I recently incorporated my first company. It has one employee - me - and its only asset is this blog. But it was a great feeling to officially become a small business owner, thereby joining 15 million other Americans. The reason for incorporation was primarily driven by the taxation benefits as I detailed below, but I also think it will make me more focused on my goals and growing this blog from a hobby to a serious source of passive income. Part of moving to a small business mindset has also involved setting up a (formal) small office space in my home and undertaking all the associated organization activities that go with that. Like the majority of small business owners and especially those whose work involve sales and/or on-line related activities, my office is my home. Initially I just worked where I wanted, but have now becoming more cognizant of having a real "office space" where I can focus, avoid disturbances (i.e. the kids) and have everything I need for getting the job done.

After working from my home office for a few weeks, I have found that the two main things you should get, without blowing the bank, are a good laptop (more on this in a future post) and purchasing a 4-1 (copier, fax, printer, scanner) home office printer. I shopped around for a number of printers and the best one I found for my budget (~ $200) was the Brother MFC-790CW Color Inkjet All-in-One Wireless-Touchscreen model. For the price this printer has all the features I need, especially the fax and copier, which are so important to deal with all the paperwork, and for a non-tech person like me it was very easy to use and setup. The other cool thing was the wireless features which reduced the cables junk and allowed other's in my house to print to the printer. However, the biggest long term cost with printers is ink and toner, and compared to similar HP and Cannon models, this printer provides the best value. From a furniture perspective, I bought my desk and chair from IKEA (less than $200), though recent back problems have made me consider a more expense ergonomic chair. The key thing with setting up your home office is that you make it comfortable and functional to what suits your style. Set a budget but buy good quality stuff, and best of all whatever you spend on a home office is tax deductible.

The other big challenge most new small business owners face is when it comes to Taxation and, Finances. One of the primary reasons people incorporate is for taxation purposes, because you can write off more expenses (the list is pretty big) and the IRS and State taxation agencies encourage the setup of small business (they are more likely to audit business expenses in a 1040 Schedule C personal tax return, than if these expenses are claimed via a corporation). However, setting up a company and managing the ongoing accounting does create extra administration. While you can get pretty good software like Intuit's Quick Books to manage your payroll, taxes, income and expenses, I recommend finding a good accountant to help you through the first year. I was lucky too find one who charges me on average between $150 and $250 a month based on income, but takes care of all my paperwork, payroll and end of year taxes. One good benchmark she gave me was that if you earn more than 25% of your total income from a side-venture (or more than $2000 a month) then it will most likely make sense to incorporate.

Finally, you will spend a lot of time online when trying to find tips and ideas on navigating through all the small business setup and administrative activities. Because time is money, particularly if this business is a side venture, save your self some time and buy these two inexpensive books, which provide a ton of useful information on the small business process: The Big Book of Small Business and How to Succeed as a Small Business Owner ... and Still Have a Life.

Getting a good business checking account and credit card are also important, and I will cover my experience and tips with getting these in a future post. From feeling overwhelmed, I am finally getting my head around what needs to be done as a small business owner and things are really not that hard (plus the potential is enormous). Once I get my operational activities under control and build a solid base, I'll start putting together a business plan for my future growth. It definitely feels good to be the boss!

Feel free to share any other good tips for the initial setup of a small business, and I encourage you to subscribe (options below) it you want to follow my small business journey, whether as a voyeur to see how things go or to get some useful tips for your own enterprise.

Related:

~ Get Free Business and Finance Magazines. Really
~ The A to Z of good personal finance (Part 2: L to Z)
~ Tax Breaks in Obama's $15 billion Small Business Plan
~ Virtual Administrative Assistants - Flexible Money Jobs

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The latest global flu pandemic has spread quite rapidly and despite the media over-hype, there is a good chance that it will be coming to an area near you. What this means is that you may have to take time of work - either for yourself or a family member. Unfortunately, in the current economy and tough job market, it can be a costly decision to do so. In fact over 35 million working Americans don't get sick leave and so any time off is unpaid. Whatever your situation here are some tips to ensure that your job and livelihood are protected if impacted by the flu virus:

- Working from home. If your job allows discuss this option with your manager as soon as possible. This means that you should have a quiet place to work at home, internet and telephone access. Also make sure you test that you can work from home (eg VPN access). The easiest way to convince your boss that working from home is necessary is that you could contaminate others. Just remember that working from home, is not a holiday and that you may have to work even harder. If you cannot work from home, then negotiate to swap or do extra shift to make up for lost time. Employers appreciate pro-active employees much more.

- Know your rights and read your HR policy : If you are able to take sick leave, then you should have minimal impact from taking a valid sick day. However many company's HR policy says that in certain national emergencies, you can get excused leave. Which means paid leave. Look for this and you many not have to use your sick or vacation days. Further, if the swine flu become pandemic (i.e. national emergency) then you cannot be fired for taking leave (paid or not) on legal grounds if you or a family member you need to take care off are actually sick. Ask any lawyer.

- Get a doctors or medical certificate. If you or a family member need to see a doctor, make sure you get a medical certificate. Not just for the day you saw the medical professional, but for the potential days you may have off. Most companies require employees to get a medical certificate if they take more than 2 days off sick. If you have a valid medical certificate, then no employer can refute your time off. So get one, just in case.

- Plan ahead. This obvious step is normally overlook by people. For example, there is a good chance that my kids day-care will soon be closed once the flu virus reaches my area. So I have already started finding backup options and ensuring that I get all my critical work done or deferred. Per the first point, I am also able to work at home if I need to. You should also develop a family emergency plan as a precaution. This should include storing a supply of food, medicines, facemasks, alcohol-based hand rubs and other essential supplies. Just don't wait till the last minute to get prepared.

At the end of day, if you really are ill, see a doctor sooner than later because like all flu virus' early treatments can reduce the chances of serious illness. However, most flu virus' affect less than 2% of population, so don't let this strain endanger your job.

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Apparently it takes 100,000 visitors a month to make $75,000 a year from blogging! Not so sure how realistic this is based on a piece I wrote about how much bloggers make, but I would put the number more at $40,000 for that number of visitors. Still not bad by any means and if you have the characteristics required for successful blogging, it can provide a nice source of side, part time or full time income. I even listed it as one of 10 ways to make cash quickly and a recent WSJ article by Mark Penn just confirmed that blogging as a profession and source of income is one of the fastest growing segments: (See my own revenue stats and chart at the end of the article)

We are a nation of over 20 million bloggers, with 1.7 million profiting from the work, and 452,000 of those using blogging as their primary source of income. There are almost as many people making their living as bloggers as there are lawyers. Already more Americans are making their primary income from posting their opinions than Americans working as computer programmers or firefighters. Paid bloggers fit just about every definition of a microtrend: Their ranks have grown dramatically over the years, blogging is an important social and cultural movement that people care passionately about, and the number of people doing it for at least some income is approaching 1% of American adults. That's almost 2 million Americans getting paid by the word, the post, or the click - whether on their site or someone else's.

Demographically, bloggers are extremely well educated: three out of every four are college graduates. Most are white males reporting above-average incomes. One out of three young people reports blogging, but bloggers who do it for a living successfully are only 2% of bloggers overall. It takes [over] 100,000 unique visitors a month to generate an income of $75,000 a year. [ I think this number is far too high, or I am not monetizing my blog well enough!]. Professional Bloggers who work for companies are typically paid $45,000 to $90,000 a year for their blogging. One percent make over $200,000. And they report long hours - 50 to 60 hours a week. Almost no blogging is by subscription; rather, it owes it economic model to on-line advertising. Bloggers make money if their consumers click the ads on their sites.

It is hard to think of another job category that has grown so quickly and become such a force in society without having any tests, degrees, or regulation of virtually any kind. Courses on blogging are now cropping up, and we can't be far away from the Columbia School of Bloggerism. There is a lot of interest now in Twittering and Facebooking - but those venues don't offer the career opportunities of blogging. Not since eBay opened its doors have so many been able to sit at their computer screens and make some money, or even make a whole living.

While it is great to see blogging go mainstream, it does mean a lot more competition and only the very best blogs will make serious money and attract new subscribers as the market reaches saturation. Personally, it has been a great ride and the revenue has far exceeded my targets. As I stated in my about page, I surpassed my original end of year targets within the first 3 months of this year, and have since readjusted those targets. But I think I may be getting back to a more normal pattern as I have seen my traffic and revenue growth slow, after a sharp rise earlier this year. However, I see this as healthy and overall if I can generate my target income range I will be more than happy. One thing I have come to realize is that while blogging may have started as fun or a hobby, you must start to treat it as a real business if you want to consistently make money from it and like any business it takes time to grow and effort to sustain.

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~ Google's Earnings, Adsense and Credit Cards
~ Page Rank - What's it worth to you?
~ The week that was: Luxury in the Sky and Around the Blogosphere
~ Looking Past the Subscriber Count

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Today's sad news about the suicide of Freddie Mac CFO David Kellerman and the shooting/suicide deaths of Christopher Wood, who killed his wife and three young children first, really hit me hard. Both apparently related to job stress or financial and economic hardship. No doubt, there are many reasons why people take such extreme actions, but it's at times like these you must realize that there is more to life than money and work. The current recession has, and is, taking it's toll on workers and their jobs, family finances and retirement plans - but to give up on life is very sad indeed. I don't know the details or the motives behind why people would commit suicide, but the key is spot the signs of personal stress and to get help. Here's some of my thoughts on how to deal with stress and hardship:

Acceptance : The first thing you have to realize, understand, and accept is that the situation is not hopeless. With just a little guidance, a couple well thought out goals, and emotional support from family and friends, you can do what needs to be done and come out of dire circumstances. Easier said than done I know, but there is light at the end of the tunnel and millions of people have found their way out of the darkness. Accepting that you are facing a problem (mental issues are just as bad as physical ones) is the first step in getting down the road to salvation.

Getting Help : Talk to a friend, loved one, your doctor, pastor, a debt counselor ... but talk to someone! If you know someone who is exhibiting the traits related to depression and stress, help them! It doesn't matter whether you lend an ear, offer some advice, or help them get counseling, do something! Most companies offer free counselling for their employee and their are many local and state agencies that offer counselling services (search on-line).

Money comes and goes : Financial hardship faces many and I know the feeling of not having money to buy what you need. This recession has made things much worse for many families and unfortunately some people resort to extreme actions on themselves and their relatives. If you are facing financial hardship and need help start by contacting your creditors/banks and explaining your situation. With all the help available in the stimulus package and from state agencies, there are many more roads to get our of your financial hardship than you may realize. Inaction and refusing external help can be your biggest mistake. Also, don't rule bankruptcy as a realistic option - laws are soon coming into place to help people lower their credit and mortgage debts.

Work is work, not life : A lot of people, particularly those in high profile jobs, have their identify associate with their job. Work comes before family, friends and all else. If there is a dramatic change in work (e.g. Job loss) or the work load becomes overwhelming many take it as a deep personal failure. If they feel they are failing in their job, then they associate it with failing in life. However, this mind-set needs to stop. The best way to realize this is to look at those less fortunate than yourself (the homeless, disabled or destitute) and appreciate what you have. Believe or not, tomorrow will come and no company or job is indispensable. At the end of the day, you are just a number in your company. Your life is your own and unique, treasure that.

Setting Priorities During Financial Stress : Sometimes when everything feels overwhelming and you are feeling lost, then the best thing to do is take 10 minutes and make a list of the things that are most important to you. Focus on personal and family items, and take a long term view. Issues that seem urgent now, may not seem so critical in the bigger picture of things. Also, break down things to get done in small chunks. Things can look much bigger and unachievable when viewed from an overall perspective, but dividing a task or action plan can make things much easier.

When you start feeling helpless and lose hope, life can become so overwhelming you literally stop functioning in the real world. This is the time to get help, It is unlikely that you can get out of it by yourself and you need external help. Don't wait any longer because the outcomes of your actions can have far reaching, unintended consequences. Believe me, I have seen this one too many times.

If you know of any other ways or methods to cope with financial hardship or stress, leave a comment. Links to useful sites are also welcome.

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~ 10 ways to Quickly Improve Cash Flow
~ I Want My Bailout Too and Here's Why
~ Too expensive to file for bankruptcy

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[Updated August 2009] The $3 billion Cash for Clunkers program will shut down on Monday (8/24/2009). Dealers must submit any pending Clunker deals, including any necessary paperwork, by 8 p.m on Monday to get refunded for the CARS subsidy. To date, the program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates. "With a date certain, NADA is strongly recommending that all dealers now focus their attention and efforts on submitting reimbursement claims prior to the looming deadline," said John McEleney, chairman of the National Automobile Dealers Association.

For consumers, this weekend is the last chance to take advantage of this wildly successful program. If you meet the eligibility criteria below, then this is a great deal for new car buyers, along with all the other government subsidies and tax breaks.

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I have received a number of reader question's on the CARS program and based on the type of inquiries here are some key things to know (in addition to mileage criteria in the previous updates below). You can also see a summary of what the big automakers are offering in relation to this program.

- The program only applies to used cars traded in for new vehicles bought July 1 to Nov. 1. Get your best new car quote from Yahoo! Autos before going to the dealership.

- The used "clunker" must be drivable & has to have been continuously insured and registered to you for one year before the trade-in. This provision was put in the law so no one would buy a junkyard car to try to get the cash credit. Further, trade-in cars must get no more than 18 miles per gallon, have been built in 1984 or after. A consumer could then get a $3,500 voucher toward a car that got at least 22 mpg. The value of the voucher will increase to $4,500 if the new car is 10 mpg higher than the trade-in.

- You cannot claim the subsidy and cash from a trade in. I.e. no "double-dipping". The dealer is required to destroy your old. Clearly, if the value of your trade-in is worth more than the qualifying cash credit, it may not be worth participating in the program.

- The manufacturer's suggested retail price (MRSP) cannot exceed $45,000 for the new vehicle (foreign or domestic) you are trading in the clunker for. You will not receive money directly from the government. The dealer will apply the qualifying credit toward the purchase price and then apply for reimbursement. Participating dealers (and most are) have to offer the credit in addition to any rebates or discounts offered. Consumers can also use the subsidy toward leasing a new vehicle provided the lease period is at least five years.

- The cash credit will not be treated as income so no tax consequences from participating in the program. It is, however, considered income for the dealer. Additionally, using this credit doesn't negate using other state and federal tax incentives geared toward fuel-efficient vehicles. For example, you can use it and still get the federal tax credit for purchasing a hybrid or new car deduction in the Obama stimulus package.

** Is your future new car eligible for this program - Get your best new car quote from Yahoo! Autos **

CARS program extension : There has been news that the Cash for Clunkers program has run out of money. However a $2 Billion extension for this program has been submitted in Congress. See this article for more on this.

Here are what some of the Big 4 Automakers are offering in relation to this government subsidy:-

- Toyota is allowing buyers to choose among 17 available car, truck, SUV and hybrid models, five available Lexus models, or select from Scion’s full lineup of vehicles. In addition to possible savings from the car allowance rebate system, Toyota dealer and Toyota Financial Services offer purchase and lease programs that can be combined with the "cash for clunkers" rebate. Low-end models can be bought with less than $500 cash down!

- Chrysler is offering $4,500 in bonus cash toward the purchase of a new vehicle as it seeks to match a government incentive for people to trade in their old gas guzzlers. That means some consumers could, in theory, get up to $9,000 off a new Chrysler vehicle if they trade in and buy the right combination of vehicles. According to Edmunds, 16 Chrysler vehicles are fuel efficient enough to qualify a shopper for a tax rebate under cash for clunkers, so long as the trade-in vehicle qualifies as well.

- Ford, Lincoln and Mercury are promoting this program for around 20 cars by focusing on the recycling aspect of the program and the bonus savings from buying a new Ford or Lincoln Mercury vehicle. Using their Qualification Calculator buyers can select their current vehicle and then learn which Ford, Lincoln or Mercury vehicle is eligible for the CARs program. The calculator is an easy to use tool (even though it is focused on Ford cars as expected) if you're seriously thinking about trading in your clunker for the clunkers credit.

- GM seems to have made the least fuss about this offer compared to other automakers, but that could be because they have bigger issues (like getting out of bankruptcy) on their plate. The provide a specific page for this program and a basic eligibility calculator. However I could not see any additional bonus or specific offers.

I'll update this post as more information comes to hand and encourage you to subscribe (free) via Email or RSS to get the latest news.

For more on the cash-for-cars program, go to the official government web site - cars.gov - or call 866-227-7891

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[Update June 20th 2009] The "cash for clunkers" program has now received senate approval and should be in effect by July 2009 once the President signs the bill and the regulatory details are finalized. The car trade-in plan is designed to last one year and will end up costing tax payers about $4 billion. The $3,500 or $4,500 vouchers will be issued electronically to dealers almost immediately upon the point of sale, based on the following criteria:

Trade-in cars must get no more than 18 miles per gallon, have been built in 1984 or after, and have been owned and insured by the purchaser for at least a year. A consumer could then get a $3,500 voucher toward a car that got at least 22 mpg. The value of the voucher will increase to $4,500 if the new car is 10 mpg higher than the trade-in. Consumers will also be able to use the vouchers toward the five-year lease of a vehicle.

A $3,500 voucher can go to a small light-duty truck that gets at least 18 mpg and is two mpg higher than the trade-in. A 4,500 voucher will be issued for a truck with a five mpg improvement.

A $3,500 voucher will be issued for large light-duty trucks that get at least 15 mpg and are one mpg higher than the trade-in. A $4,500 voucher will be issued for a truck with a two mpg improvement.

So when you go to trade in your car next month, bargain hard using these 10 new car buying tips and make sure your dealer provides you with the cash for clunkers voucher (either in cash or a reduction in the car price). You may also be eligible for the new car tax deduction also available in President Obama's economic stimulus package.

[Update June 2009] The House of Representatives has approved the "cash for clunkers" bill ( 298-119) that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles

Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the window sticker. For example, owners of sport-utility vehicles, pickups or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV is at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV is at least 5 mpg higher than the older vehicle.

Rep. Betty Sutton, D-Ohio, the bill's chief sponsor, said the bill showed that "the multiple goals of helping consumers purchase more fuel efficient vehicles, improving our environment and boosting auto sales can be achieved." Sen. Debbie Stabenow, D-Mich., has backed a similar version in the Senate, which has the support of automakers and their unions.

Other key provisions in the bill

- Consumers could also receive vouchers for leased vehicles. Large trucks (pickup trucks and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 15 mpg would be eligible for vouchers of $3,500 to $4,500.

- Consumers can receive electronic government vouchers through participating dealers for the purchase or lease of qualifying vehicles. Older trade-in vehicles must be in drivable condition, be manufactured in model year 1984 or later and be continuously insured to the same owner for at least one year immediately prior to trade-in.

The Senate version of the bill has some slightly different provisions/criteria such as the trade-in passenger car must get 17 mpg or less and the new passenger car must get at least 24 mpg to be eligible for vouchers. The vouchers would also be distributed at varying levels with passenger car owners receiving a voucher worth $2,500 if they traded in a passenger car getting at least 7 mpg more than the old car. The voucher would grow to $3,500 if they traded in a passenger car getting at least 10 mpg more than the old car. And it would grow to $4,500 if they traded in a passenger car getting at least 13 mpg more than the old car.
I'll update this post as more information comes to hand and encourage you to subscribe (free) via Email or RSS to get the latest news.

Sources : USA today, NY times

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As part of the US Government's ongoing efforts to try and reinvigorate the local car industry, lawmakers are proposing to let domestic and foreign made cars qualify for a proposed "cash-for-clunkers" program in a bid to secure passage of the measure through congress. Initially it was proposed that only US owned automobiles and manufacturers would receive the subsidy, but following charges of protectionism from overseas and the World Trade Organization (WTO), the proposal has been modified to distribute subsidies to new-car buyers based on the manufacturers' U.S. market share. So, General Motors customers, which comprised 22 percent of the market share in 2008, would receive 22 percent of the federal funding set aside for subsidies. Toyota's customers, at a 17 percent U.S. share, would get 17 percent of funds. This approach should overcome objections that the original plan only subsidizes/protects North American owned car makers.

The "Cash-for-Clunkers" program is based on similar programs in Germany which were successful in reviving flagging domestic auto sales. Basically the program would be funded by the US government (i.e. taxpayers) which would pay or subsidize owners of old, fuel-inefficient automobiles via a coupon or voucher for between $3,000 and $5,000 if they junk their old car and buy a new low-emissions model. Apart from boosting local auto-sales it aims to get millions of fuel-inefficient vehicles off the road to help lower our reliance upon foreign oil, and reduce emissions and pollution. According to the Associated Press, by its fourth year the program would save between 40,000 and 80,000 barrels of fuel a day. The estimated cost of the program is up to $2 billion and has been endorsed by the Obama Administration.

Congress will review the revised proposal soon after it returns from a recess next week. Given the sad state of the US auto industry, where sales are at a 27-year low, this program is one of the few options left. The US auto industry estimates that such a program could generate additional new car sales of 500,000 to 1.5 million cars a year. No wonder General Motors and Chrysler, which are surviving on taxpayer aid and face bankruptcy deadlines imposed by the Obama administration, are strong supporters of this program. A spokesman for House Speaker Nancy Pelosi said, "There's broad bipartisan support in Congress and we're working with the administration. We hope it's crafted in such a way that all manufacturers can participate, and that at the end of the day a consumer could be able to use the incentive to purchase the vehicle that he or she wants."

Given the success of scrappage programs around the world (albeit on a much smaller scale) in increasing auto sales and the environmentally friendly nature of this program, it is likely that Congress will follow suit and pass some kind of subsidy to promote new car sales this year. So if you are thinking of trading in your old car, maybe you will get an additional subsidy on top of the new car tax deduction.

Get your best new car quote from Yahoo! Autos

Related:
~ Car Repairs & 5 Tips to Avoid Getting Ripped Off
~ Tips on saving money when buying a new car
~ US Automakers Bailout - A Bridge to Bankruptcy or a Road to Salvation
~ 3 Money Reasons to Buy a New Car - Tax Deductions, Used CAR Trade-In Vouchers and Electric-Hybrid Credits

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We have all thought about being wealthy and rich, and what we would do if we had enough money to fund all our desires and take care of loved ones. However, how can you get rich? In reality there are only a few ways to do so and here I look at the main paths on how anyone ever gets rich. They are in order, from the quickest path to becoming rich/wealthy to the slowest and most likely path.

Luck: As the saying goes, "I'd rather be lucky than good." Think: winning the lottery; winning a slots jackpot in Vegas; big inheritance; being born into a family fortune; winning a big legal settlement. The flip side is being in the right place at the right time—by choice perhaps, but with lots of luck. Think: an intelligent but lucky stock pick (Apple when it was $5); an intelligent but lucky job choice (company goes IPO).

Extraordinary Talent: Some have the god-given talent that they are able to profit from by ensuring it is not wasted. Think: Michael Jordan, Tiger Woods and other top professional athletes; film and song celebrities and authors than can write for the masses. Growing up, it is important to recognize all forms of talent because if you become among the best in your field of practice, there is a good chance that riches will follow (especially in America).

Visionary: Build on amazing vision, unique product/service or new idea that you commercialize. Think: Bill Gates and Microsoft or the founders of Google, Ikea and Wal-Mart. Many of the richest people in the world are those who built a company from ground up, yet had the business sense to profit from their invention. Unfortunately, very few people will come up a brilliant idea AND commercialize it successfully.

Small Business Empire (franchise): Start a profitable small business and eventually franchise it. This way you are able to make money as your franchise grows without having to take much of the business risk associated with putting up your own time and money.

The Full Time Investor: Put loads of money (perhaps borrowed) into risky and high-return (speculative) investments. Think: flipping real estate; buying on margin; hedge funds; investing in hot emerging market stocks. This path could make you rich beyond your wildest dreams, but more likely than not could result in you losing everything you own and then some.

Corporate Warrior: This is the realm of the CEO's, MBA's and investment bankers. The idea is to get an ivy league education, work 70 to 100 hours a week for a big corporate or hedge fund and then retire before you are completely burnt out. Those that follow this path, assuming they have the capability, will probably achieve financial freedom sooner than most, but the personal toll could be very heavy indeed.

Slow and Steady : Sound familiar? It should. Most of us are on this path which involves working for most of our adult lives, saving diligently, raising a family and then retiring after 65. This was a pretty well worn path for many, until the recent financial crisis where all the hard work from years of saving and investing were wiped away. This is also the approach espoused by many personal-finance publications and blogs, because it is probably the surest and more straight forward. Though if you do want to get rich, before you get old, consider the above paths first.


Which path are you on? If you are like most people you are on the corporate warrior or slow and steady path. The top ones are much faster ways to get rich, but available to only a select few. I'll discuss the above paths in more detail during future posts, but early in life you should decide which path you want to pursue and follow it with all your heart.

Picture courtesy the Shane H. This post was inspired from one I read on canigetrichonasalary.com

Related:

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~ Top ten myths about buying a franchise
~ Where is the stock market headed?
~ America's Income and Wealth Inequality

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As the tax deadline rapidly approaches, many Americans are yet to file their returns. This could be because they have a tax liability and due to a drastic change in their financial or personal circumstances over the year, they cannot afford to file their taxes. You can get a good idea of your tax liability (for free) by using Turbo Tax or other online software, since you only pay when you file. So if you are not filing for fear of a tax bill – make sure you get the facts first. With the amount of government subsidies and stimulus payments you may actually qualify for a refund or a much lower tax bill than you think.

If you think your taxes are going to be manageable and you just want more time, then file an extension. The IRS offers the option of filing an extension (using form 4868), which extends your filing date by 6 months to October 15th. While filing an extension is easy, it is not free and has consequences. Here’s a few things you need to know.

> If you think you're going to owe taxes, you still need to pay by April 15th in order to avoid any late penalties. This means you need to send Form 4868 and a check of what you think you owe to the IRS by April 15^th. Filling an extension with the IRS only allows you to postpone when you actually file your return, it doesn't mean you can pay later as well. This is important, because the penalty could be up to 25% of your outsanding tax bill. The actual late payment penalty is up to 1% of any tax due and will be charged each month the tax remains unpaid, up to a maximum of 25%.

> You do not have to explain why you are asking for the extension. The IRS will contact you only if your request is denied.

> As mentioned above, use an online tool (like Turbo Tax) or go the IRS website to figure out your 2008 liability. I do know people who have underpaid, thinking that they will pay the rest at the end of extension period, but soon realize that late payment penalties can be a big hit to already stretched finances. So even if you cannot afford to pay all your taxes you think are due, try and at least make a partial payment when filing the extensions.

TurboTax® Online Federal Free Edition lets you file federal taxes online – FREE!

If filing a tax extension does not help, you are most likely at the point where you realize you are not in a position to pay your taxes on April 15th. The key thing is to deal with this problem (not hide from it) in a proactive manner and not to panic. Surprisingly, the best way to deal with the tax problem is to call the IRS. Yes, your most feared creditor can also be your salvation, especially under current economic conditions where so many families are struggling. Review the IRS website (irs.gov) and call them at 1-800-829-1040 to discuss payment options. Based on your situation, the agency could give you a short-term extension of time to pay or set up a payment installment agreement.

With a short-term extension, you are given up to 120 days to pay and there is no fee. With an installment plan, you must owe less than $25,000 and agree to make regular monthly payments to pay off what you owe. The IRS charges a one-time fee of $105 for setting up the installment plan, or $52 if you have the payments debited directly from your bank account. You don’t have to call to create a payment plan. You can set one up online. If the IRS grants online approval of your request for monthly installments, you will receive written confirmation within 10 days.

For more on this and other options on help dealng with late taxes, see the IRS’ web page called The “What Ifs” of an Economic Downturn. Aware that the economic downturn has affected many people, the agency urged taxpayers in difficult financial situations to file a tax return, pay what they can and work with the IRS to establish a payment plan that will keep them compliant. It also explains how, if your income decreases, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.

Finally, many of our brave members in the armed forces and some others serving in combat zones, or in support, can wait until after April 15 to file and pay their taxes. As a general rule, those eligible get the extra time penalty-free and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone.

Related:
~ Is my stimulus payment taxable?
~ Filing your taxes: D-I-Y Taxation Software or a Professional Preparer
~ $8000 versus $7500 First Home Buyer Tax Credit in 2009 Economic Stimulus Plan
~ I Want My Bailout Too and Here's Why

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I don’t feel so bad about my past year investing. After all, even the world’s most famed investor - Warren Buffet - had his wings clipped today. Bloomberg reported that rating agency Moodys cut his company Berkshire Hathaway's top-level Aaa credit rating by two levels to Aa2, on the falling value of stock markets and the impact of the recession on corporate profits. Last year was the worst for Berkshire since Buffett took over in 1965, as the company had massive losses on derivative bets tied to stock markets and corporate bonds.

Berkshire, which is essentially a conglomerate of companies, suffered mainly because of the write downs it’s various financial/insurance companies had to take and uncertainty over future cash flows. While Buffet played down the credit rating downgrade, it is has been one of the most coveted features of the company and the loss of it will surely not sit well with the Oracle of Omaha. The rating downgrade, with more to come from the other agencies, has probably already been factored into the current stock price that hardly moved today. Some analysts are even saying it is a bargain at $88,000 (40% below the $147,000 high last year), with hedge fund manager, value investor, and Warren Buffett fan Whitney Tilson telling CNBC Moody's downgrade will have no effect on Berkshire's holdings, and only a very small potential impact on its earnings. It may face slightly higher borrowing costs, but Tilson notes that Berkshire has lots of cash and doesn't do much borrowing. He also points out that Berkshire's derivatives positions don't require the company to put up additional collateral in the wake of a ratings downgrade.

Tilson calls it "ludicrous" that Berkshire and General Electric (GE) now have the same credit rating from Moody's when Berkshire has roughly 10 times GE's tangible book value. He says the inconsistency "underscores why no sane investor should pay any attention to the credit rating agencies." In his view, they are "thoroughly discredited" at this point

Warren Buffett is arguably America’s most-followed investor and despite the current misfortunes of Berkshire he is still one of the world’s richest people. With his continued strategic purchases in America's blue chip companies and long term focus, it would be a brave soul that bets against him and Berkshire.

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I got stuck in a major traffic jam again last week, a trend that seems to be getting worse. However this was no traffic jam on the freeway, highway or any kind of road. It was a lunch time traffic jam to the one microwave in our office as more and more people bring lunch from home; part of their strategy to save money as the national belt tightening trend continues! Belt tightening or frugality, which was shunned during times a plenty, is now back in vogue and becoming the norm rather than exception. Water cooler talk has shifted from the latest hot stock pick to money saving ideas during one of the toughest recessions the nation has ever faced. Here are some personal finance examples I have observed that confirm America's shift to frugality. Have you joined the frugality and thrift band wagon yet? If so, leave a comment with your story.

- Savings rates are going up after years of decline. With jobs less secure, houses worth less and stock-market portfolios back to 2001, Americans are saving more now than ever. The easy credit and free spending lifestyle of the last 10 years is definitely over and the shift in habits doesn’t look to be ending anytime soon. The WSJ published a soon to be released survey by Discover, that shows about 35% of consumers surveyed expect to reduce their debt levels over the next six months, and a third said they have already done so - even though their outlook on the economy has improved. One in three said they would put the money freed up by lower loan payments into savings. After doubling their outstanding debt between 2000 and 2007 to $13.8 trillion, U.S. households last year reduced their total debt outstanding for the first time since World War II, according to the Federal Reserve.

- High interest saving accounts and Treasury inflation protected bonds (TIPS) are providing the safest and most consistent returns. Once considered the most boring of investments, high yielding interest accounts like those offered by HSBC and ING Direct have become hugely popular as a place to park all those increased savings. Despite paying a measly 1% to 3%, these are the surest of investments in the rockiest of times. I know that my emergency funds are parked in these types of accounts and bonds.

- Target and Wal-Mart are opening stores as other retailers and up-market chains go out-of-business. One clear sign of thrift are changing shopping patterns with more and more people shopping at Target and Wal-Mart, once considered as shop's for the poorer working class only. This is especially the case for families where every dollar has to be stretched as far as possible. I don’t know about where you live, but it seems while every other chain is closing down or announcing layoffs, Wal-Mart and Target are going strong. Personally I am not a fan of Wal-Mart and prefer Target any day. But at the end of the day, it is hard to beat the low prices offered at both these national retailers (even compared to online deals!)

Some companies are already repositioning themselves for a more frugal consumer. "The current economic conditions have created a fundamental shift in shopping behavior," Kathryn Tesija, Target Corp.'s executive vice president of merchandising, said in a recent conference call with investors. "We are allocating more shelf space to non discretionary categories" like food, health care and baby products, she said, and drawing attention to the store's low prices. "Guests won't come to us for everyday necessities if those necessities aren't priced right."

- Bartering may sound so 19^th century, but it is back in vogue as people short on cash or with lot's of unused "stuff", look to exchange goods and services in return for what they need. A clear example of this is Craig’s list which now has a rapidly growing bartering section. As I discussed a while back, I have been surprised by the amazing response to items I sold recently like my son's three year old crib and the amount of "stuff" that is now available for exchange. Bartering has also been extended to services, where my accountant recently told me how she was doing her electricians taxes in return for some work that needed to be done in her home. "Just remember," she told me "you need to declare any bartering income to the IRS!"

- Netflix subscriptions are on the rise. The company just announced record profits and subscriber growth - which is not surprising in the current economy as folks look for cheaper entertainment options. After all, rather than pay $50 for a night out at the movies, it is much cheaper to get unlimited DVDs to your place for less than $15 a month. Fun and frugality are not mutually exclusive after all.

The fact that all generations are learning to save, albeit the hard way, is the silver lining of the current recession and habits learnt today will stand us in good stead for the years ahead. Back to my lunch time traffic jam, I may start bringing in cold sandwiches or perhaps a microwave booking sheet. Either way expensive lunches and $5 latte's are out.

Related

~ 10 ways to Quickly Improve Cash Flow and Save More Money
~ Am I a Cheapskate or Just Frugal?
~ Budgeting Pitfalls and Remedies
~ Car Repairs & 5 Tips to Avoid Getting Ripped Off
~ Breaking Down and Improving your FICO Credit Score
~ Your Work, Home, Education and Auto Tax Breaks in the 2009 Economic Stimulus Package

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The internet and it's evolution is synonymous with the leadership in American technology. However, like every thing else, the world is catching up and over taking the US. One clear example of this is internet usage, which is now the highest in China as shown in the graphic from a recent Economist article. Now, China’s population is three times that of the US, so it was only matter of time before internet usage there surpassed us over here. Eventually, India will also jump higher than the US. I say all this not in a negative context, but as a reality that we should embrace. The internet is the world’s truly democratic information highway and the more ubiquitous it is, the better it is for all people – especially those who do business online. The key is embracing this new trend, rather than to fight it.

Almost 180m internet users—over one in six of the world's online population—live in China, more than any other country. Until a few months ago America had most web users, but with 163m people online, or over half of its total population, it has reached saturation point. More populous countries such as China, Brazil and India have many more potential users and will eventually overtake those western countries with already high penetration rates

Take this blog as an example. It is now more than a year old and it is has been interesting to note the changing geographical composition of visitors to my blog. While still predominantly US based (80%), I have noticed a steady increase of international visitors (20%) and subscribers. I have mainly directed my marketing efforts at US based consumers, but the shifting trend in Internet usage is making me rethink how I position articles and information I present here. Yes, currencies and terminology may differ - but the basics of personal finance - saving, investing and budgeting tend to be similar world over. What’s more, a lot of foreign visitors are interested in the US economy (given its importance) so by providing some local context I can definitely attract more international visitors to my bog, which should hopefully translate to more ad revenue and subscribers.

Despite China overtaking the US in internet usage, the average US internet transaction is still more than 20 times that of a similar one in China, and triple that of any other western nation. I attribute this to the culture in America where buying things or doing business online is part of everyday life, whereas in most other countries transacting or buying anything more than a few hundred dollars online is approached with trepidation. This behavior is also likely due to the consumer protections and (perceived) stronger security measures in America.

However in time as the world adopts e-commerce at a consumer level the "value" of a transaction is likely to increase overseas much faster than it will locally. Which means that you need to ensure your online business model factors in this new audience and potential revenue source. In time, I have a feeling that the most successful online businesses (and blogs) will be the ones that appeal to a global audience and not just a local one.

Related:
~ Setting a Good Online Password
~ Google's Revenge
~ The Carnival of Personal Finance #184: From the Land Down Under
~ Characteristics required for successful blogging

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I received a question from a reader, who was recently laid off, about what additional health insurance benefits (via COBRA) he would qualify for under the Obama economic stimulus package, also called the American Recovery and Reinvestment Act of 2009. I covered this briefly in other economic stimulus posts, but this piece aims to provide more detail and clarifications based on information from the Department of Labor and IRS - which can be confusing and hard to sort through. So here is a summary looking at the revised COBRA health care subsidies and eligibility criteria under the stimulus package:

- Workers who have lost their jobs may qualify for a 65 percent subsidy in COBRA continuation premiums for themselves and their families for up to nine extra months. Eligible workers will still have to pay 35 percent of the premium to their former employers.

- To qualify, a worker must have been involuntarily separated between Sept. 1, 2008, and Dec. 31, 2009. Workers who lost their jobs between Sept. 1, 2008, and enactment (Feb. 17, 2009), but failed to initially elect COBRA because it was unaffordable, get an additional 60 days (up to April 17th) to elect COBRA and receive the subsidy.

- This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

- Applying for the premium reduction. If you were covered by an employment-based health plan on the last day of the employee’s employment, the plan should provide you a notice of your eligibility to elect COBRA and to receive the premium reduction. The notice should include any forms necessary for enrollment. You may also want to contact your plan directly to ask about taking advantage of the premium reduction.

- The subsidy requirements apply to all plans subject to the COBRA requirements. This includes all group health and self-insured plans.The subsidy is generally available for COBRA continuation coverage under any group health plan, including medical, dental and vision coverage. However, it does not apply to a flexible spending arrangement (FSA) offered under a cafeteria plan.

- You are not eligible for the premium reduction if you are eligible for other group health coverage (such as through a new employer’s plan or a spouse's plan) or Medicare. This applies anytime during coverage. For example if your spouse get's a job with health care coverage during your 9 month coverage, you are then ineligible for the program.

- The COBRA premium subsidy is not retroactive. The earliest it can apply is for the first period of coverage beginning on or after Feb. 17, 2009, the date of enactment of the bill.

- You cannot take this credit in your 2009 tax return. The subsidy is provided to an assistance-eligible individual only in the form of reduced COBRA premiums. That is, the assistance-eligible individual only has to pay 35% of the premium in order to receive COBRA coverage. The employer is reimbursed for the remaining 65% through a credit on its payroll tax returns.

What is COBRA? According to the Department of Labor, COBRA provides certain former employees, their spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees (i.e. if your company goes bankrupt, you will not be covered). In any case always shop around to get the best coverage/rates.

Related:
~ What would happen to My Money if Citigroup or Bank of America were Nationalized
~ Real or Temporary Foreclosure Relief from Obama's $75 Billion Mortgage Modification Plan
~ Help for Unemployed and Under Insured Workers (COBRA) in the Economic Stimulus Package
~ For further details and supporting documentation, visit the IRS and the Department of Labor websites

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As the stock market shows signs of a real revival, many new and sidelined investors are getting tempted to jump into the market. After all, you don’t want to look back in a few years and say, “If only, I had bought stocks then….” However, as the past year has shown, the market can fall just as fast as it rises. Therefore before you start investing your hard earned dollars, make sure you consider the following list of items to ensure you are financially prepared and able to trade cost effectively:

- Have at least 3 to 6 months worth of emergency funds, especially in the current economy, in a FDIC insured high interest savings account. Despite the desire to avoid “missing the boat”, don’t over extend and potentially place yourself in a financially precarious position if the market crashes again. Investing is no sure thing, but cash in the bank is.

- Pay off any credit or high interest debt first. Look at it this way, most credit cards and other high interest debt will carry an interest rate over 10% (after tax). On a pre-tax basis, you would need to earn 13% plus in the stock market to get the same kind of return as paying off your credit card debt. Unlikely in this market, so a smart investing move is to always pay off your credit card debt first.

- Investing in your 401K or Roth IRA. When the market was hurtling down with little respite in sight, I actually supported suspending your 401K contributions, but if you believe that the market is on the way up then now is the time to ratchet up your investments, because you are getting in at a low price. Because all contributions are done on a pre-tax basis and your gains are tax exempt, investing via your 401K or retirement account is the most effective form of long term investing. Even better go for a Roth IRA if you qualify, because not only are the gains tax exempt, so are the distributions when you retire.

- If you have ticked off the above points, you are now in a great position to start active investing. But you must start with enough money to make it worthwhile. People say you can start with as little as $100. I don't think so. Realistically you need at least $2000 to start with to make it worth the time you will spend researching and to ensure transaction costs don't eat up your returns. Following on the above points, make sure your investment float is not only sufficient, but an amount that you can afford to do without in the short to medium term (i.e. forced to sell) should the markets get worse.

- Read. Research. Review. The old saying, “no work, no gain” applies to investing, despite what you may hear from the pundits on CNBC. You may get lucky and pick a hot stock or tip that delivers once in a while, but over the long term the best investors are the ones who do the most research and know the most about the investments they make. If you do not have the time or expertise to do the research then pay a professional for advice. Just don’t invest blind. When it comes to research, you can search the internet for almost anything you want. Yahoo and Google Finance provide great general stock and market information, but be prepared to pay for premium information. For stocks, I also like to read the annual (10K) report to know more about what the company does. These are free and provide a lot of company and sector specific information. For investing in funds and ETF’s I like to do my research via Morningstar, thanks to its strong comparison tools. Finally, for daily financial news I subscribe to the Wall Street Journal online edition. It contains some great financial information for all types of investors and with subscriptions up to 75% off regular prices, it is a very worthwhile investment. Finally, before you jump into the real market, try some stock simulation games at the finance sites mentioned above.

- Choose the right broker. For the average investor whose portfolio is most likely below six figures, trading costs associated with buying and selling stocks can add up over the year. So before you start investing, picking an online broker with the lowest costs is key. You can start with some of the well established online brokers like E*TRADE, who have solid stock research sections and great user interfaces. However, if you are okay with a straight forward interface but want ultra-low costs go with the rapidly growing online brokers Zecco (see how you can trade free with Zecco) or Trade King, whose trading costs are about half that of the big guys. The best way to figure what is right for you is to trial these sites (free) and decide which suits your trading style and needs.

- Understand the tax consequences. Before you start investing, spend some time to understand the tax consequences of investing like capital gains rules, wash sales and the like. When you buy and sell stocks can make a big difference in how much you keep after taxes. For example the capital gains loss provision allowed me to write off $3,000 of stock losses against my taxable income, providing I sold the shares before December 31^st last year.

I’ll go into some specific stocks and funds in future posts (and do browse some of my past stock reviews), but the above should give you plenty to get started on. If this is really the beginning of the recovery and you are planning to invest for the long term, then it is a great time to start investing or get back into the market. Like any form of investing, buying stocks is risky, but do your homework and should things return to normal you could be sitting pretty in a few years.

Related:
~ How to buy shares - Two simple steps
~ Understanding Options - The Comprehensive Reference Guide for Beginners
~ 401K Basics
~ Top Dividend Stocks in a Down Market
~ Teaching Kids about Stocks and Investing

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