By Michael Lodge - The Business Advisor - www.lodge-co.com: There are times I sit down and mediate financial disputes between partners. Business partners and significant other partners in life. Money is one of the biggest issues that can create stress, fights, name calling, and finger pointing. I always like to have people who are contemplating marriage to sit down and understand their finances before they say "I Do". Many bring in a lot of out of control financial baggage into the marriage and in a few months they are pointing fingers and fights are created, and then I get the call for help. Let's start at the financial side of our financial lives right up front so both parties understand what they are getting into. So let's talk about budgets.
Mastering the art of budgeting is a crucial step towards achieving financial stability and peace of mind. When you create a budget, live within its constraints, and monitor the safety of your bank, you take control of your personal finances and lay a strong foundation for a prosperous future. In this article, we'll explore the importance of budgeting, the significance of bank safety, and the benefits of working on your budget together with your partner. If you have a partner, don't do it alone. One of you may be better in understanding and putting numbers together. But you both need to understand the money coming in and how you will use the money. If it is just one person then they tend to hold that over the other person. Do it together.
Creating a budget is the first and most essential step in managing your personal finances effectively. A budget provides you with a clear overview of your income and expenses, allowing you to allocate your money wisely. By tracking your spending habits, you become aware of where your money is going and can identify areas where you can cut back or save. It helps you prioritize your financial goals and ensures that you have enough funds for both essential and discretionary expenses. A well-crafted budget also acts as a roadmap for your financial journey, enabling you to plan for the future, such as saving for emergencies, retirement, or major life events.
Living within a budget requires discipline, commitment, and a conscious effort to make financial decisions aligned with your budgetary constraints. It means avoiding unnecessary expenses, curbing impulsive buying, and being mindful of your financial limitations. While it may take time to adjust your spending habits, living within a budget empowers you to make intentional choices that support your long-term financial well-being. It helps you avoid debt, save for the future, and build a strong financial foundation.
A budget it really quite simple:
Income (wages and other income)
Priority Expenses - rent/home mortgage, utilities, phone, food, car payment, insurance
Debt - car, mortgage, student debt, other
Other Expenses - cable, internet, fun, movies, gifts, travel, eating out, etc
Net Cash (Income minus all expenses)
Note - net cash is what is left over to attack debt. Priority - pay down your debt.
Monitoring the safety of your bank is another crucial aspect of managing your personal finances. Banks play a pivotal role in safeguarding your money, and it's important to ensure that your funds are secure. Credit agencies periodically evaluate and rate banks based on their financial strength and stability. Downgrades by credit agencies serve as a warning sign, indicating that a bank's financial health may be at risk. Such downgrades could be due to factors like poor financial performance, high levels of debt, or inadequate risk management. It's essential to stay informed about the ratings of your bank and consider diversifying your funds if you have concerns about its stability. You have the right to ask questions about your bank.
Sitting down with your partner in life and working on your budget together is a powerful way to strengthen your relationship while improving your financial condition. By collaborating on budgeting, you both gain a comprehensive understanding of your financial situation, goals, and challenges. It fosters open communication about money matters and allows you to align your values, priorities, and spending habits. Working together also means sharing the responsibility for financial decision-making, reducing the burden on one individual and promoting a sense of teamwork. It enables you to support each other in times of financial stress and celebrate achievements together.
Being proactive in managing your personal finances is essential for long-term success. Regularly reviewing and adjusting your budget ensures that it remains relevant and effective. As your income, expenses, and financial goals evolve, your budget should reflect these changes. Additionally, when you have a strong cash flow, it's advisable to prioritize paying down your debts. By tackling your debts from smallest to largest, you can build momentum and motivation as you see progress. Eliminating high-interest debts and freeing up cash for savings and investments will pave the way for a healthier financial future.
Creating and living within a budget, monitoring bank safety, and working on your budget together with your partner are all vital aspects of managing your personal finances. By taking control of your money and making informed financial decisions, you will create a less stressful life. Less fights. More understanding on how you both work together on your finances.
By Michael Lodge - The Business Advisor - www.lodge-co.com: The Employee Retention Credit (ERC) has been a lifeline for businesses affected by the COVID-19 pandemic. Designed to provide financial relief to companies that continued paying employees during government shutdowns or experienced significant declines in gross income, the ERC is a refundable tax credit. However, recent reports have highlighted the rise of third-party companies making extravagant promises of large credits without adequately informing businesses about the rules and qualifications associated with the ERC. In response, the Internal Revenue Service (IRS) has issued a warning about potential fraud and emphasized the importance of understanding the credit's requirements. This article aims to shed light on the ERC rules, caution against fraudulent claims, and encourage businesses to seek guidance from qualified tax professionals.
Understanding the ERC and Its Rules: The ERC was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. It was later expanded and extended by subsequent legislation to provide additional support to businesses. The credit is available to eligible employers who retained employees and continued to pay wages during periods of significant disruption caused by the pandemic.
To qualify for the ERC, businesses must meet specific criteria. These include experiencing either a full or partial suspension of operations due to government orders or a significant decline in gross receipts compared to the same quarter in the previous year. Eligible employers can claim a percentage of qualified wages paid to employees during the mandated shutdown by government, subject to certain limitations, for specific periods determined by the IRS. If you take the credit, you will need to file an amended business tax return to apply the credit. You may owe corporate taxes at that time if it increases you net income. The IRS will examine the credit that you took for ERC, they will also look at any PPP money you took to see if you are double dipping. If they deny you the credit later on there will be interest and penalties do. You will need to document the time you were shut down, copies of the shut down mandate by the government. This is just a brief overview, please talk to your tax accountant on the issue of qualifying.
The Role of Third-Party Companies: Unfortunately, some third-party companies have sought to take advantage of the confusion and financial distress caused by the pandemic. These companies often make enticing promises of substantial credits, with claims as high as $26,000 per employee. However, they frequently fail to inform businesses about the eligibility requirements, the necessity of filing an amended return, and the risks associated with improper claims.
IRS Warning on Fraudulent Claims: Recognizing the potential for abuse, the IRS has taken action to warn businesses about these unscrupulous practices. On IRS.gov, the official website of the IRS, a renewed warning has been issued regarding employee retention credit claims. The agency highlights the compliance risks associated with making improper claims and emphasizes the importance of understanding and adhering to the ERC rules.
IRS Web Site: irs.gov
Protecting Your Business: To avoid falling victim to fraudulent practices and potential audits, it is crucial for businesses to exercise caution and due diligence when considering third-party services related to the ERC. Here are some essential steps to protect your business:
1. Consult a Tax Professional: Engage the services of a qualified tax accountant or advisor who can guide you through the ERC rules, determine your eligibility, and assist you with the necessary documentation and filing requirements.
2. Educate Yourself: Take the time to read and understand the guidelines and notices issued by the IRS. This will enable you to make informed decisions and identify any red flags or misleading claims made by third-party companies.
3. Be Wary of Promises: Exercise caution when approached by third-party companies guaranteeing substantial credits without adequately assessing your eligibility. Remember that if a deal sounds too good to be true, it probably is.
4. File Accurate and Amended Returns: Ensure that you file accurate and complete tax returns, including any amendments required to claim the ERC. Failing to report the credit properly or including false information may result in potential audits and penalties.
The ERC is available - if you qualify for the ERC credit and have complied with the rules of filing, you should be ok. But you want to make sure you qualify and not have to face any IRS questions and determinations down the road. Compliance will make sure you are protecting your business. Again, talk with your accountant.
For business advisory / coaching - schedule a confidential session online at: http://www.lodge-co.com
By Michael Lodge - The Business Advisor - www.lodge-co.com: Many times I have sat down with partners in a business and they have gone way off course and then a conflict is created. Two friends get together and say, hay, let's start a business but forget to have the important talk about what their roles will be as partners. They go in different directions and can't understand why the other partner is doing what they are doing. Now we have to sit down with both partners and see if we can resolve the issues and define the roles of the partners. A successful business partnership requires careful planning, open communication, and a shared vision. At the outset of a partnership, it is crucial for the partners to define their roles and responsibilities within the business. By clearly establishing who is responsible for what, partners can avoid ambiguity and potential conflicts that may arise from overlapping duties.
Ethics play a vital role in any business partnership. Each partner should possess a strong ethical foundation and a commitment to shared values. When partners have different ethical standards or principles, conflicts are likely to arise, which can have a detrimental impact on the partnership and its reputation. Therefore, it is important for partners to align their ethical values and ensure they are committed to maintaining high ethical standards in their business practices.
Inevitably, conflicts may arise in any partnership. When faced with heavy-duty conflicts, it is advisable to seek the assistance of a business mediator. A mediator can help facilitate effective communication, identify common ground, and guide partners towards finding mutually beneficial resolutions. Engaging a neutral third party can prevent conflicts from escalating and potentially damaging the partnership irreparably.
Regular and structured communication is essential to the success of a partnership. Partners should make it a priority to sit down frequently to discuss the progress of the business, identify challenges, and plan for the future. By maintaining open lines of communication, partners can build trust, address issues proactively, and ensure that they are on the same page when it comes to the direction and goals of the business.
Understanding the financial aspects of the business is crucial for all partners. Each partner should have a clear understanding of the financials, including revenue, expenses, and profit margins. Financial transparency fosters trust and accountability among partners and enables informed decision-making. Regular financial reviews and reports should be conducted to ensure partners stay informed about the financial health of the business.
A partnership should also have a well-defined succession plan in place to address the possibility of a partner leaving, retiring, or passing away. By establishing a plan ahead of time, partners can minimize disruptions and ensure a smooth transition of ownership and management. The succession plan should outline the process for transferring responsibilities, ownership shares, and any other relevant considerations.
To avoid misunderstandings and disputes, it is crucial to put everything in writing. A formal partnership agreement should be drafted, outlining the roles and responsibilities of each partner, the decision-making process, profit distribution, dispute resolution mechanisms, and other important details. This legal document serves as a reference point and provides clarity on the expectations and obligations of each partner.
A successful business partnership requires careful planning, effective communication, and a commitment to shared values and ethics. Defining roles and responsibilities, resolving conflicts through mediation, regular communication, financial transparency, a well-defined succession plan, and a comprehensive partnership agreement are all essential elements for a thriving and sustainable partnership. By investing time and effort into these aspects, partners can build a strong foundation for their business and increase the chances of long-term success.
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Michael Lodge is a Nationally Certified Professional Mediator specializing in business disputes, as well as family conflicts. He has written three books and hosts an international podcast on IHeartRadio and other podcast media stations.