Money and Marriage
One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you stand.
Show me the money: Combine or keep separate or both
One of the best ways to avoid conflict is to put your money into three separate piles: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is all your own. The household spending will then come out of the joint account, and you both will make contributions to it on a regular basis.
As a couple, you’ll need to discuss who will pay for what as well as what your regular contribution will be to the joint account. This is no small discussion. The more thorough you are, the less conflict you’ll have over money.
One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, you both should have access to this account in case of emergency.
Savings and future purchase goals
Do you have goals about upcoming large purchases? These might include:
- A home purchase or improvement
- Children’s education
- Health care needs
- Saving for retirement
- A car purchase
- A second home purchase
- A vacation
- Another item such as a boat, furniture, technology gadgets, a plane, or something else
- A nest egg or cushion
If so, calculate how much you need and make a plan to set aside the money you need in the time frame you agree on.
Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems come in.
When there are conflicts in the area of spending, the best course is to focus on priorities. If you can agree on your priorities and goals, it can often shift spending habits.
You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future.
- Rent or mortgage payment
- Utilities, including electric, gas, water, garbage, phone, internet, cable
- Food and supplies, including grocery, kitchen items, liquor, and eating out
- Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.
- House maintenance including repairs, cleaning, lawn care, appliances, and decorating
- Automobile, including gas, insurance, licenses, and maintenance
- Clothing and accessories, including dry cleaning
- Health care, including pharmacy, doctor’s visit, and HSA contributions
- Personal care, such as haircuts, nail care, etc.
- Tuition and/or education expenses
- Contribution to retirement and savings accounts
- Charitable contributions
- Taxes, including federal, state, local, school, and property
- Paying down credit card or student loan debt
What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals can change over time as retirement approaches.
You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets.
Monitoring your progress
Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.
When you reach your goals, reward yourself. Managing money is hard work, and you deserve to pat yourself on the back when a goal is achieved. If there is anything we can do to help you make your financial dreams come true, please reach out any time.
Today is the perfect time to think about your business goals and where you want to be one year from now. As year-end wraps up, you’ll soon know your financial numbers for 2018. You’ll then be able to evaluate how you did and map out a new plan for 2019.
If you’re like many small business owners, you may have started your business without a business plan. Most businesses don’t need a long 20-page document that will just gather dust on a shelf. But you might want to consider putting together a short, 1- to 2-page concise document that includes the basic components of a typical business plan: mission, vision, strategies, and objectives.
A mission statement describes what the company is in business to do. And while you could simply state a mission similar to “Our mission is to sell our products and services,” you may want to think bigger than that in terms of how you want to be known or to impact more than your customers.
A vision statement describes your company’s future position. It’s what you aspire to be. It could again be, “Our vision is to sell more products and services than any other business.” Or it could be more inspiring and uplifting.
Your business strategies support how you’ll get from where you are to what is stated in your mission and vision statements. While there may be many ways to accomplish your mission and vision, strategies are the approaches you’ll take to get there.
Goals are measurable destinations with a timeline that are created from your strategies. Objectives finally get down to the nitty gritty and state the tactics and action plans you need to execute to put all of this work into play.
Each of these items can be written out on a few lines, taking up all together no more than a few pages. The benefits of having a concise business plan are many: if you think of an idea you want to do, you can check the plan to make sure your idea falls under your vision, mission, and strategies that you’ve laid out for the year. If it doesn’t, then you’ll know that your idea would take you off track from your plan, and you know how easy that can happen these days with all of the distractions and options available to us.
You may want to add additional sections to your plan depending on your strategies. If you plan to launch a new product or execute new marketing strategies, you might want to add a Market Summary section. If you seek new funding, you might want to have a section on funding options. With business planning, it makes sense to do what’s relevant, and nothing more or less.
We wish you the very best in 2019, and if we can help you with the financial portion of your business planning, please reach out.
Why Rhonda Rosand, CPA of New Business Directions LLC Vlogs Why Rhonda Rosand, CPA of New Business Directions LLC started to vlog and why she thinks it’s important to strive for excellence…not perfection!
I know that many of you are wondering if you should upgrade to the new Windows 10 operating system. It has been hard to ignore the constant reminders of this FREE upgrade. Every time we turn on our computers, there it is, asking us to Upgrade Now. Some of us have even had a surprise automatic installation of the newest operating system while we were sleeping!
Microsoft is offering this software for free until the end of July 2016, after which they are going to charge a fee – currently starting at $149 per system for the Home Edition – they have not yet released any pricing for the Professional versions of the software. If you are currently running Windows 8/8.1, then you may wish to consider the update to Windows 10, but please read further.
At New Business Directions, LLC, we have decided to stay with the Windows 7 platform and not to upgrade to Windows 10. Microsoft will still be issuing updates for Windows 7 until 2021 but will not offer any phone or online support for the product.
There have been many issues with the installation of Windows 10 especially in a networked environment and the software needs a lot of tweaking to network correctly and play with other devices – such as printers. We see no real advantage to updating to Windows 10 and we have found it to actually hinder some programs from running properly, specifically QuickBooks and Point of Sale.
Many businesses operate with seasonal peaks and valleys. Retail stores flourish in their busy holiday season. Construction contractors are busy when the weather is good. Accountants are very busy from January through April, but also experience a quarterly peak in July and October.
Your business many have its own calendar of busy and slow times. If your business goes through slow times, then your cash flow may suffer at certain times of the year. But having seasonal sales is only one of the reasons for a bumpy cash flow.
You might also have a business where annual payments are made for many items such as equipment purchases, software licenses, insurance renewals, and other large costs. On the revenue side, it could be that your clients pay you annually, which can be hard to predict.
There are many solutions that can help to smooth out the seasonal bumps, and here are a few ideas for your consideration.
Plan for Prosperity
When income and expenses go up and down and up and down, it’s really hard to know if you have enough money for obligations coming up. Creating a budget can help a great deal. Consider creating two budgets: one that shows the ups and downs and one that averages a year’s income and expenses into twelve equal parts.
With both budgets, you’ll be able to see which months will be deviating from average and by how much. From there, it’s easy to create some forecasts so you can stay on top of your cash requirements.
Cash vs. Accrual Basis
It might help your business decision-making to convert your books from cash basis to accrual basis. This is a huge decision that should be made with an accounting and tax expert, as there are plenty of ramifications to discuss.
In some cases, the accrual basis of accounting will help keep those annual payments from sneaking up on you as 1/12 of the payment can be accrued on a monthly basis to a payables account. This also keeps your net income figure steadier from month to month.
If your clients prepay their accounts on a yearly basis, you can book the income monthly and keep the difference in a Prepaid account. This spreads your revenues out and recognizes them over time.
If you feel accrual basis accounting is a little too much of a commitment, your accountant can still work with you to help you avoid the impulse of spending too much during the cash-rich busy season. Perhaps the excess cash can be put into a savings account until it’s needed. You can draw out 1/12 each month as you need it. A little planning such as the above suggested forecasts will help you determine how much you can take out each month. You can even name the Savings account “Do Not Spend!” or “Save for a Rainy Day.”
If it’s just too tempting to have all that excess cash building up in the good times of the year, try one of the ideas above to take back cash flow control and smooth out those bumps.
| The balance sheet is one of the main financial reports for any business. Among other things, it shows what a company owns, what they owe, and how much they and others have invested in the business. One of the characteristics of a balance sheet is how it separates what you own and what you owe into two categories based on timeframe.|
Current and Long-Term
You may have seen the Assets section of your balance sheet divided into two sections: Current Assets and a list of long-term assets that might include Property, Plant, and Equipment, Intangibles, Long-Term Investments, and Other Assets.
Current Assets include all of the items the business owns that are liquid and can easily be converted to cash within one operating cycle, typically a year’s time. The most common types of current assets include the balances in the checking and savings accounts, receivables due from clients who haven’t paid their invoices, and inventory for resale.
The remaining assets are long-term, or assets that cannot easily be converted to cash within a year. Property, Plant, and Equipment, also termed Fixed Assets, includes buildings, automobiles, and machinery that the business owns. You might also see an account called Accumulated Depreciation; it reflects the fact that fixed assets lose their value over time and adjusts the balance accordingly.
Intangible assets are assets that have value but no physical presence. The most common intangible assets are trademarks, patents, and Goodwill. Goodwill arises out of a company purchase. Investments that are not easily liquidated will also be listed under Long-Term Assets.
Similarly, liabilities are broken out into the two categories, current and long-term.
Current liabilities is made up of credit card balances, unpaid invoices due to vendors (also called accounts payable), and any unpaid wages and payroll taxes. If you have borrowed money from a bank or mortgage broker, the loan will show up in two places. The amount due within one year will show up in current liabilities and the amount due after one year will show up in long-term liabilities.
The most common types of long-term liabilities are notes payable that are due after one year, lease obligations, mortgages, bonds payable, and pension obligations.
Why All the Fuss Over Current vs. Long Term?
Bankers and investors want to know how liquid a company is. Comparing current assets to current liabilities is a good indicator of that. Some small businesses have loan covenants requiring that they maintain a certain current ratio or their loan will be called. The current ratio of your business is equal to current assets divided by current liabilities. Bankers like this amount to meet or exceed 1.2 : 1 (that’s 120%: 100%, although this can vary by industry).
Next time you receive a balance sheet from your accountant, check out your current and long-term sections so that you’ll gain a better understanding of this report.
The technology side of the accounting industry is rapidly changing and expanding. Literally hundreds, if not thousands of new companies and new software applications have sprung up to help small businesses automate their processes and save time and money.
The best way to profit from all of this innovation is to first identify where you can best use the technology in your business. Here are three places to look:
What business tasks are you still using pen and paper for? Look what’s on your desk or in your filing cabinet in the form of paper, and that will be your next opportunity for automation. For example, are you still hand-writing checks? There’s an app (or two) for that.
Sticky notes and to do lists have been replaced with Evernote. Business cards you collect can go in a CRM (customer relationship manager). All of your accounting invoices and bills can be digitized and stored online.
Make a list of all the manual and paper processes you do every day and look for an app that can make the task faster for you.
Take stock of what systems you already have in place. The opportunity to fill the gap is where you might have systems that should talk to each other but don’t. If you need to enter data into two different places, there may be a chance to automate and/or integrate the systems or data. For example, your point of sale or billing system should integrate well with your accounting system. A few other examples include accounting and payroll, CRM and accounting, inventory and accounting, project management and time tracking, and time tracking and payroll.
The more your systems integrate and work as a suite, the better.
It could be you have your systems automated, but the systems are not the best choice for your business requirements. If your systems don’t meet many of your business requirements, it may be time to look for an upgrade or a replacement.
If you are performing a lot of data manipulation in Excel or Access, this might also signal that your systems are falling short of your current needs. Look where that’s happening, and you will have identified an opportunity for improvement.
Look in these three areas in your business, and I bet you’ll not only find an app for that, you’ll also find some freed up time and money once you automate.