I’ve always heard how evil PayDay cash loans are. They have been called “scams” and “ripoffs”. I, personally, never had a run in with them until recently.  I met with a 60+ year old woman that was having a hard time making it work financially.  She was still employed and trying to take care of her elderly son who had his fair share of hard times.  Thinking she had on other options, she turned to one of those Quick Cash PayDay loan services.

When she showed me her statement my jaw almost hit the desk.  She had taken out a 9 month loan of $400 (or so) and her interest rate was 521%! I really thought it was a typo at first.  The loan accrued a $5.35 interest charge per day.  $5.35 PER DAY! I don’t remember the exact pay off amount, but I remember it being somewhere in the neighborhood of $1400 for a 9 month loan. If that doesn’t convince you to stay away for PayDay cash loans, then what will?  To shed more light on the topic, Miranda Marquit offers her take on why you should avoid these quick cash loans (better know as PayDay nightmares).

photo credit: kevindooley

The lure of easy money is alive and well, even after the financial crisis and recession he have had. Indeed, with credit standards tighter than ever, it is little surprise that many are looking for ways to get their hands on money without having to go through with an onerous credit check. Payday loans seem perfect, allowing borrowers access to money, usually without a credit check. In many cases, all you need to get a payday loan is a bank account and proof that you have a job. You head into the payday loan place with this information, fill out a form, and write a check for the amount of money you want, plus the fee that payday loan places charge.

PayDay Cash Loans are Dangerous

With payday loans, though, the real danger isn’t in a one-time loan that you pay off. The real danger is renewing that loan regularly as the fees pile up. Payday loan companies make it easy to renew your loan. All you have to do is come in before your check goes to the bank, or before your payment is due (most payday loan places offer terms of between two weeks and two months), and ask for a renewal. You pay the fee, and your loan term is extended. While it doesn’t seem like much to come in with $25 twice each month to renew a $500 payday loan, the money starts to add up. In 10 months, you have already repaid the $500, but that’s just in the fees; you still owe the original $500. Imagine, though, if you get that loan from a place that charges $50 each time you renew. Or $100.

PayDay Cash Loans Have Outrageous Fees

When you work out the fees, you find that payday lenders charge, on average, what amounts to between 300% and 1,000% APR. That gets expensive! On top of that, you are developing very bad financial habits. Instead of living within your means, paying off your obligations and building wealth, you soon find yourself trapped in a lifestyle that leaves you scrambling every month to make ends meet. You are afraid to pay that $500 (or $750, or $1,000) obligation to the payday loan company because you are afraid that you won’t have enough money for other expenses. So your keep making the smaller, more manageable payments. In some cases, borrowers get so entrenched in the payday loan lifestyle that they take out more payday loans to cover other expenses.

Break the Cycle!

photo credit: PinkMoose

It can be very hard to break the cycle of payday cash loans because they are so expensive. However, it is vital that you try. All of the fees that you pay go directly into someone else’s pockets. That is money that you could be using to invest — literally — in your future, building wealth (or at least a decent emergency fund). You could be using that money to go on a family vacation, or buy something that improves the quality of your life. When you continually pay large amounts of interest, you are not getting anything of value in return. You are simply paying for the privilege of borrowing money for things that you may not need.

This is a guest post Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial.

Securities offered through LPL Financial, Member FINRA/SIPC.

Last Thursday, the U.S. trade data was reported for the month of January reflecting a brief pause in an improving trend of export growth. On the same day, the stock market, measured by the S&P 500, moved up to a new 17-month high. The market reaction was fitting since export growth is a key driver of the economy and profits for S&P 500 companies. In fact, exports accounted for 2.3 percentage points of the 5.9 percent fourth quarter Gross Domestic Product (GDP) growth rate, this marked the biggest contribution to U.S. GDP in 13 years. Exports of American-made goods now matter more than ever to investors.

photo credit: Panther1619

Also, last week, President Obama took action to support his goal of doubling U.S. exports within five years by signing an executive order to ‘’marshal the full resources of the United States government behind American businesses that sell their goods and services abroad’’ under his National Export Initiative.

The export strategy will strive to improve access to financing for domestic exporters and help them promote their products overseas particularly in rapidly growing emerging nations such as China, Brazil, and India. Some pessimists argue that America can’t be a leading exporter since we don’t make anything here anymore. However, they are wrong on both counts. It may come as a surprise to some, but the United States is the world’s biggest manufacturer. In fact, the United States is the largest manufacturer by a long shot, making up 20% of the world’s total manufacturing output. The United States manufactures almost twice as much as China, double what Japan makes, and almost three times what is produced in Germany.

If that seems a little hard to believe then think of it this way: exports are measured based on the total value of what is produced, not merely the quantity. High-value items made in the United States and exported to customers in other countries include machine tools, medical equipment, computer software, pharmaceuticals, commercial airplanes, defense products, and satellites among many other products. It is the value of these exports that matters more than the quantity. After all, one U.S. built airliner is worth a lot of Chinese made toys. The United States is a leader, ranking among the top three nations in terms of exports, alongside China and Germany.

American-made goods have become more attractive for overseas buyers following a decline in the dollar last year. It has fallen about 11% against the currencies of the biggest U.S. trading partners from a five-year high reached on March 9, 2009. The dollar decline gives U.S. companies a competitive advantage in global markets.

Even better, the United States sells more to emerging than developed countries. According to the Department of Commerce, Emerging Markets now make up a little over 50% of U.S. gross exports. These end markets are growing much more rapidly than domestic or foreign developed markets. Developed markets like the Eurozone and Japan are struggling with stalled recoveries, as fourth quarter annualized Gross Domestic Product (GDP) in the Eurozone was a mere 0.1% and in Japan was only 0.9%. Much stronger rates of economic growth can be found among emerging market nations such as China, Brazil, and India. Exports matter to investors because S&P 500 companies derive about 40% of their revenue from foreign sources and global markets. Sectors with a high proportion of export-driven sales include Information Technology, Industrials, Energy, and Materials. We continue to favor these sectors of the stock market.

IMPORTANT DISCLOSURES

• This was prepared by LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
• Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability.
• Stock investing involves risk including loss of principal.
• The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
• There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.
• Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
• Industrials Sector: Companies whose businesses: Manufacture and distribute capital goods, including aerospace and defense, construction, engineering, and building products, electrical equipment, and industrial machinery. Provide commercial services and supplies, including printing, employment, environmental and office services. Provide transportation services, including airlines, couriers, marine, road and rail, and transportation infrastructure.
• Telecommunications Services: Companies that provide communications services primarily through a fixed line, cellular, wireless, high bandwidth and/or fi ber-optic cable network.
• Materials Sector: Companies that engage in a wide range of commodity-related manufacturing. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, metals, minerals and mining companies, including producers of steel.
• Information Technology: Companies that primarily develop software in various fields such as the Internet, applications, systems and/or database management and companies that provide information technology consulting and services. Technology hardware & equipment include manufacturers and distributors of communications equipment, computers and peripherals, electronic equipment and related instruments, and semiconductor equipment and products.
• Health Care: Companies in two main industry groups: Health Care equipment and supplies or companies that provide health care-related services, including distributors of health care products, providers of basic health care services, and owners and operators of health care facilities and organizations. Companies primarily involved in the research, development, production, and marketing of pharmaceuticals and biotechnology products.
• Energy Sector: Companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy-related service and equipment, including seismic data collection. The exploration, production, marketing, refining and/or transportation of oil and gas products, coal and consumable fuels.
• Consumer Discretionary Sector: Companies that tend to be the most sensitive to economic cycles. Its manufacturing segment includes automotive, household durable goods, textiles and apparel, and leisure equipment. The service segment includes hotels, restaurants and other leisure facilities, media production and services, consumer retailing and services and education services.
• Consumer Staples: Companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages, and tobacco, and producers of non-durable household goods and personal products. It also includes food and drug retailing companies.

This guest post is contributed by Raine Parker.

It’s that time of year again, when millions of workers nationwide grit their teeth and prepare to file income taxes. As a result, a lot of people are considering hiring an accountant to handle the financial work for them. Whether you’re an individual seeking assistance, a small-business owner looking for advice, or you’re just in the market for a long-term accountant beyond the tax season, here are some things to remember as you search.

photo credit: alancleaver_2000

How Involved is Your Tax Situation?

First, what exactly are you looking for? If you’re a “regular” individual or even someone married and filing jointly, you might just need an accountant for tax preparation and a few questions. However, if you’re the proprietor of a business, an accountant can help you do so much more than just file a return. They can assist you from the ground up, offering help and planning for the future, quarterly financial reviews, and tips to help your business grow without overpaying taxes. Determine what your needs are, and then find an accountant who can meet them.

How Qualified is the Accountant?

Next, what kind of education has your accountant (or the members of the accounting firm) received? Many financial procedures can be overseen by a general accountant, but a Certified Public Accountant (CPA) has undergone further training and is needed for more serious things like an audit. You can still get good work and financial advice from someone who isn’t a CPA, but with a CPA you can be sure that the accountant has achieved a minimum level of testing and education.

Editor’s note: Enrolled Agents (EAs) are tax professionals who have passed a rigorous test and background check administered by the IRS. Enrolled agents often specialize and are best for complex tax situations.

How is the Accountant’s Reputation?

You’ll also need to get a sense of the accountant’s or firm’s reputation. How long have they been doing business? Is this a place you wandered into from the street, or one that’s been recommended to you by a trusted friend or colleague? How many other clients do they handle, and how big are those clients? It’s imperative that you hire an accountant with a reputation for honest work, a quick response time, and the ability to deal with a variety of financial needs, and the best way to learn if your accountant is up to the task is to see what others think of them. It’s the only way to get an unbiased opinion.

Not Just a Need to Know Basis

Finally, get a feel for the accountant by talking to them at length about your life and finances. So much of a good business relationship is built just on the way two people’s personalities get along, and if you find that you aren’t meshing well with your accountant even though they’re a qualified CPA with skill to boot, it’s probably a good idea to keep looking. Remember, this is someone you’ll be trusting with your finances and looking to for advice, so it’s important that you click with them.

The best thing you can do is ask a ton of questions until you start to get a feel for what a specific accountant or firm can provide. The more you ask, the better you’ll be able to hire an accountant that’s perfect for you. That’s enough to make anyone feel better about taxes.

Editor’s addition:

Background Check on Your Accountant or CPA

After your interview, you’ll want to perform a quick background check. Contact your state’s board of accountacy to check the status of a CPA’s license, or to find out if any disciplinary action taken against the CPA. For enrolled agents, you can ask the IRS Office of Professional Responsibility if an EA has been censured, disbarred or subjected to other disciplinary action.

By-line:

This guest post is contributed by Raine Parker, who writes on the topics of online accounting degree. Raine has no affiliation and is not endorsed by LPL Financial.

When it comes to saving money for your child, you have several options to choose from.   Depending on what you are trying to accomplish will help you decide what option is the best for you.

• Do you want it to be solely used for college?
• Do you want the child to assume right to the money then they reach 18?
• Do you want tax deferral?

For parents that college isn’t the primary focus and they don’t mind if the kids gets control of the the money when they become a legal adult, then you may want to consider opening a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). With these accounts, you appoint a custodian, which is typically the parent.  Once the child reaches “age of majority”, then it’s legally their money and they get to do with it what ever they please.

Saving Money for Your Kids

Establishing UGMA and UTMA accounts means designating specific investments for a child’s benefit. By doing so, you may be able to reduce your estate and the taxes you owe on your investment earnings or capital gains. But these accounts also have certain drawbacks.

Where to Open a Custodial Account

Any financial institution typically allows you to open a custodial account. You just need the information for the custodian and the minor and make some sort of donation to open the account.  One perk of the custodial account is that there is no ceiling on how much you can contribute or any income restrictions, unlike some of the other college savings plans.

One item that is important to truly comprehend is that any gift you make to your child is irrevocable, which means that once money has been given it is owned by the child and cannot be transferred back to the original owner. If you donate more than $13,000 in any year (as of 2010)—or $26,000 if you’re married and filing a joint return—to any one beneficiary you may have to file a gift tax return and eventually pay gift taxes.

Differences Between Custodial Accounts and 529 Plans or ESA’s

Unlike 529 plans and Education Savings Accounts, custodial accounts allow you to tap your money with ease. The general rule is that so long that the money is to be used for the child to benefit the child in some way and not the parent, it’s pretty much allowed to be purchased.   For example, buying a car for your child when they reach 16 is perfectly allowed.

Tax Implications of Custodial Accounts: Kiddie Tax

One very BIG DIFFERENCE between UGMA and UTMA accounts vs. ESA’s or 529 Plans is how they are taxed.  Custodial accounts are taxed as ordinary income, not tax free as they are in an ESA or 529 plan. This is what is called the Kiddie Tax.

Once your child turns 14, both the income and capital gains in the UGMA or UTMA account will be taxed at the child’s rate, which might be as low as 10% for interest income and 5% for qualifying dividends and long-term capital gains income, depending on your child’s total assets. Before your child turns 14, however, his or her earnings are taxed differently:

• The first $950 is tax free
• The second $950 is taxed at the child’s rate
• Any amount over $1,900 is taxed at the parent’s rate

This can be a tricky calculation especially if you have more than one kid.  I definitely suggest seeking the counsel of a tax professional to assist you.

Pitfalls of Custodial Accounts

Pitfalls of Custodial Accounts

photo credit: docpop

Paying less tax with custodial accounts might sound like a pretty good deal, but everything good thing usually has its price.  Once your kids gains control of a custodial account, he or she is free to spend the money. The worst part is that they can spend it on whatever or whichever they want and you can do nothing about it.  Visions of helping them pay for college could easily be erased with big ticket purchases such as new shiny car.

Federal Aid For College

Another thing to consider is that if you think your child will apply for federal aid when it’s time to attend college, a custodial account might not be the best option. Since UGMA and UTMA accounts are the property of your child, they may greatly affect chances of securing federal assistance. Students are expected to contribute the majority of their savings to their college educations in any year—as opposed to parents who are expected to contribute a much smaller percentage. If you have any more questions, you can head over the Finaid.org website.

Can You Transfer Money From a Custodial Account?

In certain cases, you may be able to move UGMA or UTMA assets into a 529 plan opened in your child’s name. But your transfers must be made in cash, which means you’ll have to liquidate the assets and pay capital gains taxes before moving the balance to a 529 plan. And since donations to an UGMA or UTMA account are considered gifts to the minor, the amount you transfer will still count as the minor’s assets, which will affect his or her chances of securing federal aid.

Conclusion

As you can see, there are many considerations that go into opening a custodial account.  As of now, I’ve opened a custodial account just so I could buy some stock in certificate form for my oldest son.  I bought the stock as more of a novelty than to save for his future. Most of our money that is to be saved for our kids future is currently going into a 529 plan and I don’t see that changing anytime soon.

Securities offered through LPL Financial, Member FINRA/SIPC

Jeff Rose is a Certified Financial Planner and co-founder of Alliance Investment Planning Group.

This is fantastic guest post by Omie Ismall who shares his experience as successful entrepreneur. Looking to create your own start-up company from scratch? If so, read this and take notes.

photo credit: Infusionsoft

Some years ago, I sat down with one of my Board members to discuss my next year’s compensation.  He said something that still sticks with me to this day,

“You know, your salary doesn’t matter because you’ll never build real wealth from it”

I dismissed the thought.  After all, I had built a six-figure portfolio by the time I was thirty and carried no debt.  My wife and I had lived cheaply since college and had saved 25% of our dual incomes.  But my advisor, who was worth tens of millions of dollars, knew firsthand that the truly rich almost all do it via equity not salary.

Sure, anyone that makes a reasonable salary can build up a million dollar portfolio by simply living below their means and investing the excess cash.  That’s much of what we preach at LiveCheap.  It takes a long time with great expense control, but it is the safest way to becoming relatively well-off at minimal risk.  But the amount of wealth that can be built up with an equity position can make your best efforts saving salary look like a pittance. It’s not the only way, as I wrote in 5 Ways to Get Rich in Less Than 15 Years, but for those that want to build something and make a fortune, small companies can be a goldmine.

Average Entrepreneur

I’m not talking about the Bill Gates’ or the Michael Dell’s of the world.  That’s not your average entrepreneur.  Most small company business owners make their money by dramatically increasing their net worth on the path from $1 million in revenues to $10 million.  At $1 million, the company is nearly worthless but at $10 million it could be worth $20 million or more.  In fact, once the $10 million mark is crossed, a whole host of potential buyers are quite eager to write you a big check.  If you can spend 10 years of your life and grow a company past that mark, you will be wealthier than almost anyone of reasonable income.  Sound easy?  It’s not.  It took me 18 months to hit the $1MM mark from the day of our first sale, but it took nearly 5 more years to get beyond $5MM.  And by most business standards, especially when you are creating an industry, that’s fast.

The small company is a massive wealth builder for a couple key reasons.  Running a successful small company forces you to live below your means.  Your net worth includes a concentrated position in something that you cannot access: private company stock.  Since you are always exposed to downside risk, you tend to be very hesitant about spending money, as you may need to invest capital into the company at any time.  Also, being successful at a small business usually means watching expenses carefully, something that usually is done in one’s personal life too.

When you finally sell, it is treated as a long term capital gain subject to a maximum 15% federal capital gains tax.  If it were income, it would be taxed at more than twice the rate.  So when the day comes to sell, most entrepreneurs are able to undergo a radical change in lifestyle, although many stay true to their frugal ways.  This varies dramatically from doctors or lawyers who tend to scale their expenses as their incomes grow.  An entrepreneur that has never pulled down more than a $150,000 salary may suddenly have a check for $10 million dollars.

So what’s the catch?

Well, few people want to work hard enough to make it happen.  You make less than you would at a regular job and work far more hours, anywhere from 60 to 100 a week, for many years.  The stress is enormous and you find out very quickly how hard it is to consistently meet payroll.  You’ll expose your family to downside risk that you never had being a regular employee and you’ll put off the things that your family wants to do for years all in the name of the business.    Unlike a regular job, you just can’t hop to a new gig every few years: your employees depend on you and you’re tied to the business.  There are dozens more drawbacks but for me they were all overshadowed, not by the ability to build wealth, but rather the ability to build something of lasting value.  And that’s probably the reason why most entrepreneurs don’t want to sell their business even when they have multiples of what they need to retire.  They love it and become inseparable from it.

Interested?  The following list is a quick gut check for being an entrepreneur:

• Are you willing to put your family at financial risk in order to grow a company?
• Are you willing to put in the late nights and weekends to make it happen?
• Do you have core skills that will let you become a great business owner?
• Do you know an industry well enough to run with an opportunity?
• Do you have a passion for something? – just wanting to make money usually isn’t enough
• Do you have enough capital to start the business or make an acquisition?
• Will your spouse or significant other support you in your endeavor?

The last point is vitally important.  Entrepreneurs often have no idea how much they put their wives (or husbands) through.  If you answered yes to these questions, then start heading down the path of entrepreneurship.  In 10 to 15 years, you may have more than enough money to retire, even if you don’t want to.

Omie Ismail is the CEO of Live Smart Media Inc. the holding company for LiveCheap.com.  Omie is a successful information and software CEO for the past decade having taken eCivis Inc. from concept to become the leading grants management company for governments nationwide.  He has a passion for helping people live the good life cheaply and for growing businesses from the ground up.  Omie currently splits his time between his family, LiveCheap, and his next venture.  Omie is not endorsed or affiliated by LPL Financial.

Jeff Rose is a Certified Financial Planner and co-founder of Alliance Investment Planning Group.

One year ago, on March 9, 2009, the stock market began a rally that has led to a total return of 72% for the S&P 500, through the end of last week. As we reach this anniversary it is worth taking a look back at the powerful rally that has unfolded and seek clues as to what may lie ahead as the rally reaches a mature stage.

photo credit: Lilmsmrtas

The stock market rebound has been broad and ranged across all sectors, sizes, and regions of the globe. Even the troubled stock market in Greece is up about 56% in U.S. dollar terms, and 46% in Euros, over the past year, as measured by The Athens Stock Exchanged General Index. Other markets have posted gains, as well. Over that same period, commodities are up 33%, measured by the Commodity Research Bureau (CRB) Commodity Price Index. The bond market, measured by the Barclays Aggregate Bond Index, is up about 9%. In the bond market, losses in intermediate and long maturity government bonds were in contrast to the stock market-like gains delivered by lower-quality corporate bonds over the past year.

While the powerful 72% total return including dividends (68% price only rise in the index) lasting a full year was very strong in historical terms, it pales in comparison to the devastating decline that took the S&P 500 from 1565 on October 9, 2007 to a low of 677 a year and a half later. The S&P 500, now at 1139, has only recovered about half of the losses.

The combination of improving credit markets, the return of economic and profit growth, and demand from overseas investors has sustained the rally over the past year. As you can see in the nearby chart, the S&P 500 closely tracked the path of the LPL Financial Current Conditions Index (CCI), which measures the conditions for the market and economy, over the past year as it has steadily moved from a negative environment to one that fosters growth.

We expect that the CCI may weaken in the latter half of 2010 to reflect an environment of slow growth. The global tailwinds for growth created by massive government stimulus may begin to fade or even give rise to headwinds in the second half of the year (we presented our outlook for this transition most recently in the February 16, 2010 Weekly Market Commentary entitled The Winds of Change). Our outlook leads us to believe that the slower pace of growth may now begin to slow the rally and contribute to the return of volatility in the stock market.

In fact, this is precisely what history tells us is likely to happen. Over the past 40 years, recession-related bear markets ended with strong stock market rallies that lasted until their first anniversary. In their second year, the rallies flattened out and became more volatile providing modest gains punctuated by multiple 5-10% pullbacks.

Over the past 40 years, there have been four recession-related stock market declines in excess of 20%. The rallies that followed these bear markets began following the close on:

1. March 26, 1970, after a 36% decline
2. October 3, 1974, after a 48% decline
3. August 12, 1982, after a 27% decline
4. March 11, 2003, after a 49% decline

It is helpful to review these in reverse chronological order and compare them to the performance of the S&P 500 following the end of the latest recession related bear market.

As you can see in the chart, the S&P 500 in 2009 and so far in 2010 looks a lot like it did in 2003 and 2004. The powerful rally from the March lows may be beginning to take a more volatile path, as did the rally in 2004 after it reached the first anniversary.

Bear Market Rebound

The comparison of the 2009-10 stock market rally to the rally in 1982-83 reveals a similar path for the first year, equivalent to about 250 trading days that led to a return of volatility once the first anniversary passed and the The stock market in 1970-71 and 1974-75 also reflected the return of volatility after the powerful rallies began to mature near the one year anniversary of the bear market low point.

After one year, the S&P 500 is up about 70%. Happy Anniversary? Not entirely. Of course, it is good to have recouped half of the bear market losses. However, the next year is unlikely to be anywhere near as rewarding as the past one if our outlook for a transition from tailwinds to headwinds unfolds and if history repeats itself as the one-year anniversary of the current rally passes.

Disclosures

• This research material has been prepared by LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you,
• consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
• Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability.
• Stock investing involves risk including loss of principal.
• Small-cap stocks may be subject to higher degree of risk than more established companies’ securities. The illiquidity of the small-cap market may adversely affect the value of these investments.
• Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
• The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
• There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.
• The Commodity Research Bureau (CRB) Commodity Price Index tracks the price movements of 17 commodities.
• The CRB index does not follow any one commodity sector, but rather the general direction of commodities overall. The CRB index is watched by both commodity and bond investors because the prices of commodities and bonds tend to move in opposite directions due to inflation.
• Barclays Aggregate Bond Index: This index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.
• The fast swings of commodities will result in significant volatility in an investor’s holdings.
• The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange. The index was developed with a base value of 100 as of December 31, 1980.

Are you a self-employed business owner that is looking for a cost effective to lower your taxes and help you save for retirement?  If that fits your profile then opening a SEP (Simplified Employee Pension) IRA might be a good retirement account to start for your business.

photo credit: khowaga1

When I was researching what would be the best retirement plan to set up for myself when I first became self-employed, I narrowed it down between the SEP IRA and the Solo 401k.  Both allowed very favorable contribution limits, but the administrative costs and ease of setting up made the SEP IRA the easy answer.  If you are considering opening a SEP IRA for your business, here’s what you need to know about the SEP IRA rules and contribution limits and how easy it is to open one.

SEP IRA’s Have Tax Deferred Compounding

Just as a traditional IRA or 401k, your contributions are pre-tax and can significantly lower your taxable income.

You contribute pre-tax dollars to a SEP IRA, and that has the effect of lowering your tax bill. The money in the IRA grows tax-deferred, and your business doesn’t pay any taxes on the IRA earnings. The assets can be invested in many ways.

The traditional IRA rules apply. When you take the money out of a SEP IRA for retirement, you pay ordinary income taxes on it. (Should you withdraw SEP IRA assets before age 59½, you’ll likely be assessed a penalty, with some exceptions.)

SEP IRA Contributions are Discretionary.

One huge bonus for business owners is that you are not required to contribute to a SEP IRA each year.  In addition, there is not a set amount that you have to put in.  This flexibility is priceless for a business owner that has fluctuating net income year after year.

Also, you are not subject to the typical IRA deadline to contribute: April 15th.  If you file a tax extension, you can wait until then to make the contribution.

How Much Can you Contribute to a SEP IRA?

In 2009 and 2010, you can contribute up to 25% of an eligible employee’s compensation, up to a limit of $49,000. No catch-up contributions are permitted for older employees.  Based on the 25% rule the income threshold is $196,000.  Over an above that you will not be able to contribute any more.  That’s when you might want to consider some other business retirement plans.

What Makes Employees Eligible for a SEP IRA?

If you have employees, then provided they pass a series of test, you will have to contribute the same percentage to them- just based on their salary- not yours. Generally, employees of a small business are eligible for a SEP IRA if they

1. are older than 21,
2. have worked for the business in at least three of the five years preceding the year in which the IRA contribution is made,
3. have received $550 or more in compensation from the business in 2009 (this can rise with COLA adjustments in future years). However, the IRS states that an employer “may use less restrictive requirements to determine an eligible employee.”

If you have employees that have ties to a union contract, they may be excluded from having to make contributions.

Opening a SEP IRA is Easy Breezey.

photo credit: another.point.in.time

Opening a SEP IRA is just as easy opening a regular investment account. You can open up one of these plans with the help of almost any financial advisor or financial institution.

In fact, you can even have other retirement plans at your business in addition to SEP IRAs, and you can set up a SEP IRA for your small business even if you are already participate in another retirement plan at another company.

So if you have a small business or work on your own and you want a retirement plan that works for your future without a lot of hassles, talk to a financial professional to see if a SEP IRA is right retirement account  for you to open today.

Securities offered by LPL Financial, Member FINRA/SIPC.

With the completion of our new home, the realization of how much “stuff” we had to move to our new house sent chills down our spine. We’ve been in our first home for just under five years and I’m amazed on how much junk we accumulated over the years. My wife and I had enough stuff just by ourselves; but then you add our son, who has more toys at the age of 2 than I did for my entire childhood- and what you have is a garage sale junkie’s dream.

Back it up. it's time to move!

Moving your home may break your back, but it doesn’t have to break your wallet, too. If you are in a similar situation and are looking to move your home, here’s some ways that we found out to save some money when doing so.

Ask for Boxes, Pack, Repeat

DO NOT underestimate the number of boxes you will need. You can never have too many. We called our local grocery stores and they were willing to give us as many boxes as we could take. All in all, I loaded over 5 loads of boxes in the back of my Tahoe and a friend gave us about 20 additional boxes. This was not including the 40 or so storage bins that we already had. Yes, we are pat racks.

I think my son is in there somewhere.

Shop Your Movers

Having never moved before, we turned to the Yellow Pages to look for some moving companies. We called three different companies to give us a bid on what it would cost to move our house. Keep in mind that our new house is only approximately 2 1/2 miles from our old house, so we didn’t have that far to go.

The first two moving companies did even come out to the house and quoted us $80/hour and $107/hr respectively and both expected the move to take around 6-8 hours. If we wanted them to pack the boxes for us it was $24 per box and $34 if it was fragile (glassware and dishes). See why it makes sense to get plenty of free boxes?

The third company actually came out to look at our house to see how much we had to move. They quoted us $132/hour and claimed that the other companies underestimated how long it would take to move us and would then end up costing us more. Maybe so, but we weren’t sold yet.

Luckily, our fourth option was a referral from a friend. They had hired some guys from a local furniture store to move there house. After giving them a call, we learned that it would only cost us $475 total to move the entire house and all we had to do was rent the U-Haul-which ended up costing us $49.98 plus $20 gas. Needless to say we were sold.

Line Up Some Trucks

To expedite the process, I had my Tahoe, my father-in-law’s truck and a few other friend’s trucks on backup if needed.  While the movers were hauling the big bulky stuff, I loaded up pictures, clothes and other items that I was worried would get damaged in the move.

Beg Your Friends

Having a strong support team is crucial in successfully moving into your new house.  Whether its family, friends, or gracious neighbors; they prove to be invaluable in helping you cope in the moving craze.  We had friends that helped unload the trucks, unpack our boxes, even organize our kitchen!   It was so helpful and made it that much easier to get moved in and not living out of boxes for an extended period of time.

IRS Moving Tax Expense

While we don’t classify to deduct any expenses in the move, many may; so it’s good to keep track of all your moving expenses.   According to IRS Pub 521, here are the two tests that you have to pass to be able to write off the moving expense:

If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonal moving expenses but not any expenses for meals. To qualify for the moving expense deduction, you must satisfy two tests. Under the first test, the “distance test”, your new job must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job must be at least 50 miles from your old home.

The second test is the “time test”. If you are an employee, you must work full-time for at least 39 weeks during the first 12 months right after you arrive in the general area of your new job. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new work location. There are exceptions to the time test in case of death, disability and involuntary separation, among other things.

Good luck on your move and don’t forget your back brace. You’re going to need it!

Securities offered through LPL Financial, Member FINRA/SIPC.

Jeff Rose is a Certified Financial Planner and co-founder of Alliance Investment Planning Group.

I have many reasons in my life to be thankful, but for the purpose of this post I have two major reasons to be blessed:

1. I have an awesome family.
2. I have a truly talented best friend who takes great pictures of my awesome family.

My best friend, Jason York of Jason York Photography, paid a recent visit to the Rose household to capture us with our latest addition, Bentley.  Enclosed are some of our favorites, although there wasn’t one picture that we did not like.  And no, this is not a paid post…..just a shameless plug…..I did mention Jason York of Jason York Photography, right?  Enjoy some classic pics!

Photo shoot with the Rose's

Mom, my butt is cold!

Parker and Bentley showing some brotherly love

Hey brother!

Is there a draft or is it me?

Give me five, bro!

When do you want me to smile?

I'm just doing this to get chocolate later.

Excuse me, you're in my bubble!

You better wash my head when this is over!

I'm so over this photo shoot.

And just for fun…..

This is a urinal, right?

Thanks again Jason York Photography! You never disappoint!

Jason York is not affiliated or endorsed by LPL Financial (Another friendly reminder from my compliance department )

This is a another guest contribution by Miranda Marquit.

If you are self-employed, it can be a good idea to make quarterly estimated tax payments. Making regular tax payments can help you avoid paying interest penalties, and it can shield you from the hardships associated with a large tax bill once a year. Others who should consider making quarterly estimated tax payments include investors and landlords whose tax withholding from a regular job may not be enough to cover the full amount of your tax bill. You will need to make quarterly tax payments as follows: April 15, June 15, September 15, January 15.

How To Make Quarterly Estimated Tax Payments

Figuring your quarterly tax payments

When you make quarterly tax payments, you are estimating your tax liability. It is important to be as accurate as possible. While you are unlikely to exactly figure your taxes, you should try to come as close as possible. Here is how you can estimate how much to pay each quarter in taxes.

• Use your most recent tax return to figure your tax liability. The easiest way to do this is to subtract your total from line 63 (your withholding) on Form 1040 from line 62 (your total tax). This will give you an idea of how much you are usually short.
• Divide the result of your subtraction by four. This will provide you with the amount of money you need to pay every three months in order to meet your tax requirements.
• If you think that you will see a big difference in income (more or less) you can estimate your expected total income for the year, and divide that by four. Just realize that if you owe a great deal at tax time, you may be charged penalties and interest.
• For those that are self-employed, you will need to estimate regular income tax and self-employment tax. First, figure your average tax rate by dividing your income tax, found on line 43 of Form 1040, by your AGI (see line 37). Add your average tax rate to 15.3%, which is the self-employment tax rate. You should have a percentage as an answer. Multiply this percentage by your quarterly profit to decide how much to pay.
• An alternate method of figuring your liability for self-employment is to take your tax requirement from the year before, and divide it by four. This is much easier than figuring your required estimated tax payments each quarter. As long as you pay 100% of the tax shown on the most recent tax return, you should be largely protected from penalties and charges down the road.

Making quarterly estimated tax payments

Once you figure how much you owe in quarterly estimated taxes, it becomes important to actually make your payments. If you decide to mail in your payment, it needs to be postmarked by the appropriate due date. Your payment should be accompanied by Form 1040-ES. Write your Social Security Number or your Employer Identification Number in the memo line of your check, just in case. Your check should be made out to the United States Treasury.

Making quarterly payments easy

You can also use the Electronic Federal Tax Payment System (EFTPS) to make your quarterly estimated tax payments. You can go in every quarter and make your payment, or you can set up recurring payments that are automatically deducted from your checking account, or that are automatically charged to your credit card. With EFTPS, you can also break down your estimated taxes into monthly payments, and set up automatic monthly payments as part of your budget. This system also allows you to print out reports.

Bottom line: If you want to avoid penalties, it is a good idea to make regular estimated tax payments if you have income beyond a regular job with an employer who withholds your income taxes. You can figure your requirement on your own, or with help from a financial or tax professional, and you can easily make regular payments to the Treasury.

This is a guest post Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial. The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.

Jeff Rose is a Certified Financial Planner and co-founder of Alliance Investment Planning Group.