Category Archives for Make Money

5 Advantages of Having a Side Business

July 11, 2016
/ Make Money
/ By J. Irwin

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

A lot of people feel stuck in jobs today. They’re plagued with small pay increases, a lack of promotions, and often a missing sense of fulfillment in their work. Though it may not be possible to shift into an entirely new career, you may be able to accomplish much the same objective by starting a side business.

There are many advantages of having a side business, and here are five of them.

1. Creating Multiple Income Streams

One of the less comfortable phenomena to develop the 21st Century is career instability. Technology and the offshoring of jobs means that the average worker will hold several jobs over a lifetime. The goal is now less about job security than it is about income security. One of the best ways to create income security for yourself is by developing multiple income streams.

Your job may represent your single most important income stream, but you can also add additional streams from your investments and from a side business. In doing so, you may not improve your job security, but you will certainly improve your income security.

A side business can be a valuable second source of income that also helps offset the relentless rise in the cost of living. Even if your salary has been largely stagnating, you can use the side business to generate your own pay raises.

2. It Creates a Retirement Funding Source

One of the best dedicated purposes of a side business is earmarking it for retirement savings. You can do this by using the additional income to fund a traditional or Roth IRA. If your side business earns at least $5,500, you can fully fund an IRA account, without touching the income from your primary job.

If your income from the business is higher, you can consider setting up a dedicated self-employment retirement plan. There are several choices here, but one of the best is a solo 401(k) plan. Under this plan, you can save up to $18,000 per year ($24,000 if you’re 50 or older) as an “employee” of your business. And that can be the first $18,000 that you earn, there is no percentage limitation.

But since you’re also the employer in your business, you can contribute up to 25% of your compensation (as defined by the solo 401(k) plan rules). This gives you the ability to contribute up to $53,000 ($59,000 if you’re 50 or older) into the plan (but less any contributions made to any other retirement plans). Under this scenario, if your side business earns $30,000, you can contribute $18,000 as an employee, plus $7,500 ($30,000 X 25%) for a total of $25,500.

That will certainly supercharge your retirement savings, and you can do it by having a side business, and creating a retirement plan specifically for the business.

3. A Getting Out of Debt Plan

One of the main reasons why it’s so difficult to get out of debt is a lack of income. This is particularly true since pay increases are seldom more than 2% per year. And that usually gets eaten up by income taxes and higher health insurance premiums.

But having a side business can provide you with the extra income that you need in order to get out of debt once and for all.

For example, let’s say you owe $20,000 in student loans, which you will be paying for the next 15 years. But if you can generate an annual income from your side business of $10,000, you could pay the debt off in just two years. And you can do it without disturbing your regular paycheck from your job.

4. A Chance to Advance if Your Regular Career is Stagnating

Not only are pay raises smaller than they have been in the past, but promotions are often more difficult to come by as well. If you feel that you are stagnating in your main job – whatever the reason – a side business will give you an opportunity to find advancement outside of your job.

For example, the additional income from your side business will represent a form of a pay increase. And you can increase your income each year that you have the business. And just as important, the side business can represent work that you find fulfilling in a way that your primary job is not, or is no longer.

5. It Could Develop Into Your Main Occupation

One of the most under-appreciated benefits to having a side business is that it can create an opportunity to create a full-time business. The side business is a way to test the waters on a part-time basis, and while you still have the security of a paycheck from a full-time job.

Once you have proven to yourself that your business is successful, it will mostly be a matter of scaling it up from part-time to full-time. That would be a lot less risky than if you were to quit your job to start a new business. The side business would be proof that your business works, and will provide you with a continuing cash flow as you move forward and increase the business to full-time status.

There are probably other advantages to having a side business. But it’s clear that a side business represents a real opportunity to move forward in terms of both income and your career. Give it some serious consideration, if you haven’t already.

How about you all? What other advantages have you found with your side business? Any disadvantages?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/89228431@N06/11322953266/sizes/q/

Making Networking Work for Your Career

June 21, 2016
/ Make Money
/ By J. Irwin

Networking is one of the most time-honored ways to find a new job or to advance your career. Sometimes it doesn’t seem networking is actually working. But often the reason for that is that we don’t manage it the right way.

Here are strategies to help you get the most out of career networking.

You Should be Networking Even When You Don’t Need to Network

Networking is often an activity that we participate in only when we are actively seeking a new job. But approaching it in this very limited way is one of the primary reasons why networking might not seem to work.

The power of networking is in the network itself – you will have to keep it active at all times, even when you’re not looking for work. That is, you need to stay in touch with your network partners at all times.

This is a situation that can work against you if you have been working with the same employer for many years. For example, if you have been with the same company for 20 years, the stability of your employment might make networking seem to be unnecessary. But should your situation change, either due to a layoff, an unfortunate termination, or on the realization that you cannot/will not be promoted, you’ll wish that you had done a better job of maintaining your network.

Be Intentional in Your Networking Efforts

What does it mean to be active in your network? It means being intentional. You should have some sort of loose plan as to how you maintain at least semi-regular contact with your network partners.

That will involve periodic phone calls, emails, and even occasional face-to-face meetings. This will keep your network contacts active and solid. It will also remove any hesitation you might have about contacting people in your network when you finally do need a job.

Not All Networks are Formal

You can of course join formal networks, such as industry trade groups, but that’s not always entirely necessary. You can also maintain common interest contact with people in your field where you get together for purposes unrelated to work. It could be hobbies, sports, religious affiliation or any common bond you can think of.

A contact is a contact, so it doesn’t necessarily need to be part of a formal group. Any kind of group that involves regular contact works as a suitable network. Each member of the group is a potential resource for referrals for professional purposes if only on an as-needed basis.

Your Former Co-workers are Some of Your Best Contacts

It’s very easy to lose contact with former coworkers. And unfortunately, in some organizations, once a person leaves they are considered to be “outsiders” and all contact with them stops.

But former coworkers can be some of your best networking partners. Since they actually worked with you, they know more about you, and may not only be more likely to give you job leads, but also personal referrals. This is especially important since many employers require referrals who are people you have worked with in the past, but not necessarily your immediate supervisors and managers (because legally they can usually only confirm dates of employment). A former coworker who will speak well of you is a powerful personal referral.

Network in Parallel Fields and Industries

If all of the contacts in your network are in your immediate field or industry you may be leaving an entire very important group out of the equation. That’s people who work in related fields, but not specifically in your industry.

These contacts are important because they are often aware of job openings within your industry. Even more important, since they are not specifically employed in your industry, they’re not competitors for the same jobs. They would likely have no reservation about referring jobs to you, unlike people who are employed in your industry and may be reluctant to make a referral.

Make it Mutual – Always!

Successful networking must always be mutual. If you want to get job and career referrals, it’s absolutely essential that you reciprocate. Even if you are not interested in a new position right now, you probably know of job openings and promotions. If you do, this is an excellent opportunity to reward the people in your network with specific referrals from you.

Rest assured that if you refer a network contact to a new position, that person will reciprocate when the time comes that you need a new job.

This is another networking activity that you need to be very intentional about. For example, when an opening becomes available with your employer, or even with an outside employer that you know, send out an email to some of your network contacts who may be qualified or interested. Even if they aren’t, they’ll remember your referral. If nothing else, it’s another opportunity to contact some people in your network. And you should be doing that all the time.

If you’re working your network even when you don’t need a job, it will be there for you when you do.

How about you all? What other ways have you utilized to network with others? Have you found anything that works better than others?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/83532250@N06/7650804342/sizes/n/

How To Consistently Earn An Extra $1,000 Per Month

June 11, 2016
/ Make Money
/ By Jacob A Irwin

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy!

How nice would it be to make an extra $1,000 this month? If you have bills piling up, debt payments that need to be taken care of, or just need a little extra money to make ends meet, an extra $1,000 probably sounds very nice.

Let me tell you a little secret. It’s pretty easy to earn $1,000 this month if you consider all your options and work hard at it. You can pick up an extra job, sell some of your clothes, have a huge garage sale, or take on an additional project this month.

However, it’s not as easy to consistently earn $1,000 each month, but that’s what you really want. Instead of receiving a one-time lump sum, you can earn up to $12,000 per year if you utilize any of these techniques to earn at least an extra $1,000 per month.

Freelance Writing

If you have any experience with writing content for print or online or if you’ve ever written for a blog before, you might want to earn extra money for freelance writing. It’s a popular side hustle and an effective way to earn $1,000 per month consistently.

To get started, you should start a blog or develop an online portfolio to showcase your work. Once you start interacting with other bloggers or leaving comments on other sites, you can ask to contribute some quality guest posts to other sites to get yourself noticed and develop some writing samples.

Then, you’ll want to start pitching potential clients including other bloggers, small business owners, or solopreneurs who you think could benefit from your content on a consistent basis. A great way to earn money as a freelance writer is to pitch sites with a blog to see if they can hire you as a regular contributor or staff writer. Pitching is the hardest step in the process but the more you do it, the better your results will be. It’s a competitive industry but there’s also more than enough work for everyone.

Start quoting clients with a starting rate of $50 per 800-1000-word post, then you can raise it as time goes on. If you charge clients $100 per post and complete 10 posts per-month or two per-week, you’ll earn at least $1,000 each month.

Virtual Assistant Work

Virtual Assistants are becoming more and more of a necessity for growing businesses. A virtual assistant (VA) is an online work-from-home personal assistant who helps businesses and individuals with a wide variety of different tasks.

Being a VA allows you to work from the comfort of your own home and set your own hours so you can earn a flexible income. VAs do everything from scheduling social media updates and creating invoices to editing content and blog posts, checking emails, creating newsletters, online research and more.

As long as you are good with computers and can type well, you should be able to market yourself as a VA and learn how to perform a wide variety of tasks. Some of the best ways to get started are to start searching for gigs on sites like Zirtual.com, start a blog or professional website to immerse yourself in a community of people who may need your help in the future, and cold pitch busy blog owners, companies, and entrepreneurs.

VAs can start off earning between $12-15 per hour but can earn up to $30-60 per hour depending on the task. Of course, the higher you charge, the less you have to work to get to $1,000 per month, but even if you start with a rate of $18 per hour and work very part-time to earn $1,000 each month.

Real Estate Photography

Like to take photos? You can turn your habit into a profitable side hustle that allows you to earn an extra four figures per month. Real estate is a bountiful market as there are always potential renters and buyers who are searching for a new residence.

Property owners know the value of presentation and understand that good photos means more quality leads. If you have a quality camera that takes professional photos, start a portfolio of your work by uploading photos to sites like Flickr or even starting your own professional website to advertise your services.

Print out business cards and start sending them to realtors in your area and going to local networking events to meet other potential clients in the industry. You can even take on one or two pro bono gigs in exchange for a testimonial or referral. Freelance photography is already a pretty popular gig and with real estate images, you can easily charge anywhere from $100-300 per shoot so if you did just a handful each month you can earn $1,000 in no time.

Website Development

With more than 2 billion people on the internet, it’s no wonder why almost everyone wants a website these days. While everyone wants a visually appealing and professional website, they have no idea about what all goes into the process or how to create a stunning site.

If you have an experience with programming and coding, you can cash in on your skills by developing websites for clients. You can start marketing your services by using the same techniques I mentioned for the previous gigs.
On the bright side, if you’re interested in this type of work but don’t have much experience, you can always take a programming class and learn everything you need to know. You can make that investment back pretty quickly because experienced programmers who work full-time can earn up to $150k per year. If you just do it in your spare time and charge clients anywhere from $300-800 for a fully functional website as a starting rate, you can easily earn at least $1,000 after just doing two or three projects.

Teaching Students a Second Language

You don’t have to speak any foreign languages fluently to earn money from this side hustle. You can teach students English online from the comfort of your own home.

If you have a knack for English or a teaching background, this would be an ideal opportunity. Some great places to start looking for online teaching jobs are TurtorABC.com and Italki.com. You’ll want to charge a reasonable rate of around $30 per hour of language tutoring. If you teach online for at least 8.5 hours each week, you’ll earn $1020 per month.

Summary

As you can see, the list can go on and on. In order to earn $1,000 per month consistently, you must determine what your skills are and what you like to do. Then, properly market yourself to potential clients and network. You have to present yourself as a professional and showcase your experience in order to lock in the rates I discussed earlier. It may be a challenge in the beginning but it’s not impossible since many other people are doing it.

As an added motivation, just think of what you could do with an extra $1k each month when it comes to paying off your debt, making progress on your investments, and increasing the savings in your bank account.

How about you all? Do you have a side gig that brings in consistent income each month?

Share your experiences by commenting below!

***Photo courtesy of https://www.flickr.com/photos/76657755@N04/7027595009/in/

Building Value in Your Home – Funding and Family Involvement

May 22, 2016
/ Make Money
/ By J. Irwin

The following is a guest post by Hank. Hank is Stay-at-Home-Dad and Home Industry blogger. He loves to write about the home, living with animals, and earning supplemental income. Check him out on his blog, Home By Hank.

Purchasing a home is a great investment, but the value of new property doesn’t grow just because you’ve moved in. Every time you paint a wall, renovate a room, or add an addition, you are potentially adding value to your home. Renovations to improve the home will make it easier to set a higher selling price when the time comes without having to make large alterations.

In addition to adding value to your home with repairs and upgrades, you can also add value to the family by getting your children involved. Children are not only great helpers during home projects, but you can also curate their ‘chores’ to teach responsibility, productivity, and self-worth.

Projects

There are a few ways you can use your existing home and property to make money and build home renovation projects. With these ideas you’ll be saving and creating ‘wealth’ for your home.

Craigslist Treasure Hunting

Craigslist is an online swap meet and classifieds section. People in your area post items they have for sale or things they’re looking for. Craigslist will work for you in two ways; it can help you find products for your renovation and it can be a great place to sell goods.

If you’re looking to save money on your materials, Craigslist can be a great place to look for cheaper options in your home renovation, like used kitchen cabinets or left over flooring. Remember that these are used products and don’t be afraid to ask questions or request more detailed photographs if you’re interested in the listing.

There are often listings for project leftovers like cinderblocks, pavers, paint, or other remnant type supplies. While it may not always provide exactly what you’re looking for, Craigslist is a great place to start because you’ll never know what may be listed in your area.

You can also use Craigslist to sell unwanted items that are taking up space instead of donating them. When it comes to listing on Craigslist be sure to take quality, well-lit photographs of each item. If your photo is dark, crowded, or doesn’t display the item well you won’t get as many interested buyers.

In addition, when posting, make sure you use a descriptive title that will grab a reader’s attention. Something like, “Fully functional electric suede tan recliner” is much better than, “Must get rid of my couch.” Here is a Craigslist step-by-step guide to learn more about posting on their site.

If you’re new to Craigslist, you can also read the ads for products similar to yours. This will give you an idea of what goes into a good ad, and what you can do to make yours stick out. Looking at existing ads will help with titles, pricing, and what the current market is for your item.

Kid Tip: When you’re looking around the house to find things to list, get the kids involved. They can shop their room to find toys and other goods they don’t want. This is a good way to teach them how to let go of things, pass on to others, and use their resources to make money.

Rent your House or Extra Room

A great way to have your existing home make money is to rent it out with sites like Airbnb or Home Away. These sites list your home as a vacation rental to people looking to visit your area. This can be tricky project so make sure you stay safe and vet your tenants.

Airbnb and other sites have insurance policies but be sure to visit other resources to check the background of your tenants. I like to use this resource as it has both criminal and previous eviction reports that the vacation rental sites leave out or do not know. There is not much worse than someone that won’t pay rent!

If listing your house sounds like something you’re interested in, be sure to think about whether you’ll be away for the listing times. For example, will you be going on vacation yourself or will you be sharing your home during your guest’s stay? Remember that homes are sometimes more expensive around holidays and during popular local events.

Furthermore, renting your home could be a great source of income if you’re already leaving town during a national holiday, and will allow you to raise the price due to a higher demand on the area. Homes don’t have to be available for weeks on end; even a weekend here and there can work in your favor.

When you’re listing your home make sure you ‘up-sell’ the available amenities. Listing things like your pool, large yard, nearby walking trails or the beach will help inspire potential renters and prove why your location is such an appealing draw.

Be sure to have a PDF of local amenities including things like grocery stores, restaurants, and entertainment sources. This will come in handy and will help round out any visit, making your rating higher for future clients.

Remember to prep your home, including a thorough cleaning and have everything from linens and paper goods available during the stay. The more you prep your home like a hotel room, the greater your reviews will be, thus boosting your home for the next client.

Some great addition resources can be found here.

Kid Tip: Include your children in this process by having them help you make a list of things to do in the area, what your property and home has to offer, and why renting from you would be ideal. Children can also be included in the home preparation from cleaning to staging and even decorating to give a more personal feel.

Backyard Neighborhood Garden

If your property allows for it, you could start a community garden as an income source. Because of the psychological benefits, many people would love to try their hand at gardening but don’t want to dig up their yard or simply don’t have the space for it. By putting some money into creating raised beds on your property you could rent a plot to any aspiring gardener and pocket some extra cash.

Creating a garden space will not only increase your home’s value, but will also create a larger sense of community and allow neighbors to come together. If you’re interested in this project start at your community center with fliers and talk with your neighbors to see if anyone is interested in a community garden.

Once your beds are complete you can provide a space, soil, and water for a rental fee. It’s important to keep the rent low so you can build a reputation. If your project gains in popularity you can always start a website to streamline you process, provide information, and even post photos of your space.

Kid Tip: Make sure your garden space includes a ‘Kids’ section. This will help children gain independence and learn about gardening basics, the science of tending to plants, and responsibility.

Pet Sitting and Dog Walking

Lastly, for some pretty easy funding, consider dog walking or pet sitting. People are always looking for someone to look after their pet for vacation or business trips. There are listings for this service on sites like Sitter City, Craigslist, and even bulletin boards at your local pet supply store.

A good first step when it comes to pet sitting is to research the industry. Remember, this project is basically starting a part-time business, so the more professional you approach it, the better results you’ll get. There are great guides out there for those interested in the industry.

It is also important to know your neighborhood’s ‘pet friendly’ amenities, including vet offices, supply stores, and dog parks. Providing photos of your home will help clients feel comfortable leaving their pet in your space. Creating a resume will also help you put your best foot forward and show why you’d be a good candidate for this position.

Kid Tip: Pet sitting or dog walking can be a great way to teach your child responsibility through punctuality and maintaining quality service. It is also a good opportunity to teach about professionalism and what it takes to run a small business.

Now you should have all the details needed to put together an amazing plan to renovate you home, make some extra money, and get the kids involved.

How about you all? What kinds of projects have you done or are considering that will help you make some extra money and get the kids involved at the same time?

Share your experiences by commenting below!

***Photo courtesy http://www.public-domain-image.com/free-images/people/children-kids/two-caucasian-and-two-african-american-children-playing-together-725×483.jpg

Make $100 Tomorrow With These Quick Jobs

May 19, 2016
/ Make Money
/ By J. Irwin

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

Having an extra $100 can be a lifesaver in a wide variety of situations. Having that money can prevent a utility from being turned off, put groceries into an empty refrigerator, or help you avoid late charges on a bill that is due. Fortunately, there are many ways available to earn an extra $100 quickly when necessary. Here are some quick jobs you can use to make $100 within a day.

Sell Your Services

Nearly anyone can make a quick $100 over the course of a day by selling their services to their friends and neighbors. There are a wide variety of tasks that you can do that others would be interested in paying you for. These jobs require no special skills, only a willingness to work and a determination to make some money. Here are some easy services that you can offer to your circles to make some quick cash.

Handyman Services – If you are handy with tools, you should consider offering handyman services around your neighborhood to earn some quick cash. Simple tasks like painting, unclogging drains, and putting together pre-fabricated furniture can result in the money you need with just a few hours of work. Maintenance tasks and automotive care can earn you even more. Agree to a price with the customer before the job begins to ensure there are no unpleasant surprises for either party at the end of the job.

Lawn Care Services – There are few people that would claim that they enjoy caring for their lawn on a regular basis and many are willing to pay someone to do these outdoor chores for them. You should initially target homes in your neighborhood with unkempt lawns and untrimmed bushes, as these people may be more willing to pay you to make their yards look presentable.

Photography Services – If you have a decent camera, you can sell photography services for special events, like weddings, vacations, and graduations. Many people are willing to pay amateur photographers to avoid paying the high prices of professionals. Several companies have made it easy to get into the photography industry by providing filters and special effects that can be used to enhance the photos you take. Physical copies of the photos can be printed with a home printer on photo paper or at a local drugstore using the available photography kiosk.

Cleaning Services – Many people are looking for others that can help them clean their home or office properly. You can even make money cleaning and detailing cars. Because this is an easy job to do that requires little overhead, there is a lot of competition for these jobs. Browse listings on Craigslist or your local newspaper’s website to find clients, or consider posting your own listing offering your services. There is a good chance that you will be able to find a job and get paid for it the same day.

Babysitting – No matter how much a parent loves their child, they enjoy spending time away from them every once in a while. If you offer babysitting services to your friends and neighbors with children, you are sure to find some takers. Just make sure you have activities to do while you are babysitting, as a houseful of bored kids can turn into a nightmare really quickly. You can also offer petsitting or housesitting services for a small fee.

Make Money Online

Since you are paying for your internet connection, why not use the service to make some extra cash. Numerous companies have popped up over the past decade allowing people to get paid to do tasks outside of the normal employment environment. Some of these tasks do not pay very much, but they can be completed quickly or in unison, allowing you to accept more tasks to make more money. Here are some great ways to make extra money online.

Sell Your Photographs – There are quite a few companies online that allow you to sell photographs that you have taken. For example, both Shutterstock and FOAP allow you to post and sell your photos online for a fee. Interested parties browse the site and you get paid for each of your photographs selected. You will make more money if your photographs are of interesting subjects or have widespread commercial appeal.

Perform Tasks for Others – TaskRabbit, Gigwalk, Zaarly, and Postmates are platforms where customers list random tasks that they need to be performed and the amount that they are willing to pay for these services. You chose the tasks that you want to perform and get paid after the tasks are confirmed as completed. Amazon.com’s Mechanical Turk pays a few dollars per assignment for simple tasks like writing product reviews, entering information and editing documents.

Utilize Your Writing Skills – If you are good at writing without grammatical errors, you can earn good money writing things for companies and small businesses. You can join a writing team on a site like Textbroker or Demand Media or find your own clients through job board listings on sites like Freelancer.com or Indeed. The rates for these types of task vary by assignment, so focus on topics and tasks that you excel in to make the most money as fast as you can.

Sell Unwanted Stuff

Most of us have things lying around the house that we either do not use or has outlived its usefulness to us. Instead of trashing these items, sell them for some extra cash. There are a wide variety of ways available to sell unwanted stuff. Here are some of the most common.

Garage and Yard Sales – Garage and yard sales are a great way to sell a lot of your unwanted stuff over the course of a day. With a small investment in some price stickers and poster board to advertise your sale, you can make $100 or more from neighbors interested in what you have to sell. These methods allow you to choose the pricing of your offerings and allow you to negotiate with those who may be interested, but find your price too high for their tastes.

Websites – People have flocked to websites like Amazon, eBay, and Craigslist to sell items that they do not want anymore. On these websites, sellers can list their items individually or in lots and name their price. Listings on these websites include everything from household goods to sports equipment to clothing.

Resale Stores – In recent years, dozens of resale stores have emerged to buy people’s unwanted stuff and resell it to consumers that are willing to buy gently used items. Many of these stores specialize in a single product category. For example, Once Upon A Child specializes in children’s clothing, while Play It Again Sports focuses on sporting equipment and New Uses handles household goods. Be aware that these places pay set prices for particular items, so you will have little control over what your items are worth.

How about you all? Have you tried any of these methods of making money? Are there any other ways to make $100 fast that I might have missed?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/76657755@N04/7658159678

Will a Home Office Deduction Really Trigger an IRS Audit?

May 5, 2016
/ Make Money
/ By J. Irwin

There is a common perception that taking a home office deduction is a red flag that will trigger an IRS audit. But is it even true? Possibly, if it doesn’t comply with IRS regulations, and it seems excessive for your business or income. But if it’s handled properly, the risk of an audit from taking the deduction is actually quite low.

IRS Home Office Deduction Rules

The IRS rules required for a home office deduction include:

Regular and exclusive use. You must use part of your home exclusively for conducting business. It needs to be a dedicated space – preferably a room, that you run your business out of. It can’t be a family room that doubles as an office.

Principal place of your business. Your home office must be your principal place of business, though you may qualify if you also conduct business outside of your home office, but use the home office substantially and regularly for business purposes. This includes meeting with clients on a regular basis at your home office, even though you also conduct business at another location. You can also deduct a structure, such as a garage, if it is used to store business materials there, or used as a studio. But again, it must be used substantially and exclusively for business, and not shared with some non-business purpose.

There are also special rules for employees who use a home office:

Your business use must be for the convenience of your employer, and
You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.

As long as you are deducting your home office within the scope of these IRS rules, you should be OK to take the deduction.

So why do so many sources say that the home office deduction is an IRS red flag for audits?

Taking an Excessive Deduction

Any tax deductions that you claim that look excessive will automatically generate IRS concern. The IRS has all kinds of metrics to determine whether or not an expense is reasonable based on the taxpayer’s income and business type.

For example, if your business earns $12,000 in gross revenue, but you expense $7,000 as a home-office deduction, that will be a flag. This will be particularly true if the home office deduction is the largest in a list of expenses that ultimately results in your business showing a loss.

An outsized deduction can be an indication that a business may not be legitimate, an excessive allocation of the home for the business, or even an attempt by the taxpayer to gain a tax break for the cost of maintaining a home that cannot be deducted on Schedule A as a legitimate personal deduction.

As an example, let’s say that you live in a 3,000 square foot house, but you claim 1,200 square feet as a home office. This would be an indication that 40% of your house (and housing expenses) is used substantially and exclusively for business. As that is unlikely arrangement, it could trigger an audit.

The key with all business expense deductions is that they must be reasonable and necessary. Any deductions that look excessive or superfluous can trigger an audit.

Taking an Inconsistent Deduction

The home office deduction should be relatively consistent from one year to the next. That’s because the expenses that comprise the deduction – home mortgage/rent, real estate taxes, insurance, homeowner’s association dues, and utilities – are fairly stable expenses. Your home office deduction should represent a fixed percentage of those expenses, based on the ratio of home office space to gross household space.

Since they form the basis of your deduction, that deduction should not change substantially from year to year. But if you show a deduction of $5,000 one year, then $10,000 the next, you could be inviting an IRS audit.

The IRS may suspect that you are padding the deduction in order to offset a higher income from one year to the next. Make sure that if you take the deduction, that you keep the consistency factor in mind each year that you use it.

An Audit Might be Triggered by Something Other than Your Home Office

It’s likely that any time a person who takes the home office deduction gets audited that it’s assumed that the home office is the reason. In reality however, a tax return can be audited for just about any reason. First, a person who is self-employed already has a higher risk, due to the ability of deducting expenses from income.

But an audit could be triggered by virtually any other expense on your return, or simply by the fact that you are taking too many expenses in general. One example is contract labor. The IRS is on the lookout for businesses classifying people as contractors who are actually employees. If you have a large line item for contract labor, this could be the reason for the audit.

The point is, a home-office deduction is hardly an automatic audit. As long as the deduction complies with IRS regulations, and is reasonable, consistent and based on actual home expenses, you should be safe taking the deduction.

How about you all? Have you avoided taking a home-office deduction for fear of being audited?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/dierken/448629059/sizes/q/

Are You Sure You Want to Be Your Own Boss?

March 7, 2016
/ Make Money
/ By J. Irwin
/ 7 COMMENTS

There are outstanding reasons why people are hesitant to start their own businesses. There are obstacles and activities involved in self-employment that you simply don’t have when you have a traditional job.

And yet every year many thousands of people strike out on their own and start their own businesses. It is possible – and you know it is just by the number of people who do it.

The secret is to know exactly what you’re getting into, and more importantly, to have strategies to overcome the obstacles.

Here are the biggest challenges to being your own boss, along with strategies to overcome them.

Creating a Reliable Income

This is probably the single biggest reason why more people don’t attempt self-employment. The regular paycheck that you can take for granted on the job just isn’t there when you start a business. That can not only make life difficult, but it can also lead to a lot of worry, and that won’t help your business either.

If you decide to start your own business, make sure that you have enough money saved up not only to start the business, but also to pay your living expenses for the first few months. You’ll need that at least until you get a regular cash flow going.

It will also help if you have income sources – like clients and customers – lined up before you start your business. One of the best ways to do this is by starting your business as a part-time venture while you still have your full time job.

You can then stair-step your way from full-time employment to full-time self-employment. As the income from your business grows, you can convert your full-time job to a part-time job, and keep that arrangement going until the business justifies being in it on a full-time basis.

A lack of reliable income is probably the single biggest reason why businesses fail. But if you prepare for it, with savings and employment income, you should be able to get over that hurdle.

Being responsible for everything

When you first start a business, there isn’t much income, and you will find yourself in a position of having to do every job that needs to be done. There’s no getting around this, and no easy way to overcome it.

But what you can do is focus your primary energy and time working on the jobs that are most important to the growth of your business. For example, the primary job is almost certainly to generate income. That means you should spend most of your time concentrating on marketing, sales, and filling orders.

That brings up the next challenge…

Unlimited Hours

If it seems that your new business venture requires something that looks like unlimited hours, you’re on the right track. Upstart businesses can easily require 60, 80, even 100 hours per week on your part.

It will be that way until your business has enough income that you can begin hiring others to handle some of the responsibilities. But until that day arrives, you’re going to have to be prepared to put in the time necessary to make your business successful.

Mental preparedness is probably the only strategy, other than having family members help you along the way.

A Lack of Benefits – Especially Health Insurance

This is a serious issue, and not one that is easily overcome. When you work for someone else, important benefits are often provided by the employer. But when you are self-employed you are the employer, and the only benefits you will have will be the ones that you pay for yourself.

One way to handle that is to be on your spouse’s benefits, if he or she has a job that provides them. Another is to hold on to your current job until you are in a position to pay for benefits on your own.

Failing either of those efforts, you will have to choose which benefits are most important to you. For example, you may focus your attention on getting health insurance, and temporarily letting go of setting up a retirement plan.

Paying Your Own Income Taxes

When you work for someone else, they withhold payroll taxes for you. That not only spares you the job of having to do it for yourself, but it often sets you up to receive a tax refund when you file your return.

When you’re self-employed, there is no payroll withholding, and you must pay your own income taxes. You can do this by being prepared to file IRS Form 1040-ES, Estimated Tax for Individuals. This is a form that you file and pay your taxes with on a quarterly basis. It only pays your taxes at the federal level, so you will have to investigate the process if your own state also has an income tax.

Paying income tax estimates requires discipline. Most likely, you will have to allocate a certain percentage of your income to the pay for your estimates. The good news is that you can deduct business expenses from the income before determining your tax liability. This is a fairly complicated process, and one well worth the investment of time and some money consulting with a CPA.

There are all sorts of challenges involved in being your own boss, but if you know what you’re up against and you have a strategy for dealing with each, you can dramatically increase the likelihood of your business being a success.

How about you all? Are you your own boss? What sorts of difficulties have you encountered and how have you handled them?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/9731367@N02/6988137520/sizes/q/

How to Control a Job Interview

February 22, 2016
/ Make Money
/ By J. Irwin

A job interview can be an intimidating process, there’s no question about it. But you can take the sting out of it – and make it a more comfortable event – by taking control of the interview.

Here’s how…

Make Sure You Know the Job You’re Interviewing For

It’s mission-critical that you have a solid grasp of the position that you are interviewing for. Though this point should be self-evident, job candidates sometimes apply for jobs that they are either totally or substantially unqualified for, in the hope of a miraculous outcome. But it’s one thing to embellish your resume to make it look like you’re qualified, and quite another thing to prove it in an interview. Interviewers, managers in particular, can usually spot an unqualified candidate just minutes into an interview.

Carefully study the job and requirements presented, and make sure you understand the position you are applying for. That means not only having the skills and qualifications necessary, but also being able to comfortably explain how you’re the person for the job.

Make Sure You Know the Company You’re Interviewing At

This is easier to do with large publicly traded companies, but much harder with smaller ones. No matter, you still need to get as much information on the potential employer as possible. The more you know about the company, the more credible you will look in the interview.

Get information on the company from any public sources that are available. Also do a web search on the company name, and see what recent news stories come up. Be prepared to discuss the more interesting ones. Your interviewer can’t help but be impressed with your knowledge of the company.

Make Sure You Know the Industry You’re Interviewing to Enter

This is at least as important as knowing the company you’re interviewing with. In fact, it can be even more important if the company is small. It demonstrates that you have open understanding and an interest in the big picture environment that the employer operates in.

You might even want to be prepared to discuss challenges that the industry is facing. At a minimum, that will position you as a candidate who perceives problems, making you better prepared to solve them.

Rehearse Answers to Questions that are Likely to be Asked

If you have already been on a few interviews, you’re probably aware that there are certain questions that are common in just about any interview. Make a list of those, as well as your best answers to address them.

You should also consider questions that you are likely to face based on certain jobs. These aren’t as easy to know in advance, but if you spent time studying job requirements, that’s a good start. Be prepared to answer any questions that are likely to come up in regard to those qualifications.

Make Sure You Can Support Everything Your Resume Says You Can Do

Do a detailed review of your resume, and make sure that you can support everything you claimed. Understand that an employer may be interested in you based primarily on a single skill. If it turns out that you don’t really have that skill, or that you’re really not strong in it, the interview and your candidacy will be over.

Be sure that you can not only support what you claim, but that you can explain it easily. The interviewer may be looking for inconsistencies or a lack of comfort in your answers. Make sure that isn’t the case.

Prepare a List of Relevant Questions

This step is an absolute must on any job interview. Having your own questions will provide the following benefits:

It will demonstrate clear interest in the position on your part
It will show deeper understanding of the employer’s needs
It will help you to determine if you really want the job (you may not!)
It will take the pressure off of the interviewer having to ask all the questions
Having a list of questions will eliminate periods of “awkward silence”
It may give you the ability to get around answering a question you aren’t comfortable with

Make sure that your list of questions are relevant to the job, the employer, and the industry. That means that they need to be substantial – the kind that demonstrate your knowledge of the position and confirm your value to the interviewer.

In that regard, you must avoid standard questions, such as asking about salary, vacation time, or the 401(k) plan. Those are filler questions in a serious interview, and need to be addressed when an offer is made.

Make Sure YOU’RE the One Conducting the Interview!

The bigger picture purpose of going through all of these steps – knowing the job, the company, and industry, being prepared for questions that are likely to be asked, being prepared to support your resume claims, and having a list of relevant questions – is to put you in a position of being able to conduct the interview.

In truth, anyone can be the interviewer in a job interview – the employer or the candidate. But by assuming the role of interviewer, you put yourself in a position of strength. You’ll be able to control the flow of the interview, often to the point of being able to avoid uncomfortable situations and inquiries.

The interviewer will not only respect you, but the strategy will probably make you strongest candidate that they interviewed for the position. That should make an offer more likely to come your way.

How about you all? Do you have any other tried and true tips for maintaining control over an interview?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/21218849@N03/5015628145/sizes/q/

Two Important Strategies for Successfully Earning (and Living) on Just One Income

December 8, 2015
/ Make Money
/ By J. Irwin
/ 5 COMMENTS

The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food. She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

From the time I was little, I knew I wanted to stay home and raise my kids when I eventually had them. But life doesn’t always turn out the way we plan.

Instead, when our first child was born, I was working full-time while my husband worked part-time and attended graduate school full-time. It would take another long six years and two more children before I was able to realize my dream of being a stay-at-home mom.

But, like so many people who drastically cut their salaries when one parent decides to become a stay-at-home parent, my husband and I didn’t change our lifestyle. We still lived as if we had my good full-time salary and his part-time salary. We had lost at least 50% of our old income, but we spent like we hadn’t lost any income.

We continued to pay for our oldest child’s last year of private school, we went out to eat, we had cable, I bought adorable outfits for the babies (on sale and with a coupon, but still, we didn’t have the money for them).

In the first 18 months after I quit my job, we racked up so much debt, we’re still paying it down. (Though to be fair, that amount does include my husband’s student loans during that time.)

Here’s the simple truth—if you want to have one person become the stay-at-home parent, you have to learn to live on one income. The sooner you do this (even while both partners are still employed) the better.)

I don’t have a time machine to go back and change those early years of living on one income (though I wish I did!). However, we’ve now been primarily a one-income family for five years, and we’ve learned to live within our means. Better late than never.

If you’re new to learning to live on one income, successfully doing so depends on two factors.

Finding Contentment

Like I did for so many years, you may dream of being a stay-at-home parent. Then, once it happens, you might find yourself fighting discontentment.

At first, I found myself a bit bored staying home all day. I tempered that boredom by spending. No, I didn’t go out on a clothing spree or anything like that, but I went to the grocery store too often so I’d have something to do.

I also found myself a bit disgruntled at our lower income. I’ll be honest here—I was spoiled. I wanted the privilege of staying home with my kids without the sacrifice of losing my income. I wanted to stay home, but I didn’t want to change my lifestyle.

What I should have done then, and what I try to do now, is find contentment in my situation. Many, many parents want to stay home with their children but don’t have the opportunity to do so. I am lucky.

Over the years, as I’ve practiced contentment, I’ve learned to appreciate things that would have bothered me when I worked and we had a higher income. For instance, our minivan is 11 years old, has 160,000+ miles on it, and has a broken back door handle on one side and a broken coil on the other back sliding door. I can’t get the kids in the car unless I open up the driver’s side door and reach behind and open the back door from the inside.

Is this embarrassing? Yes. And a few years ago, I would have just focused on how old and decrepit the car is. Now, I’m grateful that the car is paid for and that it still runs and gets us around town.

Gratitude can make all of the difference in how you feel about staying home and living on a limited budget.

Be Frugal and Know that You Can Always Cut More

While we weren’t frugal the first 18 months after I quit my job, we had to rein in our spending when the debt started accruing.

We now do many frugal activities that we should have started five years ago:

We air dry clothes instead of drying them in the dryer,
We go out to eat for birthdays only,
We cook at home,
We don’t buy convenience foods,
We buy secondhand clothes and homeschool materials,
We drive an 11 year old paid for vehicle with 160,000 miles on it,
We only have one car,
We buy groceries that are on sale and plan meals around those items (rather than buying what we think sounds good for the week)
We have flip phones instead of smart phones which we use only in emergencies.

Living this way has allowed us to avoid accruing any new debt and to make headway paying off debt we have.

Yet, we don’t have a lot of wiggle room in our budget, and we want to buy a new-to-us car without taking out a loan. I started searching for ways to cut our lifestyle even further, when it occurred to me. We should live like we’re in the 1950s.

The 1950s—Living on One Income, without Debt

Why the 1950s? That is probably the last era when one-income households were common. Families then had relatively little debt outside of their mortgages. Credit cards weren’t frequently used.

While we may romanticize that time in history, the lifestyle back then was much different than we are accustomed to now. Consider what life was like for a family of four or five in the 1950s:

They lived in a house that was likely less than 1,000 square feet. They all usually shared one bathroom, and if there were three children in the family, at least two of them shared a room through their entire childhood.
There were no cell phones.
There was no Internet or cable television (or even televisions period for much of the 1950s).
Vacations, if taken, were usually within the family’s home state or within the United States. Elaborate trips to Disney or Europe or any other expensive destination was rare.
Two-car families were unusual.
Long commutes were unlikely. Many families lived close to where the family breadwinner worked.
Families rarely ate at restaurants.
Parents cooked at home with natural ingredients and did not have convenience foods to rely on.

Wow. Looking at this list, life in the 1950s doesn’t seem so romantic. Can you imagine life without your cell phone or the Internet?

Probably not.

Some things we have now like the Internet are necessary to function in modern life. Still, most of us could look at this list and find ways to scale back.

When I really researched how people used to live even just sixty to seventy years ago, I once again realized how truly blessed we are.

Rather than feeling sorry for myself because we bought a house that need cosmetic fixes that we haven’t been able to afford to make yet, I find myself grateful that we not only have a house but one that is 1.5x bigger than the houses most families had in the 1950s.

Many houses back then didn’t have central air. How lucky we are to have that.

There are many conveniences and luxuries that we have today that people even just a decade or two ago didn’t have. We all need to take the time to realize how much we do have, even when it feels like we don’t have enough.

If you want to stay home and successfully live on one income, take the time to realize how truly lucky you are and understand that your lifestyle will likely not match the neighbors’ who have both spouses working full-time. That’s okay. You just made a different choice.

How about you all? Do you or your partner stay home with the kids? If so, how did you adjust to the difference in income and lifestyle compared to what you were used to or wanted?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/happiness-kids-mom-sye-987394/

8 Compelling Reasons to Have Your Own Business

September 4, 2015
/ Make Money
/ By J. Irwin
/ 2 COMMENTS

If we’re honest, we have to admit that the job market isn’t as secure as it was just a few years ago. There’s not much that we can do about that – but that doesn’t mean that we’re helpless. One of the best ways to remedy an unstable job market is to have your own business.

And here are eight compelling reasons why you might seriously consider doing it for yourself.

1. Unlimited Earnings

It’s regrettable that in jobs your income will be determined by a certain very limited range. For example, even if you do the best job possible in your job classification – even if you exceed expectations – if the salary range for your position is between $40,000 and $50,000, there is very little chance that you are going to earn more than $50,000.

If you have your own business, no such limits exist. You can literally earn as much as your time, efforts, and talents will carry you.

2. Having Creative Control Over Your Work

When you work for someone else, that person or employer will not only have control over the work you do, but often you how you do it. Very few jobs operate as true democracies. There will almost always be parameters and rules – some that are incredibly specific – that will dictate exactly how you do your job. Even if you suggest what might be a better way, the idea may be rejected by the employer, since it is “not the way we do things around here”.

When you have your own business, you have complete control over your work. You can eliminate any process that you think is not entirely necessary, or modify it so that it is easier to do. You can also choose to work on those areas of your business that are most productive, and most fulfilling to you on an emotional level. That alone could make day-to-day work less of a chore.

3. You Can’t be Fired or Downsized

While it’s true that you can always lose clients or customers when you have your own business, you can’t be fired or downsized out of your position. When you have a job working for someone else, either you are employed – and everything is fine – or you are unemployed, and your life has been turned upside down.

When you have a business, there may be times when it takes a downturn, but you can then make every effort to find additional sources of income to make up for what was lost.

4. You Can Blend it With a Full-time Job

You don’t necessarily have to start a business that will become a full-time venture. You can choose to make it part-time, at least until you get to the point where you are willing to take the leap of faith into full-time. But you can also decide that it will remain a part-time activity, and blend it with your full-time job.

5. Choosing Your Own Income Sources

If given a choice, most of us would probably choose pursuing certain income sources over others. If you have a job, that choice will not be yours to make. But if you have your own business, you can choose to pursue whatever income sources are most agreeable to you.

And in most cases this will work to your advantage. People typically earn more when they are doing what they like, and what they believe in. In that way, you can earn more money while getting more satisfaction out of your work.

And speaking of satisfaction…

6. Personal Satisfaction

It’s usually easier to create a work/life blend that works for you on a personal level when you’re self employed. You could not only choose to work as much or as little as you want, but you can also control the specifics of how that comes about. That control that you will have for your professional activities is likely to translate into greater personal satisfaction.

7. An Asset to Sell to Fund Your Retirement

Certain types of businesses can be sold, often for a large amount of cash. For example, a business may have a substantial amount of capital invested in property, equipment, or inventory. The cash flow of the business may even be salable – businesses often sell for X times their annual gross revenues.

The point is, if you have an established business, and you would like to retire, you could probably sell your business to provide additional capital to add to your retirement portfolio. This could the an amount that enables you to take early retirement, or at least to have more funds available for retirement at more traditional ages.

8. An Additional Income Source in Retirement

There are two possibilities here. You can choose to slow down your business activity so that you can semi-retire at whatever age you choose. The extra income can supplement your Social Security income and retirement investment income, and provide you with a very comfortable life.

But the second possibility actually works in conjunction with selling your business. Very often, when a business is sold, the previous owner continues to work in the business in order to ensure a smooth transition from himself to the new owners.

Under such an arrangement, you might be able to make your employment into part-time situation, or you may even be able to make it permanent.

Either way, this will enable you to draw a continued income from your business in retirement.

Considering all the above, there are certainly compelling reasons to have your own business – especially these days, when the job market seems to be permanently unstable.

***Photo courtesy https://www.flickr.com/photos/9731367@N02/6988137520/sizes/n/

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