Bad Credit Card Policy?

Some business owners are penny wise and pound foolish with their credit and debit card policies. Even worse some do not even accept credit cards. Here is why you should review your credit card policies:

Higher Purchase Amounts: Statistics show that when consumers use a credit or debit card it increases the amount of their purchases. Several studies show an increase of approximately 10% to 15%, but when the purchases tend to be small the increase in purchases can easily climb to 50% or more. Why do you think McDonald’s and other fast food restaurants started to accept credit cards? I believe McDonald’s shows an increase of over 50% for customers that use a credit card. That is why a business should never place a minimum for credit cards either due to this phenomenon. On the flip side, this is why I advocate that consumers use cash!

Convenience Factor: Recently, I went to a really good burger place that I knew doesn’t take cash, and if I didn’t have any cash on me I would have went somewhere else. To make matters worse, the man in front of me placed a fairly large order and was told that he had to walk across the street to get cash from the closest ATM. I wonder how often he will go back there but, the business saved approximately 3% plus $.25 of transaction fees. Next time they will save the transaction fees, but lose the sale.

You Actually Get Paid: Businesses need to get paid to survive, which is why they should accept credit cards. If a customer has an outstanding balance, then it may be easier for them to pay with a credit card.

Businesses may be able to mitigate credit card fees by implementing a few strategies. First, they may be able to charge a surcharge when a client uses a credit card, secondly, they can accept ACH’s, which have lower transaction fees, and lastly, they can shop around for lower-cost processors, such as Square.

3 Ways to Wealth (Almost Anyone Can Do)

Aside from inheriting your wealth, there are 3 main ways to become wealthy over time that almost anyone can do and there really are no secrets. They all depend upon income, savings and investments as follows:

Slow and Steady Corporate Route: This is the most common, easiest, and accessible way for most people even with average wages or slightly above average wages. It may take some time, say 25 to 30 years, but you must do the following: increase your wages by at least 3 – 5% per year, start investing no later than your 30’s, save approximately 15% of your income, earn a rate of return of about 7%, and don’t touch your investments. Many people have a match from their employers, which can be included as part of their savings, so essentially they are saving around 12% of their own money. It’s a very practical, but slow way to wealth, with the largest obstacles being the starting age and your savings percentage.

Corporate Executive Route: This way is available to less people, but if you want to accelerate your wealth then the corporate executive route is much quicker. Your wages will grow double-digits, along with large, but variable bonuses, and access to stock options. Stock options can really increase your earnings and wealth, which will enable you to become wealthier sooner. Since your income accelerates so quickly you should be able to save a much larger part of your income than 15%, plus the rate of return on your stock options has the potential to be very high. There is a smaller pool of people who can take this route, but it works. The downside to this approach is variable income, risk of stock options dropping in value or becoming worthless, and the ups and downs of the corporate world.

Successful Business Owner Route: Running a small business can be challenging, but very rewarding. If you run a small business well, then your earnings will be way above average and your business will increase in value over time. The quicker you grow your business and increase profits, then the quicker you will become wealthy. Additionally, some business owners purchase the real estate where their business operates, which generally increases wealth even more and faster. You need to invest your income just like the other ways, but an added bonus is the value of the business. If you create a saleable business, then this can be your ticket to early wealth and retirement if you decide to sell. But who wants to retire in their 40’s? I can think of a few.

Other factors to consider that can help you are: minimizing debts, staying healthy, having a strong, supportive family, and taking smart risks/good decision making.

Don’t Change for the Exception

Most people don’t like conflict and make a great effort to avoid uncomfortable situations with people, especially those who are difficult to satisfy. It’s important to learn from these situations and consider their feedback, but you probably should not change your business practices because of them. Actually, if you listen to them you may seriously harm your business. Here are a few examples:

Pricing: There is always going to be someone who thinks that your product or service is priced too high. Most likely this is not that case as most businesses actually underprice their services. This is true in all industries, from software developers to manufacturers. If you do not price your product or services properly, then there will not be enough money to invest back in your business to support operations or make improvements.

Speed: Everything takes time. This can take the form of turnaround time or communications. Today, communications are instant, but it doesn’t mean that a business owner can communicate instantly. If you rush or perform work out of its place, then it can negatively impact the quality or your product or service. An example of this was on the show The Profit regarding a furniture manufacturer that would rush furniture production when a customer was over eager to receive delivery, but then their quality would decline dramatically.

Technology: There is always someone who will resist the implementation of technology, but it doesn’t mean that you shouldn’t move forward if technology will help your business. You may be able to make exceptions, but you should still change.

The bottom line is this does not mean that you should over price your services or perform poorly for your customers, but to be careful not to listen to the wrong people. Sometimes you should put in ear plugs when you hear the squeaky wheel.

Business Tax Breaks for 2018

Although individual tax brackets have been lowered, many businesses will also reap the benefits of major changes. Here are some of the major changes:

Corporations: The corporate tax rate for c corporations has been reduced to 21 percent from 35 percent. Hopefully this will encourage more investment and business activity in the United States due to these new lower rates.

S-corporations, partnerships, and sole proprietorships: Business owners will receive a 20 percent deduction from their business income starting in 2018. To give an example, if a small business earned $150,000, then they would get a $30,000 deduction. However, there are limitations based upon income thresholds and even the type of business that you operate, including professionals such as accountants, lawyers, doctors, and any trade or business where the principal asset is the reputation or skill of the owner.

There are other factors to consider when calculating this deduction such as wages and assets, and the calculations can be very detailed.

Are Children Really That Expensive?

Virtually every financial article regarding children makes you think that you will go broke if you have children. Between childcare, housing, food, diapers, vacations, clothing, activities, and especially college, they make it seem that you can’t afford to even think about children. The truth is that raising children is as expensive as you make it. Let me dispel some myths . . .

Housing: If you have a three bedroom house and have three children then one of them will have to share a bedroom. The good news is that the two that share a bedroom will not be scarred for life, but they may actually enjoy the company of each other and learn to work together.

College: I am a very, very strong believer in education, especially higher education. However, as I have written before, college is only one route to [financial] success and is not for everyone. There are alternatives, such as attending a trade school, jobs that don’t require college, entrepreneurship, or you may actually want to be a stay at home parent. Just look around you and see for yourself that some of your friends, colleagues and family members have taken a different route and are doing well for themselves.

Vacations: Vacations don’t have to be expensive and Disney is not the only option. Strangely, if you have ever travelled by car for vacation and stopped at a hotel on the way it seems as though the children enjoy the hotel visit more then the vacation! A more expensive vacation does not equal more fun and relaxation.

Food: I’ve written how to reduce your food costs before so I won’t elaborate here. Food can be as expensive as you want it to be.

Everything Else: Expensive private schools or preschools, an abundance of activities, and unnecessary purchases will make raising children very expensive. Also, when both spouses work while the children are very young it usually skyrockets your expenses (see my November 2015 blog article titled, “Should Both Parents Work?”).

Don’t misunderstand me – it is good to have nice things, but not when the “need” for those nice things steers you in the wrong direction. Children are a blessing. All seven of mine.

Did Your Tax Balance Catch You by Surprise?

What should you do if you file your tax return and then realize that you now have a large liability that can’t pay? First, don’t panic as there are several options for you:

Installment Agreement: An installment agreement can be a good option for you, which can sometimes be requested when you file your tax return. Interest and penalties will still accrue, but now you do not have to worry about levies. You may also request an extension of time to pay for several months if you expect to be able to pay off your balance quickly.

Offer in Compromise: Pennies on the dollar! We’ve all heard this advertisement from tax resolution companies. There is some truth to this, but it is greatly overstated. The way it works is that the IRS will accept an amount that is less than the amount of your tax liability. However, a majority of the offers are not accepted by the IRS.

Currently Not Collectible: This option allows you to postpone making any payments towards your tax balance and essentially places all collection activities on hold. However, the IRS may reassess your situation in the future to determine your ability to pay. Penalties and interest will still accrue.

No matter which payment arrangement you make, the caveat is that going forward you must always file your returns timely and full pay your balances. If not, then any arrangement that you have in place can default. Additionally, you generally need to submit financial information to the IRS for them to determine eligibility of an arrangement.

Prevention: How can this be prevented going forward? The first way is to make sure that you are properly planning how to minimize your tax liabilities before the year is over with proactive tax planning. The second way is to project your tax liabilities during the fall to estimate what your tax liability will be, which will make you aware of how much you will owe and give more time to figure out a good solution.

Lower Tax Brackets = Higher Taxes?

The recent tax law changes have lowered the tax brackets starting in 2018, but that does not necessarily mean lower taxes. This is due to the elimination or reduction of items that are no longer deductible. Deductions that have disappeared include, but are not limited to:

Personal exemptions: This will have the most impact on taxpayers who claim their adult children or parents. However, this may be offset somewhat by a partial credit.

Miscellaneous deductions: Sales people who have to incur out of pocket expenses or who use a home office will be greatly affected.

State and local taxes: The deduction is now limited to $10,000 for property taxes and state income taxes. This mostly impacts us here in North Jersey because we have such high property and income taxes. However, many taxpayers in this area are subject to the Alternative Minimum Tax (AMT), so their deductions would normally have been limited anyway.

Mortgage interest and home equity loans: No deduction for home equity loans, and a lower threshold of $750,000 for new mortgages.

The list goes on and on, but includes either limitations or eliminations of moving expenses, alimony payments (for divorces after 2018), entertainment deductions, like-kind exchanges, business losses, etc.

On the plus side the child tax credit has been increased to $2,000, along with the thresholds to claim this credit. Also, the standard deduction has almost doubled. Every situation is different and must be looked at on a case by case basis.

What’s Your New Tax Bracket?

The recent tax laws have not only changed the income tax rates, but have also expanded the income that falls within each bracket. Here’s an example of the old rates vs. the new rates for married individuals filing a joint return:

Old Brackets:

Rate                       Taxable Income

10%                        $0 – $19,050

15%                        $19,051 – $77,400

25%                        $77,401 – $156,150

28%                        $156,151 – $237,950

33%                        $237,951 – $424,950

35%                        $424,951 – $480,050

39.6%                    $480,051 +


New Brackets:

Rate                       Taxable Income

10%                        $0 – $19,050

12%                        $19,051 – $77,400

22%                        $77,401 – $165,000

24%                        $165,001 – $315,000

32%                        $315,001 – $400,000

35%                        $400,001 – $600,000

37%                        $600,001 +


There are other numerous changes that will impact your overall tax liability, including but not limited to the suspension of personal exemptions, expansion of the standard deduction, itemized deduction limitations (especially for state and local taxes), and lastly, the change to corporate tax rates.

(Don’t) Fake it ‘Til You Make It’

Fake it until you make it! I heard this expression recently and many times in the past, but this time it made me cringe. Some might feel that there’s nothing wrong with showing people how successful and smart you are when you’re not really there yet. Here’s the problem and what to do instead:

It’s a Lie: If you just started your business and pretend that you are a huge success with your words or actions then that’s a lie. Don’t exaggerate your capabilities, the size of your business, or how long you have been in business. Would you want to do business with someone who lies to you?

It Hurts Financially: Purchasing a brand new piece of equipment, a very expensive vehicle, or renting a pricey office before you can afford to do so will put you in debt and cause a strain on your finances. This will actually reduce your chances of success in the future.

Damage to Your Reputation: A good reputation is one of the most valuable assets of your business. Why damage it before you even get off the ground?

Her are some alternatives:

Be Humble: Everyone has to start somewhere so start from where you are. Over time you can invest what you can realistically afford, including the “nicer things.” It’s amazing how much people are willing to help out their colleagues that need some help, and how customers appreciate authenticity. Many successful businesses have started from humble beginnings.

Get Better: Make yourself and your business better by investing time and reasonable sums of money to learn how to get better and more successful. Be creative and remember that bigger is not always better.

Be Honest: Don’t lie. This is self-explanatory.

Update: LOWER NJ Sales Tax Rate to Take Effect on January 1, 2018

The sales tax rate will decrease to 6.625% on and after January 1, 2018.