All tagged Eric Maldonado CFP MBA CKA

How to start a sole-proprietorship business in San Luis Obispo — Quick Start Plan #SanLuisObispo #soleprop #businessownership

I work with a lot of business owners in San Luis Obispo, and being one myself, I thought I’d right a ‘quick start’ tutorial on how to set up the simplest kind of business — a sole proprietorship.

This article is meant to be a nuts-and-bolts, “what’s needed”, general information in order to create a formal sole-prop business in SLO.

  1. Fictitious Business Name Filing

If you are using a fictitious name, or a doing business as (DBA) name, you will first need to file for it with San Luis Obispo County. Here is the 4 step process outlined: https://www.slocounty.ca.gov/Departments/Clerk-Recorder/All-Services/Fictitious-Business-Name-New-Filing.aspx

In short, you’ll need to make sure your fictitious business name isn’t taken then file for the name here: https://crrecords.slocounty.ca.gov/SLOWeb/action/ACTIONGROUP201S3

Then, you need to publish the fictitious business name statement once a week for four weeks in a local newspaper like the tribune. 

Then the newspaper will provide you with proof of publication to the County of San Luis Obispo.

The fee for is about $52. Here’s the link to the county fees: https://www.slocounty.ca.gov/Departments/Clerk-Recorder/Forms-Documents/Fees/Fee-Schedule.aspx

2. Acquiring the City Business License. 

You’ll need complete the business application: https://www.slocity.org/home/showdocument?id=8083

You can mail it to: P.O. Box 8112, San Luis Obispo, CA 93403-8112 or drop it off at: 990 Palm Street, San Luis Obispo, CA 93401-3249 

If your business address is your home, you’ll need to complete this form and submit it along with your business application: https://www.slocity.org/home/showdocument?id=11454

You as the home owner, or your land lord will need to sign it. The city will post a small sign in front of your home for a couple weeks that a business permit is pending. 

The total cost for the business license for a home-based business located within the city limits is $226.96

Here is the cities “How do I get a business license?” page with more info:

https://www.slocity.org/doing-business/doing-business-in-slo/how-do-i-get-a-business-license

3. Setting up separate Business Checking, Savings accounts.

Next, I would go to either the current bank you use, or search for an online business bank to set-up separate business checking and savings accounts. You will need a copy of your business license for this. These accounts will further legitimize your business by keeping all your expenses and revenue separate from your personal bank accounts.

I also like the idea of starting a separate credit history for your business as soon as possible by applying for a separate business credit card with which you can make business expenses with. Disclaimer: if you are not “good” with credit cards, or have a history of not paying your credit card balance off every month, then it’s not a good idea to put yourself in a position to rack up credit card debt through your business. A credit card only makes sense if you pay off the balance every month so as to not subject yourself to any high interest fees. 

Disclaimer: this article is not meant to be specific advice nor recommendations for anybody, rather general information. 

#AquilaWealthNewsletter -- Home Ownership vs. The Stock Market and An Under Appreciated Way to Save Money - Your Car(s)

In this week's personal financial newsletter installment, I have a couple articles to highlight from my reading -- Home Ownership vs. The Stock Market and An Under Appreciated Way to Save Big Money -- Your Car(s) 


Home Ownership vs. The Stock Market

https://awealthofcommonsense.com/2019/03/real-estate-vs-the-stock-market/

The age old question, "what's a better investment, owning a home or owning stocks?" is addressed in this article. The article writer, Ben Carlson, is more-so writing a response to a research paper put out by the San Francisco Federal Reserve Bank in March entitled The Risk Premium Puzzle. Like many a research paper that attempt to take on a massive data-set in order to draw out a couple of conclusions, there are some glaring issues with this research paper. Namely, the paper shows real returns of the world wide housing market as pretty much keeping pace with stock market returns going back all the way to 1870. Which could then lead people here in the U.S. to believe that owning a home is as good of an investment as owning stocks, aside from the fact that any world wide housing data going all the way back to 1870 would be fraught with all sorts of questionable data gathering methods. Taking world wide data on housing, and using as a basis for owning a home in a very specific part of the world is obviously flawed. Carlson points a couple other very important items to consider when owning a home which this paper didn't consider, "the leverage involved, the cost of borrowing, the length of time in the home, the imputed rent, the psychic income from home ownership and the fact that you have to live somewhere."

Here are a couple opinions from the article I agree with:
"... comparing your home as an investment to the stock market makes little sense."

"Risk can be exponentially higher in housing for the simple fact that it’s also the roof over your head."

"I’m not saying people shouldn’t invest in real estate ... But before you head down that path, no matter what the historical return numbers show, first understand the risks involved in trying to make the roof over your head the biggest part of your nest egg."

 


An Under Appreciated Way to Save Big Money - Your Car(s) 

https://garrettplanningnetwork.com/articles/an-underappreciated-way-to-save-big-money-117

I like this article because it gives some outside-the-box ideas and resources when it come to saving money and counting the cost of car ownership.

First consider the actual cost of your car, including: 

  • Insurance

  • Gas

  • Maintenance

  • Registration fees

  • Taxes

  • Depreciation


Nerdwallet has a helpful tool for finding out the real cost of your car per month: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/

The 3 main points listed in the save money category, from most to least obvious & convenient, include:
1. Buy Used
2. Go Down to One Car
3. Negotiate via Email for your next car

On the negotiating via email front, here's a link to an email template: https://www.moneyunder30.com/get-the-best-deal-on-a-new-car

Writing Your Own Personal Financial Plan, Part 1 -- Your Values and Your Purpose

In this 3 Part Series I will cover, what I believe to be, the three main elements of a properly built personal financial plan.

The 1st element of a well written personal financial plan is: Your Purpose and Your Values.

We start your financial plan writing process with the question: “What is important to you about money?” And, if you have a significant other, this is a wonderful opportunity to hear from them about what makes money important to them. So you can take turns asking each other “what is important to you when it comes to money and finances?” 


It’s important to start with this type of question before moving on into goals, specific to-do items, or investment techniques, because this focuses the entire personal finance discussion around your core values that you hold to be most important to you. 

Everyone has a story when it comes to money and how it has impacted their life from childhood all the way through adulthood. And this plays a major roll in finding out what you value most when it comes to money and having a plan for your finances. So, a few other really insightful questions to ask of yourself, or for you and your spouse to ask of each other, is “what was money like for you growing up” or “what is your first memory of money’s significance in your life?” The answers to these questions will start to fill in some details as to why you think about money the way you do.

Another great exercise to use in coming up with your highest values or your main purposes when it comes to your finances, is to ask yourself or have some one ask you “why is money important to you?” And the key is to continue asking this question over and over with each new answer that comes to mind, until you come to your highest values or purposes for money. Usually it take 5 to 7 “why’s” until you come to a place where your answer is the most important thing to you when it comes to dealing with money and planning for the future.

For example, someone might answer “providing for my family” to the first question “why is money important to you?”

Then the second “why” question is “why is providing for your family important to you?” And someone might answer, “because I want to make sure I can spend time with my family while we’re healthy and young.”

Then the third “why” question is “why is spending time with your family important to you?” And the answer might be, “because I want to make sure we experience new place around the world”

And (you guessed it) the fourth “why” is “why is that important to you?” The answer, for example, might be “because I want to give and serve people in need with my family?”

The fifth question, “is there anything more important than giving and serving with your family?” Answer, “No that’s the most important thing to me.” 

Another title for this exercise is called “The 5 Why’s.”

Now as the example above shows, this person now has at least one purpose or one highest value for their financial plan, which is "to give and serve those in need with my family.” This then become a driver for the rest of their financial plan and it dictates their main goals.

It helps to frame goals with what you value, and it gives a “true north” when determining if your goals are compatible with what is really important to you. Putting your values and purpose for money in writing also serves as a way of preventing you from setting goals that don’t really jive with what’s important to you and/or your significant other. For example, maybe someone thought their mail goal was to buy a condo in the city, when in reality, after going through this exercise, they actually value most flexibility, space, and travel. So, this allows them to redirect their funds towards these goals that better align with their lifestyle desires.

In short, start your financial plan by trying to come up with one or two purposes or highest values for money in your life. This is different than a goal, because goals tend to change based on ages and stages of life, where as, your values and your purpose tend to stay constant and consistent throughout life.  

Putting “your why” to paper, or “your highest values and purposes for money” in writing might sound daunting or even a little too touchy-feely when it come to writing a personal financial plan. However, it’s the most important step of the process. At first it can be slow-going to come up with core values when it comes to money but give it some time and you’ll start to recall pivotal money moments  in your life and you’ll start to have answers to the “why is money important to you?” question.

Tax Planning for Retirement – Roth Benefits

After years of saving and planning for their golden years, many people nearing retirement fail to consider the tax burden they may face on income they receive after they stop working. While you may see a reduction in the amount of taxes you owe after the age of 65, you still need to plan ahead if you want to minimize your tax bill from the IRS.  

Social Security Benefits

Depending upon your total income and marital status, a portion of your Social Security benefits may be taxable. For a rough estimate of your potential tax liability, add half of your Social Security benefits to your projected income from all other sources. This figure is your adjusted gross income (AGI), plus any tax-free interest income from municipal bonds or foreign-earned income. Up to half of Social Security benefits are taxable if this sum, which is called your provisional income, exceeds $25,000 for singles or $32,000 for married couples filing jointly. However, up to 85% of Social Security benefits are taxable if your provisional income is above $34,000 for single filers or $44,000 for married couples filing jointly.

Use the Social Security Benefits Worksheet in the instructions for IRS Form 1040 to calculate the exact amount of taxes owed. Rather than writing a large check once a year, you can arrange to have taxes withheld from your Social Security benefits checks by completing Form W-4V and filing it with the Social Security Administration.

Other Income Sources

In addition to collecting Social Security benefits, most retirees receive their income from a variety of sources, including distributions from 401(k) accounts and individual retirement accounts (IRAs); payouts from company pensions and annuities; and earnings from investments.

Contributions and earnings growth are tax deferred on 401(k)s and traditional IRAs; however, distributions from these accounts are fully taxable, but have no penalties if withdrawals are made after age 59½. If you have savings in 401(k) accounts or traditional IRAs, you must begin making withdrawals from these accounts—and paying taxes on the distributions—by April 1 of the year following the year in which you reach age 70½. If you are at least 59½ years old and have owned a Roth IRA or Roth 401(k) for at least five years, withdrawals are completely tax free. There are no minimum distribution requirements for Roth accounts.

Strategies to Minimize Taxes

Most retirees with nest eggs or pension income of any size will pay at least some taxes on their retirement income, but there are strategies to reduce the amount owed. While it usually makes sense to delay taking taxable distributions from retirement accounts until the funds are needed, or until distributions are required, you may want to withdraw more funds in tax years when claiming a large number of deductions temporarily lowers your tax rate. You may, for example, choose to take advantage of itemized deductions, such as the breaks for medical expenses or charitable gifts, in certain years, while taking the standard deduction in other years.

A desire to leave a portion of your assets to your family may also influence how you handle withdrawals from tax-deferred accounts. Keep in mind that, if you leave behind funds in a traditional IRA, the rules for inheritance can be complex. To avoid these issues and make it easier to pass on your estate to family members, consider converting traditional IRAs to Roth IRAs. While you will have to pay taxes on the funds converted, moving to a Roth IRA eliminates future tax liabilities, regardless of whether you use the funds in retirement or pass the money on to your heirs.