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Your boss has just informed you that your department is being reduced by two and you are fired. After he leaves, what are you going to do?
This is not about finding a job it?s about being prepared for financial change. How you prepare for employment change is different for everyone. Being prepared for financial change is the same person to person.

1. Build an Emergency Savings Account

Everyone should have a passbook savings account with money to use in Emergencies. This money is to never be touched except when your car needs repairs you can not afford, your basement floods and you need to pay to clean it up, or your Great-Grandma Ruth is dying and you need to go to her bedside.

Use your Emergency money, and immediately start rebuilding it by paying yourself. A good amount to have in this account will equal six months of your net income (after taxes). This will provide you with a cushion for when you receive the pink slip. If you have a little time to search, you will be able to find enjoyable, quality employment.

2. Prepare a Spending Plan

You already know you should be living on a spending plan now. Have you thought about how you would live after a job loss? Take time today to create a ?Job Loss Plan? so you will have an idea what spending you will reduce as soon as you know you our out of work. Then as soon as you are told those two little words (You?re Fired) you can pull out the plan and start conserving your money. Do not deny what happened and continue trying to live like you did before.

3. Carry No-Debt

This is good advice for everyone, but as it pertains to this article no-debt is really wise. If you are out of a job, you do not want to be paying $500 a month in non-mortgage bills. By keeping your credit card and even your mortgage debts Read more…

For me, the most terrible time of each month is the day our bank statement comes. We commonly call it BSS (Bank Statement Syndrome). I don’t know why it is, but I have trouble getting the parsonage checkbook to balance with the monthly bank statement.

That ominous document intimidates me every time it arrives. After all, the bank’s business is keeping track of accounts. They have hundreds, maybe thousands of accounts and I have just one. On the surface, it seems a rather simple thing for me to keep our checking account up to date, but I assure you, it is not. Every time I try, I lose interest.

Keeping our checkbook accurately balanced is almost like a circus balancing act; everything is up in the air. No matter how often I add those figures, I never get the same result twice. I have resorted to adding up the figures at least three times and then take the average. So far, I’ve been batting a .195 and have been dropped by the major league, which has lost interest in my career. This may satisfy my conscience but it does little to appease the accounting department of my friendly banking institution.

The thing flustering me more than anything else are those fees. The average bank has more fees than a West Virginia hound dog has fleas. Everything I turn around there is another fee. (I need to stop turning around.) Somebody needs to invent a fee powder.

Each bank must employ a stable of employees whose only job is to dream up these fees. How else can you explain it? These fees are creative enough to cover every aspect of a person’s wallet, retroactive three generations back.

To open an account there is a fee. Each account carries a monthly maintenance fee. I have been paying this monthly maintenance fee for several years and I have yet to see someone from the bank come out and mow my lawn. What is this maintenance fee? What are they maintaining? They certainly are not maintaining my checkbook. With all the fees I am paying, I would expect someone from the bank come to my house, sit around my table, and help me balance my checkbook. I would supply the coffee and donuts -for a small fee of course.

Another thing I do not understand is the ATM fee. Why do I have to pay money to the bank to get my money out of the bank? Whose money is it anyway?

I think banks offer monthly bonuses to the employee who comes up with the most creative fee for that month to impose on its customers. Fe?Fi?Fo?Fum all those bank fees are dumb.

Once upon a time and far far away, banks would bribe customers with toasters or umbrellas to open accounts with them. Those very days are over, you can be sure. Now, I’m the one bribing the bank to keep my account with them.

Last week I slipped the cashier the usual quarter and asked her to make sure my deposit got in my account, please. I do not know whether it is bribery or just a gamble and probably would do better with the Florida lottery.

I would not mind it so much if only my checkbook would occasionally agree with the bank statement. It takes a lot of effort on my part to keep some semblance of order in my checkbook. I am not always as successful as I would like. I make mistakes and sometimes they cost me. Read more…

Should the market turn against you, it is important that you design a system that will produce as much loss as you are prepared to take. This loss, known as drawdown, is the maximum amount by which your trading float will temporarily drop at anytime. Doing this in advance, will help you avoid nasty surprises in the future. This gives you the confidence to continue trading when the good times start once more.

It is very unlikely that you will stop trading if your system is trading profitably. However, if you are in a trading year that takes too big a loss, you are likely to stop trading, even if your system has been tested and shown to make a profit over a longer time period. Therefore, design a system based on the risk you are prepared to take which includes a budget for your drawdown.

So how does one pick the best formula for your drawdown time? I will rephrase this question. How many losses in a row should you allow for?

First, I will use the simple example of tossing a coin. If I tossed a coin and it landed “Heads Up” 10 times in a row, are you surprised? However, if I tossed the coin 800 times, your outlook on the results are different.

Trading uses the same scenario. When testing your trading system over many years, you will find a run of 10 losers or 10 winners in a row. Mathematics provides some answers to the likelihood of this happening.

See the examples given in the table below:

———————————————–
Probability of Losses in a Row
———————————————–
System Win/Loss Ratio 60:40 50:50 40:60
———————————————–
5 losses in a row 1% 3% 8%
6 losses in a row 0.4% 2% 5%
7 losses in a row 0.2% 1% 3%
8 losses in a row Read more…

A taxpayer can avoid the tax on long-term capital gains by donating the property to a recognized charity. If the sale of the property would result in a long-term capital gain, but the taxpayer donates the property to charity, the taxpayer avoids the tax on the long-term capital gain and also receives a charitable contribution deduction equal to the fair market value of the property at the time of the donation.

A long-term capital gain occurs when the taxpayer sells or exchanges a capital asset that the taxpayer has held for more than one year for an amount that exceeds the asset’s adjusted basis (usually cost). Most long-term capital gains are taxed at a maximum rate of 15 percent. This rate is much lower than the maximum 35-percent rate that applies to ordinary income.

However, a taxpayer can avoid even the 15-percent tax rate on a long-term capital gain by contributing the property to a recognized charity. In such a case, the taxpayer does not have to recognize the gain. In addition, the taxpayer may deduct the fair market value of the property as a charitable contribution.

For example, assume that a taxpayer bought land for investment two years ago at a cost of $6,000. The land is now worth $16,000. The taxpayer donates the land to a recognized charity. The taxpayer does not have to recognize the $10,000 ($16,000 – $6,000) long-term capital gain. In addition, the taxpayer may deduct $16,000 as a charitable contribution.

The deduction for charitable contributions of an individual is generally limited to 50 percent of the taxpayer’s adjusted gross income (AGI). However, for contributions of long-term capital gain property, the limit is 30 percent of the taxpayer’s AGI unless the taxpayer elects to deduct only the adjusted basis of the property rather than its fair market value.

The taxpayer may carry over any charitable contributions that exceed the annual limit to the next five tax years. The current year’s contributions are deducted before any contributions carried over from a prior year.

If the property is tangible personal property, such as a work of art the taxpayer had purchased, the charitable contribution deduction is limited to the taxpayer’s adjusted basis in the property. The taxpayer may not deduct the fair market value of such property if it exceeds the property’s adjusted basis. In addition, the deduction for contributions of property to private nonoperating foundations is limited to the adjusted basis of the property.

If the property is ordinary income property or property the sale of which would result in a short-term capital gain, the deduction is also limited to the adjusted basis in the property. However, the taxpayer would not have to Read more…

Practically every small business has receivables that it cannot obtain from clients. If your small business doesn’t have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Bad Debt Tax Deduction

A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:

A. The existence of a legal relationship between the small business and debtor;

B. The receivables are worthless; and

C. The small business suffered an actual loss.

Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest requirement to meet, the Read more…