4th Quarter Money Moves for Business Owners

By: Kate Welker, CFP®

A Less Stressed Holiday Season

By: Kate Welker, CFP®

It seems that as we close out Halloween night and the calendar turns to November, our thoughts turn to the holiday season and year end planning. I love the holidays and I get so excited thinking about the time with family and friends. Along with all of the happy feelings creeps in something else, a little bit of anxiety and worrying about being stressed. Yes, I’m stressing about being stressed before it happens, but I’m working on that habit. 

If you are like me, you are trying to balance multiple roles at once; business, career, family, and self. Throw in a few extra obligations and it can feel a bit too much. Let’s look at a few things you can do now to have an organized approach to year end planning.

Thoughtful Shopping - I am not generally an early shopper, but with supply and shipping concerns, getting an early start this year is recommended. To get organized, reduce the hectic shopping feeling, and budget I like to make a list of everyone I need to purchase a gift for. Next to their name I write the price range I would like to stick to, when your list is complete you can total and review to see if this matched your total shopping budget or if you need to make adjustments. I either do this on an index card I keep in my wallet or on a document on my phone (both are creatively stored to remain hidden from curious eyes). The next thing I do is to brainstorm ideas for that person, I keep this on hand and if something comes to mind I can write it down. This way if you see a sale you can take advantage of that, or when you are shopping you can be more focused. I also find this helps to find more thought out intentional gifts and does make it easier to stick to the budget.

Time Management - With all of the parties, concerts, and events it can feel like you lose control of your schedule. Be intentional in the things that you say yes to and don’t be afraid to say no to others. At a conference I attended this weekend two speakers said the same quote “Saying yes to something means saying no to something else.” 

Financial Tasks - This is a great time to review your finances and check in on where you stand year to date. The blog post Year-End Tax & Financial Planning that we posted last December has an excellent list of items to review. 

Tax Planning - Run a tax projection to see where you might come out at the end of the year. You can reach out to your accountant to do a tax projection for you. If it looks like you might owe this will give you time to make some adjustments. If you haven’t maximized your retirement plan or HSA, making a contribution will lower your taxable income. If you can itemize, consider moving some expenses such as property tax payments and charitable donations into this year to have a larger deduction. This will also let you know which tax bracket you will fall into and you can then have a conversion with your accountant and financial adviser on topics like recognizing capital gains and Roth conversions. This is also an excellent time to get your tax information organized. For more information on that you can read Tax Time in America- Getting Organized.

These are just a few ideas of things you can do to feel more prepared heading into the end of the year and to enjoy a more restful December. 

It's That Time! Employee Benefits and More

By  Kate Welker, CFP®

This month we want to continue to remind our readers that it will soon be open enrollment through your employer and Medicare, the time of year you are able to review and change your health insurance and other benefits. 

There are several posts on our blog that cover this topic more in depth:

• Last week Rachel discussed how to review your health insurance options and prepare for making that decision in her post “Knock, Knock - Open Enrollment Who?”

• Last year I wrote a guide to the terms and options you may be deciding on in a post titled “Build Your Wealth by Taking Advantage of Benefits Open Enrollment.”

While you are taking the time to review your employee benefits it is also a good time to tackle several other employment related tasks.

• Beneficiary Review- We recommend that you review your beneficiary designations once a year on all of your accounts. Those tied to your employment would be your retirement accounts (Pension, 401(k), 403(b), etc) and any life insurance benefits.

• Benefit Package - If you have a position that comes with flexibility in negotiating additional benefits such as bonus payouts or additional time off, this would be a time to review your performance and approach your supervisor. 

• Salary Benchmarking - It is a good practice to occasionally review your salary for your position and duties. Compare what your compensation is against others in your industry and in your geographical area. If your research shows you are underpaid this would again be another time to approach your supervisor for a discussion. To research this you could use sites such as salary.com or glassdoor.com.

Finding Ways to Save for College

By  Kate Welker, CFP®

It is again the back to school season. Preschool through college school will look different for students this year, but one thing is the same. The changing of the year, feeling of a fresh start, and thinking about the future year ahead. For older students we are discussing college plans and for those of you with young children you may be thinking about planning for your children's eventual college. With a growing student loan debt load in this country how to pay for college is a concern we like to address. I wanted to share some thoughts on a few unique ways to think about saving for education.

Childcare Expenses- If you are paying for daycare or after school programs this is a large expense you are already budgeting for and handling with your current income. Once your children are old enough to not need that expense, convert it and start putting that same amount into their college savings. Depending on the age of children and area you live most people are paying between $8,000 and $15,000 a year for daycare. As that number decreases and then goes away that is a large amount to be contributing each year. 

Side hustle- I've had a few friends recently start a small business on the side and nickname them "college fund" jobs. They are committing to putting all of the earnings from this new venture into college savings. 

Scholarships- This is a huge opportunity for your student to start earning funds for their education. This takes time and diligence on their part, but starting in their freshman year have them look for these opportunities. Have them search out competitions that focus around their strengths such as writing, debate, or technology.

Saving on College- Combined with saving for college consider ways to save ON college expenses. Being aware in advance of the full expenses of an institution along with the scholarship and aid available should make a major impact on your choice of where to attend. If there are scholarships available for a particular GPA or test score that is a goal to work towards. 

There are many other creative ways to fund that education goal. We enjoy working with our clients to find their solution. Once your child is in high school (9th grade is not too early!) we offer college planning services and in depth analysis that will compare college costs, grants available, and the total net cost. Contact us for a consultation! 

Summer Staycation

In Pre-Covid times many of us would be enjoying or planning a summer vacation. I had originally looked at this month and planned to write about summer vacations, saving for them and the importance of enjoying your money and your time. Just as summer plans have shifted, I thought I’d shift to talk about ways to enjoy the opportunities for entertainment and relaxation you can find around you.

This may be your summer to save money. Being forced to stay close to home opposed to taking the big vacation should cost less. You could use those extra funds to put towards another financial goal or take those funds and add to next year’s vacation fund for a bigger dream experience. Even if you did not have a vacation planned it is still summer and you want to take advantage of the weekends.

So what do you do? You have the time off, might be tired of being home after self isolating for months, but still want to maintain social distancing. Following are a list of places to consider exploring, maybe you’ll find a treasure close to home you have experienced before.  I am located in Western, NY so I am going to share some local experiences I have been encouraged to check out. Let me know what you find in your area! 

• State Parks - Last summer I wrote a blog “Summer In the Park” sharing information about the New York State Park system. This is still one of my favorite go to options for an easy, frugal day out surrounded by natural beauty. A quick tip to find a park near you is to use Google Maps. Zoom out and type in the search bar the type of park you’d like to find (local, county, state) and they will be marked for you. 

• Wineries - I am blessed to be in the Finger Lakes region and we have beautiful vineyards. You do not have to be a wine drinker to enjoy this, seeing the operation and following the trails to see the scenery is a fun outing. One excursion in our area is the Seneca Lake Wine Trail, mapping out a journey to follow. 

• Museums - There are going to be more restrictions on visiting indoor locations so I recommend calling ahead to see if you need to reserve a time to visit. In nice weather you can also visit outdoor museums and historical sites. Right down the road from our primary Corning office is the Corning Museum of Glass and The Rockwell Museum of Art. A little further away we really enjoy the Rochester Museum and Science Center. Outdoor sites - Again right in Corning is Heritage Village and a little further away one of my favorite destinations is the Genesee Country Village and Museum. 

• Hiking Trails - Free to explore and likely easier to avoid people! A quick google search should bring up local trail maps. Please be safe and take a hiking partner. The Finger Lakes Trail runs right through my town, there are over 1,000 miles of trails so there are many opportunities to find a small section to hike. 

Use this summer as an opportunity to explore life in a way that may be different for you. See what your area has to offer. With conditions and requirements changing regularly I do encourage you to call or visit the website of where you plan to go beforehand to be aware of any closures or requirements they may have.

This is a summer to reconnect with your local community, and remember Amy’s saying, “Life is about events, supported by your dollars and cents.”

Raising Children Who Understand Money

By  Kate Welker, CFP®

One of my goals as a parent is to raise my children to be aware of the value of money and as they age to develop healthy financial habits. I have had friends ask my advice on this and have seen social media posts from parents of young children asking for input. The hardest part of this is just like everything else in parenting, you will need to find what works for your family and for your children or the children in your life. We are so excited we have become a Sammy Rabbit official partner and have been able to bring Sammy’s Dream Big story program to you! This is geared towards children ages 7-10 and is a storybook coloring book and activities to teach financial literacy.

I had a specific experience that really impacted me and has made this issue important to me. I was working a merchandise stand for an organization that had a special event for 3rd-6th graders. The kids had come with money they were anxious to spend, but it quickly became apparent that a simple understanding of the value of money was missing. They might have brought ten dollars and asked for a more expensive item like a performance wear sweatshirt, when I said the price they would be flabbergasted that things could cost that much. It was across the board obvious these children had no concept of the monetary value of things, how much they should cost. Quite literally I had three children state they thought a postcard and a hat would cost the same. The other thing I saw happen was the child would find something in their price range (after they asked me if they had enough) and then just throw all their money at me to figure out, and many many times didn’t know they had change coming back or didn’t wait for it and I was chasing them down with money.

So what are some things you can do to work on awareness and behaviors over time? Here are a few thoughts.

Let children regularly pay for items. This is something that can be started with very young children and I’d recommend keeping the transaction to one or two items. This helps them connect in their head that you don’t get an item unless you pay for it, and starts to build awareness of values. Let’s use a matchbox car as an example with a price of $1.42 after tax. The child will hear the total, have to give the cashier 2 one dollar bills, and wait for the change back. When they are learning about money children need to use actual physical money to build that bridge in understanding, a debit/credit card does not provide that mental connection.

Discuss prices. When you are shopping don’t be afraid to point out prices. My kids love weighing and printing the labels for produce, I like that it saves me a step but more so that they see the price on that sticker as they print it. Sometimes I even hear the comment of “I didn’t know those cost so much!” or “wow, those are pretty cheap.”  Those are the moments you are building toward. Side note: a small bag of bulk candy costs much more than a bag full of bananas, that is a visual learning lesson on multiple levels. This can be done with everything you shop for. If you are buying new winter hats, mention the price of several items you are comparing and maybe talk about brand and quality, point out menu items with the associated cost, repeat out loud the price of a movie ticket. This will not be something that turns into immediate results, but over time will help children really understand what price means and develop that internal calculator of value.

Have children manage their own money. There are many schools of thought over giving children money and many resources out there. Allowance, earnings, gifts wherever the money is coming from allowing them to have some spending money to manage is important. You can absolutely still guide them and have ultimate veto power over their purchases. As there are things they want to purchase they will need to learn: how much it costs, how much they will need to save for it and how long it will take to get that. If they are of an age where they are earning money for work they will need to think how long they will have to work to make that much. We made a decision a few years ago to give our children a certain amount of money each week to manage, but the condition was they had to pay for their wants. I was tired of the “can we get this,” “I want that,” and “Why can’t I have this” whining when we shopped and I was really struggling with how to make them understand. For my children this has worked really well. Those whiny questions happen rarely now and the number of items coming into my house to be played with once and set aside has gone down because they are really thinking through their purchases and how much they will value that. I’ve been excited to see them stop and look at a price and the item and make a thoughtful decision. They’ve also been more motivated to go above and beyond to find ways to earn money now that they are learning how much items cost and how long it takes to save.

As I said in the beginning each child and family will be different in how they learn and teach, but start with small things and see where it takes you. I think so many people are afraid to talk about money with their kids or don’t know when or how to start. I encourage you to just start, wherever you’re at, and build that financial literacy foundation with them.

Five Money Moves for Graduates

By  Kate Welker, CFP®

Graduation, the day you’ve worked towards for years. Once you walk across the stage (or should we say proverbial stage this year) and take that diploma a new stage of life begins. There will be many new decisions and actions ahead of you, but here are a few simple moves to take as you enter that next stage of life.

1) Keep your cost of living below your income. As your income increases it will be easy to start spending more. You might feel like you deserve to splurge after those years of living like a “poor student,” but if you try to keep that mentality for a few years you will be able to build a solid financial foundation. Housing is one of the largest expenses you will encounter so look at ways to keep this low. Consider a roommate or even moving back in with your parents for a period of time. This will allow you to spend less each month and put that money towards your financial goals.

2- Make a plan for your student loans. Take the time to research your loans and to find out the details of each. Reach out for help if this is something  that you are struggling to understand. There are resources such as Loan Buddy (https://www.loanbuddy.us/), loan counselors, or financial planners like the team at Rooted Planning Group (don’t miss out on Becky Eason’s monthly blog on this topic) to help you work through these. Making moves early on these will get you on the right payment plan. If you are able to pay more on these early and lower your principal this will lower your interest paid over time. 

3- Start an emergency savings account. Get in the habit of putting away some money from each paycheck. Check with your bank to see if you can set up an automatic transfer into a separate savings account with each deposit. I also encourage people to make this money harder to get to so it is not tempting to spend it. Even a small amount will start to add up over time and will be available in the case of an emergency (so that expense does not go on a credit card) or the start of long term savings goals.

4- Take advantage of retirement plans. If your employer offers a 401(k) enroll as soon as you are able. If your employer offers a match your first goal should be to defer as much as they will match, for example if they match the first 3% defer at least 3%. That is like free money into your retirement plan. If you don’t have an employer plan you can open your own IRA. Set up transfers into your IRA to correspond with each paycheck.

5- Track your expenses. Just tracking where your money is going will be beneficial. It will make it easier to build a budget when you are ready for that step. Getting in the habit of looking at your expenses and seeing where your money goes naturally makes you more aware of your money. There are numerous apps to track this automatically or if you like to be more hands on you can create a spreadsheet or just write it in a notebook.

While it is tempting to start bumping up your standard of living after school, slowing that process down and being disciplined with your money will help build a strong financial foundation to take you into your future. If you find ways to keep your expenses low and work towards saving and paying down debt you will be ahead of your finances, less stressed over money, and develop long term healthy money habits.

What does your 1040 tell you?

Before we dig into the “year in review,” we’d like to mention a provision that was written in to the CARES Act regarding Donations. Beginning in 2020, there will be an “above the line” charitable deduction (maximum $300) that you will be able to take, even if you don’t itemize. So, save your receipts this year, even if you don’t itemize, those donations will reduce your 2020 tax liability.

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By  Kate Welker, CFP®

This week we would normally be seeing the tax deadline hit and the last minute rush of filers. With the deadline extended the filing season will be drawn out over three more months, but we still encourage you to finalize your return so you can plan accordingly for 2020. Once your return is done you should take time to review the returns and see what the numbers are telling you. Over my years of working with tax returns I have had way too many people tell me they just look to see if they have a refund or owe, sign the return, then stick it in their files. I challenge you not to be one of those individuals. Following are some items I like to look at when assisting with tax planning.

Large Refund- getting a refund is always nice, but if it is a large refund consider why it is so large. If you are over-withholding from your paycheck use the Tax Withholding estimator at www.irs.gov to see how you should adjust your W-4. Your end of the year refund would be smaller, but that could give you several hundred dollars more a month in your budget. 

Balance Due - If you owed over $1,000 on your return you will need to make changes or set up quarterly estimated payment to avoid being penalized on the next year’s return. You can also check the withholding tool at irs.gov to adjust your W-4. 

Credits - Look on your 1040 at lines 13a (Child tax credit) and 13b (other credits from Schedule 3). If there are entries on those lines you received a tax credit. A credit is a dollar for dollar reduction in your tax so changes in these year to year can make a large impact on whether you receive a refund or owe. Take a look at what the credit was for and if this is something that will be the same next year or will change. If you have a child turning 17 you will not receive the child tax credit of $2,000 the following year, this means your refund would be $2,000 less or you would owe $2,000 more. Conversely think about any credits you may qualify in future years. For example if there is a child heading to college you may qualify for the American Opportunity Credit which is up to $2,500. 

Dividends and Capital Gains - If you hold mutual funds or stocks in your portfolio you may have taxable income due to dividends or capital gains distributions. If you find these numbers are large you may want to speak with an advisor to make sure your portfolio is designed correctly for your needs and tax situation. 

Overall your tax return tells you a significant amount of information about your financial situation. These are just a few of the big items I take a look at, but each individual is different. It is one of the places where everything comes together for a quick snapshot. I really want to encourage you to take the time to pull out the papers and look it over, make sure you understand what your income and deductions are, and over time learn a little more about how your information comes together on that 1040 each year.

Cares Act Part 2 - Small Business Provisions

By Amy Irvine, CFP®, EA, MPAS®, CCFC and Kate Welker, CFP®

With all of the closings that have been mandated as a result of COVID-19 along with requirements to stay in, many small business owners are worried about their operations. If you are a small business owner you are probably wondering how you are going to keep your business sustainable long term, provide for your employees, and provide for your own needs. Thankfully there has been a lot of legislation passed and the CARES act expanded and added benefits for small business owners. There is a lot of information out there so we wanted to summarize what these different benefits are, who qualifies, and what the effect is.

Unemployment
Who is eligible: 

• If you are self employed and have had to close your business due to the pandemic you will be able to file for unemployment benefits. 

• Self employed individuals who were generally not able to collect unemployment benefits  are now eligible. 

How to file: 

• You will file with your state’s unemployment division.

How much?  

• You will receive the payment you are eligible for under your state’s guideline, plus the $600 weekly benefit from the federal government. 

More details:

• You will need to login in weekly to provide an update on your status.

• This is taxable income so keep that in mind as you keep your books throughout the year and prepare for filing the 2020 tax returns.

This topic will be further explored in Friday’s blog release.

Employee Retention Credit

What it is:

• A credit against the employer’s portion of payroll taxes 

Who is eligible: 

• A business that has had to close or suspend operations or has had a significant decrease in revenue and continues to pay employees. A significant decrease means your quarterly gross receipts are down 50%.

• If there are over 100 employees the credit only applies if the business has been mandated to close. 

How to file: 

• We are waiting on final details as to how this will be claimed.

How much?: 

• The credit is 50% of compensation paid up to $10,000 per employee. It will be a refundable credit against payroll taxes.

More details: 

• The credit will be determined on a quarter by quarter basis as long as the business remains closed or gross receipts continue to be down by 50%.

• This also allows employers to defer payment of the employer’s portion of payroll taxes. Half would be due in 2021 and half would be due in 2022.

• If you take the Small Business Administration Paycheck Protection Loan you are NOT eligible for this credit.

SBA Paycheck Protection Loan
What it is: 

• A forgivable loan to cover payroll and basic operating expenses. 

Who is eligible: 

• Employers with under 500 employees, including self-employed sole proprietors, IF you retain the same number of employees.

• This includes the “gig economy” workers as well.

• Sole proprietors and Independent Contractors - wages, commissions, income or net earnings from self-employment is included and capped at $100,000 on an annual basis

How to apply: 

• These loans will be done through local banks who are approved with the SBA.

• Check with your normal bank and if they do not participate check with others in your area.

How much: 

• 8 weeks of cash-flow

• 250% of average monthly wages and salary (calculated monthly average over the past 12 months).

• Seasonal employers use the 12-week period beginning February 15, 2019 (or March 1st if elected) to June 30, 2019.

More Details:

• The funds are to be used to pay for payroll expenses including healthcare benefits, rent, mortgage interest, and utilities, Rent/lease, and utilities. 

• All or a portion is forgivable if the business uses the loan funds to pay for the covered expenses in the 8 week period after the loan is taken. 

• Updated 04/01/2020 - Unforgiven amounts have a maximum term of 2 year term and 1 year deferment, but interest accrues during that time.

• Updated 04/09/2020 - Interest rate may not exceed 1% on Non-Forgivable portion 

• The fees for this loan are being waived

• The fees for this loan are being waived

• Personal guarantee and collateral requirements are being waived

SBA Economic Injury Disaster Loan  
What it is: 

• A small business loan to offer financial assistance due to COVID-19

• Also known as EIDL

• Immediate advance of $10,000 - provide advance within 3 days of request; never has to be repaid, even if you’re denied a SBA loan.  

  • Update 04/09/2020 - this will be limited to $1,000 per employee, with a maximum of $10,000.  Sole Proprietorship will be considered 1 employee.

• Use of Funds - Overhead/Operating Expenses

  • Payroll (including owner payments)

  • Insurance

  • Rent

  • Utilities

  • Phone/Internet

  • Office Expenses

  • Repairs and Maintenance

  • Fixed Debts

Who is eligible: 

• Small business owners who have suffered economic injury as a result of the virus.

• 501c3 or 501c19 non-for-profit

Who is not eligible:

• Agricultural Businesses (Farms)

• Religious Organizations

• Charitable Organizations

• Gambling Concerns

• Casinos and Racetracks

How to apply: 

• For the immediate advance, apply at https://covid19relief.sba.gov/#/

• Through the Small Business Administration. The application can be found at https://www.sba.gov/disaster/apply-for-disaster-loan/index.html. There was an online application but due to high demand it seems to be requiring a paper application be submitted.

How much:

• Up to $2 million with a guaranteed rate of no more than 4%.

More Details:

• 6-months of working capital

• Maximum Loan $2M

• 3.75% interest rate

• Up to 30-Year Term

• 1-Year Deferment 

• Funds are to be used for payroll including paid sick leave, rent, mortgage, debt payment, accounts payable, and other bills.

• You will need to prove economic injury

• Funds come direct from the US Treasury

• There is authorization to approve based off credit score alone

• Apply directly to the SBA

Other Notable Small Business Provisions

• Employers and self-employed individuals can defer payment of the employer share of the social security tax - half due by 12/31/2021 and the other half due by 12/31/2023

• If you have a current SBA Loan - 6 months deferment principal and interest - talk to your lender.

• You can’t take a loan under multiple programs for the same expenses.

• Want more credible information - watch this webinar: https://www.uschamber.com/co/events/national-small-business-town-hall-inc-us-chamber

• Sole Proprietorship Options

  • EIDL

  • PPP (for your income)

  • Unemployment

  • Can not receive Unemployment and Loans

  • Can apply for both loans, but can’t use the funds for the same expenses

• January 23, 2020 the business must have been in operation

• Active Payroll prior 2/15/2020

Women Rocking Business

March is women’s history month and we want to take some of our space this month to recognize that. I love working with small business owners so I wanted to share some thoughts on women as business owners. Rooted Planning Group is owned by women so this is certainly special to us. 

by Kate Welker, CFP®

What are the traits that help women succeed in business? I thought back on some conferences I’ve attended, drew on personal experience, and looked at our team to see how the ways we think or act differently can be beneficial.

Women tend to be more emotionally intelligent, this makes us more attuned to social cues and emotions. This article from Forbes refers to a study listing all the various categories where women outscore men. This can help a woman read a room to pick up on what’s not being said. When working with a client you might better pick up on something that is causing an emotional response. Being able to understand and empathize with employees makes for a better work environment.

As women many of us have had to face hurdles in our careers because of the fact we were women, and to push through that builds determination. Running a business comes with many challenges that are going to be aided because of that. By overcoming the different walls and barriers thrown at us we are cultivating the traits that help to be good leaders- tenacity, resolve, and maybe a little stubbornness. 

In the business world women tend to be better collaborators, aka “team players.” We are not afraid to share ideas and work together to build something better. This also tends to mean women are more often open to mentoring opportunities, to pass on their knowledge, and encourage others. 

Of course the pendulum swings the other way too and there are some traits we need to be aware of that can impede success.

Women tend to be more nurturing and can have the feeling we need to take care of things. This can lead to burnout. Sometimes I think women can be worse at delegating because we want to just handle everything and make sure it’s taken care of or we don’t want it to look like we’re not doing enough. Self care is a buzzword, but it really is essential.  Evaluating where you tend to take on too much or get too involved and focus on ways to manage that is going to be a healthy step for you and your business.

Impostor Syndrome, that feeling that you don’t know enough or aren’t competent. You might doubt yourself and your accomplishments. Both men and women can associate with this, but I hear it more from women. Acknowledging this is important, that way when it's happening you can face it and deal with those feelings. Remind yourself of how far you have come and how much knowledge and experience you have. I once had a very respected person in my industry with lots of letters and designations after their name tell me they sometimes walk into a meeting and still feel like it’s their first day on the job. When I feel this way I like to repeat the phrase “fake it ‘til you make it,” paste on a smile and go in with confidence, because here’s the secret- you’re not really faking it. You ARE the person with the expertise, you just need to remind that little part of your brain of that.

Fun History Fact: In Holland women were treated more equally than in other countries in the 17th century and this carried to New Amsterdam (roughly modern Manhattan). For years women held more rights than in other parts of the country and many owned businesses. They were referred to as she-merchants.*

*Summarized from womenhistoryblog.com