The 10 Most Common Money Mistakes For Businesses

There are only 2 ways to be profitable in business - create more sales or reduce expenses. The latter is easier because you're in control of what you have to pay for, but creating sales can be tougher. What if you could create profit and reduce expenses at the same time? You can! Often, a business owner is unaware of potential savings in different areas of their business because they are busy running the business. How can a physician be an expert at merchant services or tax shelters? Below are the 10 most common money mistakes that business owners make.



1. Corporate Structure - Sole Proprietor, Partnership, C Corp, S Corp, LLC, Pa are various ways to structure your business. Which one are you and why? These entities are not taxed the same. One might provide a benefit over the other. If your business isn't structured properly, how would you know? For example, sole proprietors are taxed first and spend last and Sub S Corps spend first and are taxed on what's left.



2. Banking - This one is the most pervasive. In my 15 years in business, I see many business owners take what they can get and settle for low interest and credit terms that they don't love. How you run your money can make a big difference in the fees, interest (charged and received), and credit terms that can add thousands back to the bottom line each year. Does your bank have a sweep option on your business checking? Never heard of a sweep account? Most larger banks have a sweep option which enables your cash in checking to be "swept" into a money market account (which pays higher interest than checking) overnight and then is swept back into checking when a check is presented to be paid. Additionally, interest charged on lines of credit is reduced if the sweep option is set up correctly to pay the line down overnight. Let's look at an example:



A business carries an average balance of $100,000 in checking and has a line of credit of $300,000. The business has an outstanding balance on their line of $75,000. A sweep option would pay the line of credit down to zero overnight saving the business interest charges each time money in checking was swept.



Be prepared for your bank to tell you that a sweep option wouldn't make sense for you because they are losing interest on your line and they have to pay higher interest on your checking.



3. Merchant Services - Do you take credit or debit cards? If so, then chances are that you are over paying for the merchant service. About 10 years ago, there were merchant services salespeople everywhere. The reason is that there were huge profits in swipes. Prices and charges have been drastically reduced, but the fat still remains. How would you know if you have the right fees and charges? There are basically two credit card processors in America, but there are thousands of companies that provide merchant services. The key is to find a service provider with the least middle men to one of the two main providers.



4. Employee Benefits - If you provide employee benefits, this may be your biggest profit stealer. I hear business owners constantly whine about benefits. If structured properly, providing benefits can actually add profit back to the bottom line. Your business should have a Section 125 (cafeteria plan) in place so that your employees can pay for their insurance (health, life, etc) on a pre tax basis. How will a Section 125 put money back into your pocket? Your company will save 7.65% on the FICA match otherwise known as payroll taxes. Any dollar that the employee spends on benefits will avoid taxation and you keep the FICA match. Secondly, a 401(k) can accomplish the same savings. Dollars deferred into a 401(k) are done so on a pre-tax basis thereby saving you more payroll taxes.



5. Purchasing - How do you buy stuff? How you buy can be as important as how you bank. Do you buy materials to make something? Wouldn't it be nice to have the money from the sale of your widget before you had to pay for the materials. This is known as float. A business can float (not pay) generally for 30 to 60 days. For instance, if you own a manufacturing business, the raw materials can be charged on your corporate card and not paid for 30 days. Additionally, points can be earned on purchases. If your business spends $20,000 or up buying "stuff", that is a pile of points possibly reducing other areas of cost (travel, office supplies, etc.).



Unfortunately, many business owners don't know what they don't know or like Will Rogers said - "It's not what you don't know that's the problem, it's what you know that ain't so". If you would like the other 5 key money mistakes, please send me an email request. I will send you remaining 5 which are equally as powerful as these.

Go to james.w.mewborn@ampf.com

Thoughts On Insuring Your Home

Insuring Your Home

Every homeowner needs to carry homeowners insurance. After all, your home not only provides a roof over your head, in most cases it’s the largest asset on your personal balance sheet. Come what may — whether it’s a tornado, fire, theft or other catastrophe — homeowners insurance offers peace of mind and the confidence in knowing that you are covered.
Generally, homeowners insurance is optional only if you own your home outright. If you have a federally-backed or insured mortgage, your lender will require you to maintain a minimum amount of replacement insurance to protect their investment in the event your home is damaged or destroyed. But even if your mortgage is paid and you own your home, it’s important to keep your homeowners insurance just in case something happens. Without a policy in place or a sufficient level of coverage, you might not be able to repair or rebuild your home, or replace property if something unpleasant does transpire.
So, what is covered by homeowners insurance? A basic homeowners policy covers damage that occurs as a result of a host of “named perils” spelled out by your insurer, which may include wind, hail, fire, theft and other events. Losses of personal property or possessions are also included under homeowners insurance. Typically, a standard policy pays replacement value of structures on your property, such as your home and garage, and provides an additional 75 percent of your home’s appraised value to account for loss of personal property. However, your policy may contain limitations on the replacement value of items that fall under the following categories:
Jewelry and furs
Silverware and goldware
Business property
Home computers
Firearms
If you own personal property in excess of 75 percent of the value of your home, or in excess of standard limits in any of the above categories, you should consider purchasing a rider or endorsement to guarantee comprehensive coverage. The trick is to find the right balance so you are not under- or over-insured.
Ask yourself the following questions when purchasing homeowners insurance:
Does your policy readjust the replacement value of your home annually to reflect changes in value due to inflation or other factors?
Do you need a separate policy because your property is in an area predisposed to a special hazard such as flooding or earthquake?
Does your policy include liability coverage for accidental injuries that might occur on your property?
Do you need a rider or endorsement for valuable items for which replacement costs would not be covered under a standard policy?
Do you own a special breed of animal that might require a special rider to ensure liability coverage for attacks on your property?
Keep in mind that not every natural disaster is covered by homeowners insurance. Flood and earthquake losses are not covered by homeowners insurance and require separate policies. Go to FloodSmart.gov to assess the risk of flooding where you live and determine if you should purchase flood insurance. The National Flood Insurance Program was created by Congress to help homeowners insure their properties against conditions that could result in flooding and water damage. To qualify for this insurance rider, you must live in an area that has agreed to meet certain standards for reducing the risk of flooding. If you live in California, you can assume you need some form of earthquake coverage. Learn more about earthquake insurance from the California Earthquake Authority at earthquakeauthority.com.
To find a reputable insurance company, check with independent rating services such as A.M. Best Company and Standard & Poor’s. Friends and family are often a valuable resource for insurance company recommendations, especially if they have had experience filing claims. Laws regarding homeowners insurance vary by state, so be sure to consult with a knowledgeable agent who can help you review your insurance needs and state requirements.
Making sure you have adequate homeowners coverage is just one step in protecting your financial future. Enlist the help of a financial advisor to review your insurance policies and other emergency contingency plans.

The Car "Sinsurance" Game

How much should your car insurance deductible be? Most people that I talk with tell me that their deductible is $500.00. I then ask them how many accidents they've had in the last 5 years that was their fault. Most people tell me that they haven't been in any accidents in the last 5 years. Let me give you a new thought about your car insurance. Where did deductibles come from anyway? Deductibles are a way to participate with the insurance company to share in the cost of a claim. This way, everyone benefits with lower premiums and are covered for the enormous cost that could create a financial hardship for you. So it would make sense that if your deductible was higher and you were willing to share more in the possible losses of a claim, then your premiums would be lower. The difference between a $500 deductible and $1000 deductible may surprise you with respect to the premium cost savings. I would encourange you to call your insurance company and inquire what your savings would be if you were to increase your deductible to $1000. I think you will be pleasantly surprised. Oh, by the way, if you are afraid that you "might" have to pay $1000 for an accident (especially if it wasn't your fault) I would submit to you that either you know little about financial planning or you don't have sufficient cash reserves set aside for emergency costs, but that's another post. If you want more information on car insurance or financial planning, go to my site and request a contact. Go to - http://www.ameripriseadvisors.com/james.w.mewborn

Soar or Plunge - A tale of informed investors

If you walked into an elevator and the only buttons to push were labeled soar or plunge - which one would you choose.  I ask this question occasionally in my talks.  I get varied answers, mostly people answer soar.  I then go into my dissertation about Charlie flying in the glass "Wonkavator".   I assure you, both answers are incorrect. Neither answer brings peace of mind or safety.

I'm not sure exactly when the news started making the news instead of reporting the news, but one thing is for certain - the media has an axe to grind. They seem to want to report only the stories that are shocking, breaking, or mind blowing.  We can't hate them for it, they are just trying to sell advertising and keep you watching, but what are you supposed to do with the flood of informations and often misinformation about the markets and your money?  It has been said that knowledge is power.  Some people think that information is knowledge, but information is information.  Knowledge is information and enough scars (experience) to know what to do with the information.  I would encourage anyone that is concerned with the future of their money or their retirement to seek professional advice.  We know things that you don't. Will Rogers said "It's not what you don't know that's the problem...It's what you know that ain't so".  Unless you are reading 10 economist's weekly notes, studying monetary policy, the yield curve, interest rates, trends, and sentiment - then you need to hire someone. In the end, find somenone that you know that has money and ask them who they use.  Interestingly enough, if you were to ask someone that you know has money, my bet is that they are using someone. Soar or plunge? How about plod or cruise? I like those better. You can visit me at http://www.ameripriseadvisors.com/james.w.mewborn/?BNR=solc%5Fid%3D23709%26vend%5Fcd%3DALA%26offer%5Fid%3D1315 for more information.

The Plate Lickers - An Investment Seminar Tale

I do seminars as part of my marketing strategy.  We strive to provide our customers and prospective customers with a memorable experience.  I've noticed recently that some repeat offenders have taken my hospitality as a public service to feed them every month.  Don't they know that I have only invited them so that they can meet me and see that I am a good guy so that they will move their account to me?

Whoa cowboy - my thoughts and emotions go there so easily.  I met with a retiree from one of my recent seminars to hear his "story".  It was remarkable.  He is a veteran of the Vietnam War and retired early because of his disciplined saving strategy.  He and his significant other doesn't have much, but they do okay.  He is able to winter in Florida and summer in Michigan. Vic is a collector of vintage hotrods and sells one every once in a while to finance some new venture.  He was a treat to talk with.  He doesn't need financial planning because he doesn't have much in money, but he is rich in history, nostalgia, and cats (he has 4).  His outlook was a refreshing reminder that I manage expectations as well as people's money.  I look forward to getting to know Vic a little better.  To learn more about my services - please visit http://ameripriseadvisors.com/james.w.mewborn/?BNR=socl%5Fid%D23709%26vend%5Fcd%3DALA%26offer%5Fid%3D1315

The Do It Yourself Investment Disaster

One of my favorite channels is HGTV. The shows create a false sense of security and gives me the confidence I need to really screw up a home project.  DIY investing is no different.  I spoke to one of my clients today that wanted a bond quote and was disappointed that he couldn't find the ticker symbol for the bond.  Well, there isn't one.  This guy is so ignorant about the credit markets, I didn't know where to begin.  It reminds me of the time that I tried to do a bathroom remodel in our master bath.  I bought the counter top, the mirror, the new light fixture, etc.  When I started installing the items, I ran into those unforeseen and unexpected roadblocks that occur in all remodels.  You know what I'm talking about.  For example, the new counter top had 2 sinks (a feature my wife desired), but there was only one drain.  After I ran into about 3 more of those roadblocks, i decided to call a plumber - 3 hours and $500 later, he had everything installed correctly without leaks.  I learned then that the money spent was well worth it.  When I got home from work, the bathroom was operating properly.  I peeked down below to ascertain how the plumber managed to construct the pipes, drains, etc.  I was impressed.  I neither had the equipment or the know how to accomplish what I was staring at. In short, I needed a professional because I didn't know what I didn't know.  My client is no different.  I shook my head in a very silent but condescending way over the phone in response to his ignorance.  My hope is that he will look to me to guide him in his investments and continue to pay my fee.  I wonder how many professionals and tradesmen have laughed at me after they got off the phone.