Business On The Side

Mary Weinand
Our guest blogger is our colleague Mary Weinand, Human Sciences Specialist, Family Finance, in southeast Iowa

Given the economy, many people are trying to make ends meet with a side job or small business. Before you begin, consider what expenses might go with the business as well. Running a business can be profitable but it can be expensive too. Deductible expenses help entrepreneurs with many of the costs of running a company. Business owners include expenditures on tax returns so that not all of the business sales are taxed as earnings.

The IRS realizes there is a cost to doing business but there may be limits and timing issues for many deductions. Business expenses are reported in the year they are paid – which can differ from the year income is earned. There are some exceptions to this rule, which can allow a business to carry a loss forward to the next year. If your expenses exceed your income for the year you may be able to carry forward some of the business expense to the next year. Check with your tax accountant to make sure you are reporting correctly on your taxes.

According to IRS.GOV, you have to file an income tax return for 2018 if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Instructions for Form 1040.

Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business. You can be liable for paying self-employment tax even if you currently receive social security benefits. The law sets a maximum amount of net earnings subject to the social security tax. This amount changes annually. All of your net earnings are subject to the Medicare tax.

Some common deductions for small businesses:

Vehicle – If you use your vehicle in your business, you can deduct vehicle expenses. If you use your vehicle for both business and personal purposes, you must divide your expenses based on actual mileage.

Employee Salary – If you pay someone to perform business services then you can deduct their salary or contract services on your taxes. Be sure the service is related to the business and not for your personal benefit. For example, if you own a home cleaning service you can’t deduct the employee salary to clean your own home.

Interest – You can deduct the expense of interest for money borrowed for business activities.

Business-Related Education – You can deduct seminars, classes, educational tapes or CDs, and convention fees related to your business.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Trends in Saying, “Good Bye”

Dad's Urn
My Dad’s Urn

My brother and I had what I would consider “a lot” of time to prepare for the passing of our father, since Alzheimer’s is a slow-progressing disease. We had time to talk, ask questions, research and make decisions. This was especially helpful since we knew that Dad would most likely pass in Indiana; the funeral would be in Iowa at my church; and the burial would be next to our mom in Minnesota. As we liquidated his Minnesota assets, we consulted our lawyers in Indiana, Iowa and Minnesota as we made decisions about where the estate’s bank account should be located and in which state to file probate. The choice of cremation made for less paperwork and expense when it came to transporting his remains from Indiana to Iowa and then on to Minnesota.

The funeral home director in Indiana made everything very easy and advised us on issues we had not considered like the purchase of a vault for the urn holding dad’s ashes. Not all cemeteries require urn vaults, but Dad’s did. For being nothing more than a small plastic box that is sealed with rubber cement, it came with a hefty price tag. The funeral director suggested finding one online, which was about a fourth the price.

It is interesting the things that are said during the time of grief. Old feelings bubble up. Emotions are raw and run deep. Two of our family members were struggling with the fact that they had not attended my mom’s funeral 30 years ago, and had not even known where she was buried; in some ways they were burying two family members that day. It became apparent to me the important role the graveside service played for these two family members. Interestingly though, the one struggling most had made the decision to donate her body to science. In this way, her body would then be cremated (at no cost to her) and the remains returned to her family. She intends to have no grave, no funeral…no final expenses. Her decision was purely a financial decision. I wonder if she will think differently now that she has experienced the effects of 30 years of deeply buried grief, magnified because she had experienced all the traditional rituals that come with the passing of a loved one.

A financially secure and elderly friend passed away recently. She was devout in a faith which we shared. Her children lived far away and I was eager and willing to help them make all the funeral arrangements through our church. It caught me completely by surprise that they decided that there would be NO funeral. She had the means to pay for such things. She was a long-time member of our church and community, so there were a lot of people planning to say “good bye” in a public way AND a lot of people trying to make sense of this decision. She had donated her body to science and the remains were returned to her children…end of story.

With increased access to information, survivors as consumers are seeking more alternatives to the conventional funeral. Funerals are among the most expensive purchases made in a lifetime. The national median cost of an adult funeral is $7,360. The time to make these decisions is now…not during a period of duress, grief, and guilt. Funeral Directors are excellent sources of information and you may want to check out this document by the University of Florida Extension – The Art of Goodbye; A Closer Look at Emerging Trends in End-of-Life-Rituals.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Peak Alert

Peak Energy Alert

I love the fact that our home has hot-water heat. As a person with allergies, I am not overwhelmed in the summer or winter when the central-air or furnace blows the collected dust out of the vents. But with hot water heat, there’s no option for central air conditioning; I would have to say that this week I would give almost anything to have central air! As I write this during a heatwave, it is expected to hit 95 degrees today with a feel-like temperature of 103 degrees. I can only imagine how widespread the brown-outs will be with everyone retreating to their air-conditioned homes and places of employment.

So, what about those brown-outs? In visiting with my co-worker (who has central-air) I have learned that our local energy-provider has a program called Appliance Cycling. This program will not only reduce the amount of energy used by the homeowner, which will reduce their cost…but the homeowner will also be compensated with a credit of $8/month for participating in the program.

When you sign up for the program, a technician will come to your home and install a small radio-control switch on or near your outdoor central air conditioner at no cost to the homeowner. 

If the demand for electricity escalates to a critical point, a “system emergency” or “peak alert” is announced, and a radio signal is sent to activate the switch on your air conditioner. Your outdoor cooling unit will then cycle off while the furnace fans continue to circulate the cooler, drier air already in your home. 

The program runs from May to September and the cycling events typically occur Monday through Friday from 1 PM – 7 PM…never on weekends or holidays.

My co-worker says she notices a slight difference in the temperature and humidity in their home during peak alerts but nothing that a box fan or ceiling fan can’t make up for. Do you have a similar program in your area?  What has been your experience? As for me…I think I will plan on supper at a restaurant!

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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To Buy or Borrow?

My family just returned from a camping trip in the mountains of Montana. Our decision as to where to camp was determined by the fact that not all campsites would allow soft-sided tents and campers because of bears living in the area. We drove up into the mountains to picnic, visit sites and see the wildlife…including bears. Those that were serious hikers wore bells so bears would hear them coming; as to not surprise the bears that might be along the path. Hikers also carry BEAR SPRAY…a kind of “pepper spray” to temporarily blind a bear, giving a hiker a chance to escape, if they did come upon a bear. This product was sold in all the shops for more than $50 for a small spray can…OR you could rent a can. If you were a visitor to the area, and would not have use for the spray once you returned home, renting was a good option. At $10 per day rental, you would have to spend more than 5 days hiking to justify buying the can of spray.

Our son almost purchased a family pass at their local pool because that is what they had always done. At the last minute, he changed his mind and decided to buy a couple of punch cards. They have hired a high school girl to watch their oldest child for the summer, and wanted their daughter and the sitter to be able to spend time at the pool. The family pass would not cover a caregiver…only family members. When he added up the number of times they visited the pool, divided that into the cost of the family pass, it made more financial sense to buy the punch passes instead of the family season ticket.

I can think of many times where a decision to rent or borrow was a better financial choice…like borrowing an expensive tool that you would only use once or twice. I can also think of times where I mindlessly purchased something rather than looking for a more economical way of doing something…just because it was easier, faster or just “the way I’ve always done something.” How about you? What are some ways you have accomplished something without actually buying something?

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Check Before You Go

Several years ago, my brother, his son and my son took my dad on a fishing trip. Dad insisted on taking his fixer-upper boat with its fixer-upper motor on his fixer-upper boat trailer…all of which he acquired for free or next-to-nothing. He had been working hard to get ready for this trip and was excited to see how seaworthy his equipment was. Dad prided himself on recycling and upcycling stuff and he was quite good at it. At the time, dad was in his early 80’s and was in the beginning stages of Alzheimer’s…which looking back, should have been a red flag that someone should double check dad’s work.

My son loved spending time with his very patient grandpa in an amazing, well-stocked shop, where one summer he learned to weld as he created his first meat-smoker.  Their motto was, “Beat it to fit; paint it to match.”  The fishing trip turned out to be an opportunity for my son to repay his grandpa with time and a great deal of patience…as the boat, motor and trailer all failed in epic fashion…wheel bearings seized, motors died in the middle of the lake and the boat ended up with a huge hole in it.

My son recently purchased a fixer-upper popup camper which he is checking over before we head out on a 10-day camping trip to Montana. When I saw him last week, he shared his to-do list with me which would ensure he would “not repeat an adventure like the one he had with grandpa.”

As you head out for adventures this 4th of July weekend, you may want to check out this list by Consumer Reports.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Less is More

Woman holding clothes on a hangerIn December, the calendar may say it is winter, but I am never in the mood to do wintery things (decorate, bake and eat comfort foods, etc.) until there is snow on the ground. The same is true for Spring which officially began March 21…almost 2 months ago. The last of our snow recently left and the grass finally turned green and I am now just finding myself in the mood to do spring cleaning…which includes digging out summer clothes and putting away the sweaters.

As I put winter clothes away, I discovered that most of the items in my closet are worn year round…like a short-sleeved t-shirt, jeans, a black dress, a white long-sleeved blouse, a black blazer and dress slacks.

The CAPSULE wardrobe, a term coined in the 70’s, refers to a collection of a few essential, quality items of clothing that never go out of fashion, do not wear out, and can be paired with seasonal pieces. The key is to make sure your essentials are well-made and fit properly…basics that you can wear daily and from which you can create different looks.

If done correctly, a capsule wardrobe should reduce the number of items in your closet — and thus, reduce the amount of time you spend organizing and cleaning out your closet and donating unused items.

Because it is now okay to wear white after Labor Day, to mix prints, and to wear navy and black together, you will find the items in your capsule can remain in your closet all year, eliminating the time-consuming task of removing, organizing and properly storing out-of-season items.  Reducing the number of pieces in your closet also makes it possible to keep all your clothes in your closet, year round.

If these aren’t reasons enough to create a capsule wardrobe, consider the environmental ramifications of cheap, “disposable” clothing. Poor quality clothes lose shape and look tired after being worn only a dozen times. According to a 2017 report we are wearing pieces fewer times before disposing of them. The study says that more than half of all lesser-quality clothes are disposed of in under a year. It also noted that less than one percent of the materials used are recycled; as a result, “one garbage truck full of textiles is land-filled or burned every second.”

Buying high-quality, well-made pieces of clothing that will last years instead of months is not only far better for the environment, but it’s also better for your pocketbook in the long term. And, the capsule wardrobe has great potential to reduce the amount of time spent organizing, storing and cleaning out your closets.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Care Co-op For Aging Parent

Financing Aging

A couple of years ago, I shared about my experiences as an adult child with an aging parent who came to live with me. One of the first things I did when I received word that dad would be coming was to look for support or companionship for him. Early on, he was able to be left home alone during the day (as my husband and I both worked) but I didn’t want his life in my home to be a lonely existence. My neighbor was on a similar journey; her father had also come to live with her. Dad and the neighbor became friends and most days, would walk downtown together for coffee. I appreciated the fact that the neighbor could make sure Dad found his way home. How lucky I was to know of my neighbor’s similar situation and their willingness to work together in providing quality of life for our parents.

My daughter, who lives in Boise, is very tech savvy. I enjoy hearing about her use of technology to solve problems or streamline tasks. To coordinate volunteers or donations of food for school celebrations, they use an online app called SignUpGenius.com. Accounts are free and reminders can be sent from the online app. Her close-knit group of friends uses another online app called MealTrain.com. When someone from their group has a baby, surgery, death in the family or other cause for support, the delivery of meals is organized utilizing this app.

While each of these apps was designed for a specific task, creative minds have found other ways to use them.  For example, one of my daughter’s friends had a parent going through chemo. The Mealtrain.com app was used to help organize rides and moral support (company during treatments).

Another app that came to my attention was called Komae.com. This app is used for community co-ops…babysitting coops or carpooling or…use your imagination. Membership in these co-ops begins with an application process to ensure new members are a good fit for the group and to clearly communicate the expectations of the group. In the case of childcare, the app records “deposits” of time you provide caring for the children of others, and makes “withdrawals” of time when your children are cared for by others. This ensures there is a balance of give and take.

What instantly came to mind for me was the growing number of adult-children-with-aging-parents in Iowa. What if adult children caring for aging parents formed a co-op where adult care could be provided for the members by the members in the co-op. Considering the huge expense associated with care for the aging, and the fact that there is a shortage of service providers, especially in rural parts of the state, this app would be very useful. Near the end of Dad’s stay with me, this app would have come in handy as I struggled finding care providers that were willing to come to my house and sit with dad. What solutions have you found addressing the issues of caring for an aging parent?

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Smile! For the Camera

On Super Bowl Sunday in my area it was so foggy you could not see your hand in front of your face. While many were preoccupied with football (or the commercials), there were others that were taking advantage of weather that easily conceals illegal activities.

Padlock

On Monday morning, my colleague found that the family’s storage unit, located a few blocks from their home, had been broken into. In total, there were 4 or 5 units that had been broken into, plus it was obvious that unsuccessful attempts were made on several other units.  An examination of the storage units that withstood the break-in attempts made it clear that the quality of the padlock is what made the difference in the safety of the contents. My friend was lucky because only tools and equipment were stolen — not the classic car they also had stored in the unit.

This is a common problem among rural properties.  Farmers often have buildings that they only spend time in during the spring, summer and fall months. Thieves will frequently enter these building and take a few small items. Their intent is to see if you notice that the small things are missing AND to take inventory of larger, more expensive items stored in the building. They may also leave something leaned or stacked in a certain way that would topple or need to be moved if someone entered the building. These tactics inform the thief whether someone does visit this building.  After several weeks, if the building still appears un-visited, they will come back and help themselves to the big-ticket items. A lot of farmers use trail cameras, (cameras used by hunters to study the activity of animals in the area) to monitor building sites or even their homestead.

With all the new and fairly inexpensive security equipment on the market – doorbells with cameras, spotlights with built-in cameras and small camera units – it is no surprise that the police are having an easier time catching thieves. It is also interesting to see the number of police and neighborhood postings on Facebook asking for help in identifying thieves that are caught on home security systems. As for my friend, it was suggested by local police to consider using a trail camera to keep an eye on their storage unit and, of course, to purchase a better lock.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Auto-Pilot vs Mindlessness

Two cardboard boxes delivered to a residential home wait outside a black metal front door on a brick patio, Midwest, USA

We have frequently talked about strategies for making good financial habits. One strategies is to “make it automatic”. For example, if I want to save 10% of my monthly paycheck, I would have a greater chance of making it happen if I were to set it up with my employer. Each month, a portion of my paycheck could be auto-deposited in a savings account while the remainder of my check would go directly into my checking account. Basically, I made the decision once and it happens monthly without me having to remember to transfer money from my checking account to my savings account.

For the last couple of years, I have done a lot of on-line purchasing, including a large portion of my gifts and a few household consumables. Within the online shopping platform, I have always compared prices, companies, and options. I would also check Consumer Reports to compare brands and quality reviews. I considered myself to be a good shopper. When this online platform first arrived on the scene, I was diligent in comparing prices with our local stores to make sure I am getting the best deal.  In recent months, though, I haven’t done much comparison shopping;  …I just assumed…which I am sure is what online “stores” were counting on.  They hook consumers with the price, convenience & variety, and then later, when the prices rise, we either don’t notice or don’t care because we are hooked on the convenience.

This past week, a new study revealed that when compared to local store chains, this online shopping platform (the one I had gotten used to using) was not always a less expensive way to shop. This is NOT what I wanted to hear! I LOVE the convenience and the speed at which things arrive at my home. I WANT (but I don’t need) more brands to pick from.

So I have a mixed scorecard as an effective consumer. On the plus side, I have been effective in putting my savings account deposits on auto-pilot; but on the minus side, my desire to save money while shopping has slipped as it became a bit mindless. Now the I have to decide if the convenience is worth a slightly higher price.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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A Credit Score Boost

credit score

In the past, the only way to create a credit score for yourself was to borrow money.  This makes borrowing a little tricky for those who have little or no credit history.  How can banks or credit card companies comfortably lend people money if they have no history for determining if they are a good risk?

Payment history – how you have paid your bills in the past — is one of the most important factors in a credit score. Lenders check an individual’s credit score when deciding whether to lend money to him or her.

FICO, the developer of the most widely used credit score, will begin piloting a new score next year (2019) called the UltraFICO score. This new scoring model considers how you manage your checking, savings and money market accounts in addition to how you pay back your credit cards and loans; it could be good news for those who have a strong banking record but have little or no credit history or have negative information on their credit reports. If you manage your checking, savings and/or money market accounts wisely, avoiding overdrafts and usually keep a modest “cushion” of  at least $400 in your checking account, your credit score could receive a much needed boost that can make a difference when applying for a loan.

Use of the UltraFICO score is not automatic. Consumers must opt in before lenders can access their banking records and calculate the alternate score.  Consumers who already qualify for credit on good terms will never need to authorize the UltraFICO score; those whose “regular” FICO scores aren’t quite good enough to qualify are the ones who may benefit from use of the UltraFICO.

FICO has announced the new scoring model as a “pilot” and has not specified how widely it will be in use, so there is no guarantee it will be available through your lenders. Nevertheless, it is worthwhile to be aware of the possibility, for two reasons:

  1. If you are turned down for a loan or credit account, you may wish to ask the lender if they can check an alternate scoring model such as the UltraFICO score.
  2. It is a reminder that responsible management of your banking accounts can pay off; if you have a tendency to occasionally get sloppy and incur an overdraft, the existence of UltraFICO may motivate you to manage your accounts more carefully.

FICO is marketing the new score at its website, which includes a link to a short video describing the basics of UltraFICO.

As always, the best way to improve or protect your credit score is to consistently pay your bills on time, reduce the amount of debt you owe as much as possible and apply for credit only when needed.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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