounting issue, you could. But the reality is, you’ve got a business to run. And considering that you’ll need to file taxes quarterly– not just annually– there should be a certain degree of urgency involved. For help, look into local resources such as entrepreneur-focused groups for advice. (In Vancouver, where I’m based, we have resources like the British Columbia Innovation Council and the Vancouver Entrepreneur Meetup. Scour your local community for co-working groups as they’ll usually have a schedule of classes and talks specifically for entrepreneurs. WeWork Labs in New York is a great example.) Ask former bosses and fellow entrepreneurs to see who they use. Usually, there’s great value in an accountant or bookkeeper who specializes in small business. If nothing more, they’ll be a voice of comfort if you receive some alarmingly confusing IRS mail.

In the end, accounting isn’t really that scary. If you start off right, it can actually be fun. That’s where you’re going to see your fortunes grow.

 

Unless you’re an accountant, the word “accounting” probably strikes fear in your heart– or a little bit of nervousness, at least. The frequency is up to you, but you should carve out some accounting time at least once a month, if not more.

 

Find the accounting software that’s right for you. If you’re running your business from your iPad, go with a cloud-based accounting software package like Easy Books or Kashoo, which both offer iPad apps.

 

Chances are, if you spend enough time trying to figure out an accounting issue, you could.

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