Saving for Two

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An employer’s 401(k) plan (or similar retirement plan) can be a good way for people to save for retirement. But what if your or your spouse’s employer doesn’t offer a retirement plan?

According to the U.S. Bureau of Labor Statistics,* 69% of private sector workers have access to a workplace retirement plan. Since most people don’t save for retirement outside of their workplace plans, often only one person in a dual-earner couple is saving. And while you probably want to save enough to maintain your preretirement standard of living, 401(k) plans are designed for individuals, which makes it difficult to save for two.

Plan Design

The specific design of a 401(k) plan is a main deciding factor in how much individuals contribute to their plans. Many plans offer auto-enrollment, where employees, upon eligibility, are automatically enrolled in their workplace retirement plan at a default contribution rate, which usually determines the rate at which employees save in their plans. Another feature in 401(k) plan design that influences contribution rates is the employer match. Employees may contribute at the rate necessary to receive the full employer match and often will increase their contribution amount to that rate, but they won’t go beyond it.

These plan design features are targeted to help individuals save and do not take a spouse into consideration. Therefore, if you have a non-saving spouse, you may need to reevaluate and increase your contribution amount.

Closing the Gap

Incorporating certain features in a 401(k) plan’s design could help employees save more. For example, marital status might be considered when setting default contribution rates. Another plan feature that may help is auto-escalation, or incrementally increasing plan contribution rates automatically over time. As with auto-enrollment, employees have the opportunity to opt out instead of opting in, making it more likely that they’ll just let it ride. Educating employees about the need to save more to cover a non-saving spouse is also important.

However, saving enough for retirement is ultimately an individual responsibility. What can you do to help ensure you’ll be able to retire comfortably? Here are a few tips:

  • Set a savings goal. Your financial professional can help you determine a target amount based on your projected retirement income needs.
  • Consider increasing your plan contribution. Look beyond your employer match to determine your contribution rate. Take advantage of features like auto-escalation while also evaluating how much you can increase your contributions on your own. Remember that although you may have only one retirement plan, your combined incomes may make increasing your contribution rate not only desirable but also affordable.
  • Consider using a traditional or a Roth individual retirement account (IRA) to supplement savings in an employer plan. A married individual may contribute to a spousal IRA even with little or no direct earnings. Keep in mind that specific tax rules apply to different IRAs, so you may want to consult a tax professional before investing.
  • If there’s a significant age gap between you and your spouse, plan for retirement with the younger spouse’s life expectancy in mind. You may have to adjust your asset allocations if you follow age-based guidelines, and you may need to scale back on withdrawals later on since you will likely have a longer combined retirement. On the other hand, if you and your spouse are close in age and are nearing retirement, you may want to consider staggering your retirement dates in order to keep saving in your plan a little longer.

Before taking any action, please consult with your tax and financial professionals.

Signs You’re Ready to Invest in Additional Properties

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Investing in real estate can be a lucrative endeavor, offering the potential for long-term financial stability and wealth accumulation. However, knowing when to expand your portfolio and acquire additional properties requires careful consideration and assessment of various factors. In this article, we’ll explore the signs that indicate you’re ready to take the leap into investing in additional properties.

1. Strong Financial Position

The first and most critical sign that you’re ready to invest in additional properties is a strong financial foundation. This includes having sufficient savings for a down payment, a stable source of income to cover mortgage payments and property expenses, and a healthy credit score to qualify for financing. Before acquiring additional properties, ensure that you have a clear understanding of your financial situation and are prepared for the financial responsibilities of property ownership.

2. Positive Cash Flow from Existing Properties

If you already own rental properties, positive cash flow is a key indicator that you’re ready to expand your portfolio. Positive cash flow means that the rental income from your properties exceeds the expenses associated with ownership, such as mortgage payments, property taxes, insurance, and maintenance costs. Having a consistent stream of income from your existing properties can provide the financial stability needed to pursue additional investments.

3. Diversification Strategy

Diversification is essential in real estate investing to mitigate risk and maximize returns. If you have a well-diversified portfolio that includes a mix of property types (e.g., residential, commercial, multifamily) and geographic locations, you may be ready to add more properties to your portfolio. Diversification helps spread risk across different assets and markets, reducing the impact of adverse events on your overall investment performance.

4. Knowledge and Experience

Investing in real estate requires a certain level of knowledge and experience to navigate the complexities of the market effectively. If you have successfully managed and operated rental properties in the past, you may be ready to take on the challenge of acquiring additional properties. However, if you’re new to real estate investing, consider seeking guidance from experienced investors, attending educational seminars, or partnering with a mentor to enhance your knowledge and skills.

5. Long-Term Investment Goals

Before investing in additional properties, it’s essential to have a clear understanding of your long-term investment goals and objectives. Are you looking to generate passive income, build wealth through property appreciation, or diversify your investment portfolio? Understanding your goals will help guide your investment decisions and determine the types of properties that align with your objectives.

6. Market Analysis and Research

Conducting thorough market analysis and research is crucial before investing in additional properties. Evaluate market trends, supply and demand dynamics, rental rates, vacancy rates, and economic indicators to identify promising investment opportunities. Look for markets with strong job growth, population growth, and economic stability, as these factors can positively impact property values and rental demand.

7. Risk Assessment and Mitigation

Real estate investing inherently involves risks, including market fluctuations, tenant turnover, unexpected repairs, and economic downturns. Before acquiring additional properties, assess the potential risks and develop strategies to mitigate them effectively. This may include maintaining adequate cash reserves, securing insurance coverage, conducting thorough tenant screening, and implementing property management best practices.

Conclusion

Investing in additional properties can be a rewarding venture for those who are well-prepared and strategic in their approach. By assessing your financial position, evaluating market opportunities, and understanding your long-term goals, you can determine whether you’re ready to expand your real estate portfolio. Remember to conduct thorough due diligence, seek professional advice when necessary, and approach investing with a long-term perspective for success in the dynamic world of real estate.

Diversification: A Tool to Temper Risk

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Market volatility is a given in the investment world, so employing strategies to cope with fluctuating market values should be a priority. Diversification — spreading your money among many different investments and investment types — is one such strategy.1 Although you can’t eliminate volatility, diversifying your investment portfolio may help you manage it.

A First Step: Asset Allocation

Different asset classes often respond differently to similar market conditions, so investing in a mix of stock, fixed-income, and cash investments is the first step in creating a diversified portfolio. Investing across all three of the major asset classes — a strategy known as asset allocation — reduces the possibility that a decline in any single investment or asset type would put your entire portfolio in jeopardy.2 For example, including fixed-income and cash investments in your stock portfolio may help moderate losses if the stock market suffers a decline.

Taking It to Another Level

In addition to allocating your investments among stocks, bonds, and cash, you may want to diversify within each investment type. For instance, holding a variety of small-, mid-, and large-cap stocks and investment-grade bonds with varying maturity dates may help reduce your risk of loss. Similarly, you may want to consider investing in a variety of stocks from different market sectors.3 A market sector is a segment of the economy that includes companies or industries offering the same or similar products or services. Investing across several market sectors may help control risk and provide greater portfolio diversification than investing in only one or two industries.

Cyclical Versus Defensive

Some industries are notably affected by economic highs and lows. Cyclical stocks come from industries such as housing, transportation, and technology, that typically are sensitive to the health of the economy. Consumer demand for their products and services tends to rise when the economy is flourishing and decline when the economy experiences a downturn. Defensive stocks come from industries such as utilities, food, and other staples where demand tends to be relatively steady. Investing in both cyclical and defensive stocks from different industries may further improve your portfolio’s diversification.

Traveling Abroad

You can provide another layer of diversification and add exposure to new markets by including investments from different countries and regions of the world in your portfolio.4 International markets may respond differently to various economic conditions than U.S. markets do. Investing overseas may help cushion your portfolio when U.S. markets are underperforming.

Not a One-Time Undertaking

Periodically checking your portfolio for changes to your investment mix can help you maintain your desired asset allocation and level of diversification. If market conditions have altered your asset mix, the risk level in your portfolio may have shifted, and your investments may need to be rebalanced to return to your original asset mix and risk level.

In the Long Run

Your portfolio’s asset mix can help prepare you for the uncertainties of market performance. So it is important to select investments carefully and invest with a long-term perspective.

Business Email Compromise: A Growing Threat to Businesses

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Business everyday’s cyber fight

Business Email Compromise (BEC) is a sophisticated and increasingly prevalent form of cybercrime that targets businesses of all sizes. By exploiting the trust and familiarity within corporate email systems, BEC attackers deceive employees into transferring funds or disclosing sensitive information. This article delves into the mechanisms of BEC, its impact on businesses, and effective prevention strategies.

Understanding Business Email Compromise

Business Email Compromise involves a range of tactics to infiltrate corporate email accounts and manipulate employees into making unauthorized transactions. The most common BEC scenarios include:

  1. CEO Fraud: Attackers impersonate a company’s CEO or other high-ranking executive, instructing employees to transfer funds to a fraudulent account.
  2. Invoice Scams: Fraudsters pose as legitimate vendors and send fake invoices or change payment details on real invoices to divert payments.
  3. Account Compromise: Attackers gain access to an employee’s email account and use it to request payments or sensitive information from other employees.
  4. Attorney Impersonation: Fraudsters impersonate legal representatives and create a sense of urgency, pressuring employees to act quickly and bypass normal procedures.

The Impact of BEC

The consequences of a successful BEC attack can be severe and far-reaching:

  • Financial Losses: BEC scams often result in significant monetary losses, which can be difficult to recover.
  • Reputational Damage: Victimized companies may suffer damage to their reputation, leading to a loss of customer trust and potential business opportunities.
  • Operational Disruption: Addressing and mitigating the effects of a BEC attack can disrupt normal business operations.
  • Legal and Regulatory Consequences: Companies may face legal repercussions and regulatory penalties if sensitive information is compromised or if financial transactions violate compliance requirements.

How BEC Attacks Work

BEC attacks typically follow a structured and methodical approach:

  1. Reconnaissance: Attackers research their targets to gather information about organizational structures, key personnel, and email communication patterns.
  2. Gaining Access: Attackers use phishing emails, malware, or social engineering tactics to gain access to corporate email accounts.
  3. Spoofing or Impersonation: Once access is obtained, attackers either spoof the email address of a trusted individual or use the compromised account to send deceptive messages.
  4. Deception and Manipulation: Attackers craft convincing emails that create a sense of urgency, authority, or confidentiality to manipulate employees into acting quickly.
  5. Execution: Employees, believing the requests are legitimate, execute the fraudulent transactions or share sensitive information.

Preventing BEC Attacks

Preventing BEC attacks requires a multi-faceted approach that combines technology, employee training, and robust policies:

  1. Employee Awareness and Training
  • Regular Training: Conduct regular training sessions to educate employees about BEC tactics and red flags.
  • Phishing Simulations: Implement phishing simulations to test and improve employees’ ability to recognize and respond to suspicious emails.
  1. Email Security Measures
  • Multi-Factor Authentication (MFA): Enforce MFA for email accounts to add an extra layer of security.
  • Email Filtering: Use advanced email filtering solutions to detect and block phishing emails and malicious attachments.
  • DMARC, DKIM, and SPF: Implement email authentication protocols like DMARC, DKIM, and SPF to protect against email spoofing.
  1. Verification Procedures
  • Call-Back Verification: Establish call-back verification procedures for any requests involving sensitive information or financial transactions.
  • Dual Authorization: Require dual authorization for high-value transactions or changes to vendor payment information.
  1. Monitoring and Response
  • Continuous Monitoring: Monitor email accounts and network activity for signs of compromise or unusual behavior.
  • Incident Response Plan: Develop and maintain an incident response plan to quickly address and mitigate the effects of a BEC attack.
  1. Vendor and Partner Security
  • Vendor Due Diligence: Conduct thorough due diligence on vendors and partners to ensure their email security practices are robust.
  • Secure Communication Channels: Use secure communication channels for sensitive transactions and information exchanges.

Business Email Compromise is a sophisticated and evolving threat that requires vigilant and proactive measures to combat. By understanding the tactics used by BEC attackers and implementing comprehensive prevention strategies, businesses can protect themselves from the potentially devastating consequences of these attacks. A combination of employee education, technological defenses, and robust policies will create a resilient defense against the growing threat of Business Email Compromise.

Frequently Asked Questions About Estimated Taxes

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Quarterly Estimated Tax Payments can be a nightmare for business owners to determine how much they owe the IRS. Here is our guide for Frequently Asked Questions regarding Estimated Taxes.

What are Estimated Taxes?

Estimated Taxes are taxes that are paid to the IRS throughout the year on earnings that are not withheld from the federal government. Most people pay these taxes on a quarterly basis.

Who pays estimated taxes?

Unlike individual workers who receive a traditional paycheck from their employer, business owners and 1099 workers are required to pay estimated taxes.

You can also be eligible to pay estimated taxes for income you have earned on the side through investments such as realized capital gains or dividends.

Sometimes, W-2 workers can end up not withholding enough to cover their taxes and need to pay estimated tax payments as well.

What are the Tax Payment Dates for 2024?

  • If you earned income from Jan. 1 – Mar 31, 2024, your estimated payment deadline is April 15, 2024.
  • If you earned income from April 1 – May 31, 2024, your estimated payment deadline is June 17, 2024.
  • If you earned income from June 1 – Aug 31, 2024, your estimated payment deadline is September 16, 2024.
  • If you earned income from Sept. 1 – Dec 31, 2024, your estimated payment deadline is Jan. 15, 2025.

How much do I need to earn to be eligible for estimated payments?

  • Workers that have not withheld enough: You will owe at least $1000 in federal income taxes
  • Self-employed individuals: If you expect to owe more than $1,000 from your gigs, you should pay quarterly estimated taxes as there is no tax being withheld on your income.
  • Businesses: You should make estimated tax payments if you expect to owe $500 or more for the entire tax year.

How do I figure out how much I owe?

There is a reason they are called estimated taxes unfortunately. You need to estimate your projected annual income to determine your tax bill. You can use data from your previous year to help you figure out how much to send. For example, if you think you will owe $12,000 at the end of the year, you should send $3,000 quarterly. This works best if you have a stable income.

If your income varies, you can estimate how much you owe by your previous quarter. The IRS has plenty of resources to help business owners.

Can I pay more often than quarterly?

Yes, similar to paying off a credit card expense, you can pay as soon as you want, and not just on the listed deadlines. It is a good idea to pay more frequently if you are nervous about underpaying.

What happens if I underestimate my tax payment?

If you underpay your estimated tax payment, you will receive a penalty from the IRS. This penalty is determined by how much you underpaid at the deadline plus the interest rate the IRS will apply to how much you still owe. Paying quarterly helps to prevent this.

What happens if I overpay my tax estimate?

You will receive an overpayment credit of the refund that you can either receive or ask the IRS to use as an advanced payment towards next year’s taxes.

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Many individuals find it difficult to manage their estimated taxes because they are scared of messing up. Having a better understanding of how they function makes it easier to process your payments each year. For more information, call our business today!

Bookkeeping & Accounting Tips for Small Business Owners

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Running a small business is a demanding task, requiring you to wear many hats, from managing operations to marketing and customer service. Among these responsibilities, bookkeeping and accounting are crucial for the financial health and sustainability of your business. While it may seem daunting, effective financial management doesn’t have to be overly complicated. Here are some essential bookkeeping and accounting tips to help small business owners stay organized, compliant, and financially sound.

1. Separate Personal and Business Finances

One of the first steps for any small business owner is to separate personal and business finances. Open a dedicated business bank account and use it exclusively for business transactions. This separation simplifies bookkeeping, aids in tax preparation, and ensures legal protection of personal assets.

2. Use Accounting Software

Investing in accounting software can save you time and reduce the risk of errors. Tools like QuickBooks, Xero, or FreshBooks offer user-friendly interfaces and automate many bookkeeping tasks, such as invoicing, expense tracking, and financial reporting. Many of these platforms also integrate with your bank account, further streamlining the process.

3. Track All Expenses

Maintain meticulous records of all business expenses. Use your accounting software or apps to capture and categorize receipts immediately. Keeping a detailed record of expenses not only helps in managing cash flow but also ensures you can claim all possible tax deductions.

4. Regularly Reconcile Bank Statements

Reconcile your bank statements at least once a month. This process involves comparing your accounting records with your bank statements to ensure they match. Reconciling accounts helps identify discrepancies, catch errors, and detect potential fraud early.

5. Implement a Consistent Invoicing System

A consistent invoicing system ensures you get paid on time. Send out invoices promptly, set clear payment terms, and follow up on overdue payments. Using accounting software for invoicing can automate reminders and track outstanding invoices.

6. Monitor Cash Flow

Cash flow is the lifeblood of any small business. Regularly monitor your cash flow to ensure you have enough funds to cover operating expenses and invest in growth opportunities. Create cash flow projections to anticipate future needs and adjust your operations accordingly.

7. Set Aside Money for Taxes

Avoid the year-end scramble by setting aside money for taxes throughout the year. Estimate your tax liability and regularly deposit a portion of your revenue into a separate tax account. Consider consulting with a tax professional to understand your tax obligations and maximize deductions.

8. Maintain Accurate Financial Records

Accurate financial records are essential for making informed business decisions. Regularly update your books and keep records of all financial transactions, including sales, purchases, payroll, and other expenses. Accurate records are also crucial for compliance with tax laws and regulations.

9. Prepare for Financial Reporting

Prepare financial statements, such as the balance sheet, income statement, and cash flow statement, on a regular basis. These reports provide insights into your business’s financial health and performance. Use these reports to identify trends, assess profitability, and make strategic decisions.

10. Seek Professional Advice

Consider hiring a professional accountant or bookkeeper, especially if your business finances become complex. A professional can provide valuable insights, ensure compliance with tax laws, and help you optimize your financial strategy. Many small business owners find that the cost of professional advice is outweighed by the benefits of improved financial management and peace of mind.

Effective bookkeeping and accounting are fundamental to the success of any small business. By implementing these tips, small business owners can maintain financial order, make informed decisions, and ensure their business thrives. While it may require an initial investment of time and resources, the long-term benefits of sound financial practices are well worth the effort.