Amplify Cash Flow by Maximizing Credit Card Rewards – Playing the Rewards Game

With a bit of planning and discipline, credit cards can provide users with real benefits.

These steps can help you maximize the available rewards:

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1. Reward types: Before you begin your search, determine the type of reward you are looking for: cash back, travel, gift cards, etc. Once you know what you are looking for, begin your search for the best card for each type of reward.

2. Strategy: After you review available cards and select one or more for the rewards you want, develop a strategy to use your cards to get the most out of their reward terms. You may find that some cards offer different rewards for different types of purchases. For example, a card my offer 6% back for food purchases, another may offer 3% for gas, while another may offer 2% back on all purchases. Develop your “credit card portfolio” based on what is being offered. Understand the cards’ rules and be prepared to play by them.

3. Fees: You want to avoid paying any late fees, which average $34, because these fees quickly undermine any rewards you may earn. On the other hand, annual fees may be worth paying depending on the rewards being offered. For example, if you earn 6% back on purchases, then a $75 annual fee may make sense. You can always call the company and try to have the fee waived. If you signing up just for the sign-up bonus, then you will probably want to cancel the card before the fee is incurred.

4. Apply: Once you have narrowed down the cards with the best offers for you, apply for the credit cards within a two day period to minimize the number of inquiries recorded on your credit report. Multiple inquiries may damage your score.

5. Tracking: Develop a method to ensure you are using the right card for the right purchases. This can be anything from notes, to an Excel workbook to using QuickBooks.

6. Card balances: Keep your credit usage to 20% to 30% of your available credit because your credit score is affected by the amount of credit you use.

7. Payments: Pay off your balance every month. If you allow yourself to carry a balance, the interest rates you incur will diminish or wipe out any rewards you earned.

If you try any of these ideas, let me know how they worked for you!

Make customer service calls work for you – Get them on your side

Years ago, I read a compelling account of success in handling customer service issues and was transformed from the angry guy making threats to the customer rep’s new friend. My new attitude brought great results, like the time Verizon Wireless effectively paid me (via a new phone, billing refund and free headsets) to replace a malfunctioning cell phone.

Your goal on these calls is to convert the customer service rep to your side so that their goal is to make you happy. Most people in customer service are there because they want to please others; you want tap into that bent.

Here is how:

  1. Be Respectful: Make them feel important and validated. Ask them their name, if they did not give it, and use that in the conversation.
  2. Show Gratitude: thank them.
  3. Recruit Them: Use terms like “we” and clearly state your objective so you turn the call into a mission, with the representative committed to helping you accomplish it.
  4. Remain Calm: Avoid trigger words, anger and any swearing. Otherwise you risk losing the bond you created. Maintain the position of being empowered to get what you, as the customer, deserve.
  5. Communicate Your Determination: Be clear that you are not going anywhere until your mission is accomplished. Be clear that you are not taking any brush off.
  6. Escalate: If you are not making progress, then escalate: ask to speak to a manager. Many representatives are judged by the number of calls referred to managers or supervisors, so asking may prompt them to be more helpful.

This approach may take practice (and patience). However, it is quite effective.  Good luck and I hope you experience good results!

7 things to do when starting a business to avoid nasty surprises

The only thing that hurts more than paying an income tax is not having to pay an income tax. Thomas Dewar

When you decide to start a business, taxes may be the last thing you think about. However, not realizing that you owe the self-employment tax as well as income taxes can lead to a nasty surprise when you file your taxes. This post is aimed at avoiding that costly surprise.

But, before we discuss the self-employment tax, there are other important steps to take when you become self-employed. Here are the 7 things to do after you start your own business to avoid nasty surprises:

Avoid nasty surprises – set up bookkeeping, form your entity, get licensed, buy insurance, and pay taxes

Bookkeeping – set up bookkeeping using software like QuickBooks (either online or on your laptop). You don’t want to be scrambling to find receipts at tax time or not be able to tell somebody if you are making money or not.

You can save time by downloading from your bank and credit card companies. If you set up things well, all income and every expense will be properly categorized for your profit and loss statement, or P&L. The P&L and balance sheet help you monitor your business to see how well you are doing and are essential for preparing your tax returns. The balance sheet will also come in handy if you need to apply for financing.

For all these steps, you may want to hire an accountant or speak to an attorney.

Entity – for many small businesses, being a sole proprietor is appropriate. You avoid paying corporate excise taxes and filing annual reports. However, if you have partners, you may want to form a partnership, corporation or LLC (details on choosing are beyond the scope of this post).

If your business involves risks that could lead to law suits, form a corporation or LLC to shelter your personal assets from liabilities of the business that insurance may not cover. Make sure that any actions you take for the business are in your capacity as an officer or manager – i.e., never sign personally.

Remember, you may want to consult with an attorney.

Get licenses, file annual reports and pay local taxes – certain businesses require a license to operate. Most entities are required to file annual reports. And, your city may impose taxes on the personal property in your business. Be sure to find out so you don’t owe penalties for failing to file and pay.

Buy health and other insurance – in addition to liability insurance, you will want to obtain health insurance if you are no longer working for another employer. You may get favorable treatment for this expense on your income taxes. You can also purchase insurance to cover damage to equipment, loss of data, identity theft and so on.

File payroll taxes – if you hire people to work for you and pay them over $600 per quarter in any year, you need to report the compensation. If they are independent contractors, you file a form 1099 with the IRS. If they are employees, you file a W-2 with the Social Security Administration. You also provide these forms to your people for the income tax filings.

You may need to withhold and remit FICA and Medicare taxes. Also, your employees may request that you withhold and remit federal and state income taxes (unless you live in a state that does not impose income taxes). Failure to withhold and pay to the IRS and state can lead to serious penalties.

Pay your income tax – one big shock for many who start a business is how much they owe in taxes. When you received a paycheck, you probably did not focus much on the fact that your employer withholds federal and state income taxes and FICA and Medicare taxes. And, you never had a chance to spend what was withheld.

However, when you run your own business, you have full access to the pre-tax income, so you must diligently allocate funds ahead of time so that you don’t come up short at text time. To avoid owing interest on the taxes due, you make estimated tax payments each quarter to the IRS and state.

Pay the self-employment tax – when you were an employee, your employer withheld FICA and Medicare taxes from your paychecks. The employer also contributed FICA and Medicare taxes on your behalf

When you become self-employed, you are responsible for both the employee and employer amounts. This tax is based on your net self-employment income

A lot to remember, right?

Maybe, but knowing and planning is far better than trying to scrape together money in April to cover taxes you did not expect.

Good luck with your new business!

In future posts, we will examine partnering with others, assessing your profitability, rules on deducting expenses, and entry into the real estate market.

 

“Simplify your finances? No; “Gain control, understand your finances?” Yes

After reading a recent article in Kiplinger’s Finance Magazine  on simplifying your finances, I wondered if your personal finances can really be made simple.  While many of us may hope so, I am not sure that “simple” is best.

However, gaining control of your finances and gaining a better understanding do make sense.

clutter-286975_1920 Okay, that does need to be simplified!

Here are some ways that help you gain control that may also “simplify” your life:

Cash management and Debt management

Set up automatic payments with vendors so they use your bank or credit card, or set up payments using your bank website.

  • If the payments are regular, and of similar amounts, you save time and can plan on the withdrawals.
  • However, if you change banks, sorting and resetting auto-pay at the new bank can be a major headache. Similarly, if you change credit cards, you need to update information with all vendors.

You can also automate tracking of your spending by using websites like Mint or Personalcapital.  Or, you can use Quicken or QuickBooks software from Intuit to track your bank and credit card accounts.  You can download from your bank and credit card websites into the program and then review to analyze your cash flow and spending.

Setting up direct deposit for payroll into your checking is great.  You can also split part so it goes to savings or even have some go to your investment accounts.  You will then need to follow up to invest the cash that accumulates, but having money set aside saves it from being spent, and adds to your investments

Investing

Kiplinger’s recommended consolidating retirement accounts to avoid low balance fees.  It also makes updating beneficiary designations easier.

While avoiding fees makes sense, am not sure that putting all investments into a single retirement account does.  You cannot do this if you have Roth and pre-tax accounts like a 401(k) plan, and you probably should not do it if you have contributory IRA and 401(k) accounts that are subject to different tax rules.

Kiplinger’s also recommended using one broker for your taxable accounts.  This makes more sense, in that you have a higher balance which should mean lower fees and more attention from the broker.  However, I prefer using exchange traded funds, or ETFs, and avoiding most broker fees, which means essentially no attention from a broker.

One article said that your investment plan should be to “sign up and forget it.”  While avoiding investment pitfalls like second-guessing yourself out of panic when a fund goes down is good, I do think you need to review and rebalance your investments once a year.

Another article recommended using an “all in one” fund for investing.  Now, this really troubles me.  If your sole goal is retirement, then an age-targeted fund could make sense.  But, if you are saving for goals with different time horizons, this is a bad idea.

If you use an age-targeted fund, do your homework on the funds.  For example, if the fund plans to suddenly shift to bonds when you retire, that will not serve you well because you are likely to have several decades for which you will need the growth from stocks.

Protecting your information

Having a master password for access to all your other passwords reminds me of the joke about the student who repeatedly distilled his notes down, first to an outline, then to note cards, and finally to one word.  How did he do on the day of the exam?  He forgot the word.

Nonetheless, having passwords is clearly important so having a way to manage them is as well.  Check out this recent review of apps for managing your passwords PC Magazine Best Password Managers for 2015.  You can manage the passwords yourself by creating a document that you save as a PDF and then encrypt.  But don’t forget the password you used for the PDF!

Store files in one place

We did a post on using cloud storage when you do not need originals.  Here is another site to check out:  Shoeboxed

Credit cards

In addition to downloading transactions as noted above, you can track your credit score and credit history by using sites like Credit Karma

Estate planning

For insurance purposes, and for your estate plan, having a record of possessions, you can list all your property using sites like Know your stuff home inventory.

Conclusion?

There are ways to gain better understanding of your finances that also make your finances simpler.  But setting simplification as your primary goal risks distorting your finances – too simple may be a bad result.

P.S. Our sister website, www.wokemoney.com, encourages you to gain a better understanding of your finances so you can handle your own planning.  Let me know what you think.

Holiday Tip and Gift Guidelines

As we recover from Thanksgiving, we turn to Black Friday and then Cyber Monday, so the holiday season is in full swing.

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Part of your gift giving may be tipping those around you upon whom you depend. While gift giving etiquette may be obvious in some instances, it can get less clear when considering gifts for people outside of your friends and family. So, to help you navigate the season, we have put together a guide of suggested amounts for gifts and tips, as well as final comment on notes and cards in lieu of cash.

We all have people in our lives that help us keep our families, homes and businesses on track and get through each day as we move forward throughout the year. In many cases, the services they provide ensure we can go to work, have clean homes and stay fit, including caregivers, delivery, home maintenance, and personal care services:

Caregivers (for kids, parents and pets, too!)

Caregivers for your children, parents and pets can be lifesavers. They provide care, education, exercise, and attention to those you care about most. This is the time of year to let them know how thankful you are for all that they do. The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

  1. Nanny/au pair – a week’s salary and a small gift;
  2. Daycare teachers – a $25-$70 gift;
  3. Home healthcare worker – a week to a month’s salary;
  4. Teacher – a small gift and a handmade card from your child;
  5. Dog walker – depending on your walker’s schedule, you may want to gift a day’s pay or a full week’s pay; and
  6. Dog groomer – half the cost to the full amount for the service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect. If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office.

“Neither snow nor rain…”

Despite the weather, terrain or traffic, your mail carrier delivers your mail every day and your online purchases arrive on time and in good condition. Let those who make those deliveries know you’re grateful. In deciding what and how much to give, consider the particular company’s gift giving restrictions:

  1. Mail carriers – are not prohibited from receiving cash gifts and gifts more than $20;
  2. FedEx – employees may accept gifts under $75, though no cash or gift cards;
  3. UPS – workers are allowed to accept tips, but UPS discourages the practice; and
  4. Newspaper delivery – $10-$30 is standard.

Home Maintenance:

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way.

  1. Trash and recycling collectors – $10-$30, which you may want to mail directly to the collection company if you’re not home to hand deliver it;
  2. Doorman – $25-$100;
  3. Regular cleaning person – the cost of one visit;
  4. Landscapers/gardeners – $20-$50 per person or if you have just one person doing the work, the cost of one visit;
  5. Parking garage attendant – $10-$50; and
  6. Building’s handyman, superintendent and custodian – $20-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a doorman who is quick to carry heavy packages for you, then a larger tip may be warranted.

Personal Services:

It’s hard work keeping you fit, perfectly coiffed and beautiful, but recognizing the efforts of those who do is easy and may also buy you scheduling flexibility when you really need it. In deciding whether to tip and how much, consider this:

  1. Hairdresser/manicurist – if you’re a frequent visitor, tip the cost of one visit. If you’re a less frequent customer, then $20. However, if you tip generously through the year, you do not need to give an extra tip at the end of the year;
  2. Personal trainer – up to the cost of one cost;
  3. Massage therapist – also cost of one visit; and
  4. Golf or Tennis instructor – a thoughtful gift.

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year. Another effective gesture of gratitude is to send a thank you note to the supervisors of the people who provide you with great service throughout the year, letting them know how impressed you are with the service you receive. Good feedback is appreciated by both the supervisor and the people who are helping you out.
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