Tag Archives: krane financial solutions

Do Your Taxes Have Bad Breath?

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Today, our guest poster Justin Krane offers up a step by step plan on how to stay on top of your taxes and how to avoid putting them off till the last minute. Additionally, you can join Justin and our CEO Deborah for an amazing financial webinar on May 29th at 1PM PST/4PM EST. In this webinar, Justin will teach you how to create high quality goals and the financial strategies to put in place to work towards achieving them. You in? We are! Register by clicking here.

You are trying to back away from them but their stank is just ridic? They have no idea how bad their breath is! Especially when they eat the onion bagel with lox cream cheese! You’ll do anything to avoid their halitosis.

Got me thinking. Do your taxes have bad breath? Your taxes only end up stinking if you put them off till the last minute. It stinks to have no idea how much money you owe the IRS. Give your taxes a breath mint! No more scrambling the last few days before taxes are due. No more tax surprises. No more bad breath.

How you plan your taxes is most likely how you plan your financial life. It’s time to be proactive, not reactive! I want your financial life to be easier for you.

Here’s my step by step plan on how to stay on top of your taxes.

1. Keep your books/financial records current. Hire a bookkeeper. You didn’t get into business to enter all of your receipts/bills into Quickbooks by yourself. This should not be your day job. No more 10pm data entry after your kids go to bed. Why not watch Homeland instead?

2. You need to speak with your accountant every quarter (better than getting a root canal, right?). Give them your quarterly profit/loss statement. Review it with them. Ask your CPA to tell you what you owe in taxes for that quarter. Then when you get the amount owed, pay the taxes then. Don’t wait till the end of the year. You will forget. You might spend your tax money somewhere else and then it’s game over. If you do this every quarter, you will most likely have paid in enough in taxes and you wont get hit with a huge bill.

3. Ask your CPA how you are going to pay your taxes. Will it be through withholding from a salary, or just based on paying estimated taxes?

4. Make sure you have the correct entity for your business. Should you be a sole proprietor, LLC, or an S Corp? Ask your CPA if you need to take a salary to pay your taxes. Most of the time, S Corps and C Corps have to pay salaries to you.

5. If you have sizeable realized gains in your investment portfolio, tell your CPA. A realized gain is when you buy something (stocks/mutual funds, etc) and sell it for a profit, in a taxable account.

Why do all of this tax planning stuff? Because now we can have a clearer idea how much money we have left. Our money is dying to talk with us! It’s so much easier to have a conversation with it when we know what we have – once we pay taxes. It’s time for us to get peace of mind, happiness, and more financial control. We just have to make the decision that doing tax planning isn’t that bad after all.

Justin Krane, is a Certified Financial PlannerTM professional and the President of Krane Financial Solutions.  His savvy, holistic approach to financial planning allows clients to unite their money with their lives and businesses with sound financial decisions. Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to create a bigger vision for their business with education and financial modeling. Follow Justin on Twitter @justinkrane.

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How to Get the Most Out of Your Marketing Dollars

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Don’t let your marketing dollars get stuck in the vending machine.

It happens to everyone. It’s like a rite of passage. You go to the vending machine to get your chocolate fix and buy a bag of Raisinets. You put your money in the machine but your candy gets stuck on its way out.

You’re bummed out. You weren’t expecting this to happen. You’re faced with the decision of putting more money in the machine to get what you want – or calling some number to complain, (do they ever answer?) knowing you will never get your money back.

Doesn’t it stink when you spend money and you don’t get what you pay for? Or you have to pony up more money when you thought you wouldn’t have to? Especially if it’s for your business!

First off, when you spend money in your business, think of it as an investment. Don’t just think of it as an expense. That way you will be in the mindset of getting a return on your money, which is really what you are paying for.

Let’s pretend you are considering hiring a marketing consultant to redo your whole brand. Here are 5 things you can do as a business owner to make sure you get what you set out to get in the first place.

  • Is the fee a one-time fee or will you pay as you go? How much time does the fee cover? One week, six months, 20 years or as long as it takes to get what you want? It’s important to be really clear about the length of the engagement. That way, there will be no surprises.
  • Does the fee cover advice and implementation? Sometimes you will get advice to do something, and then you will have to go implement the advice and pay again. For example, your marketing person may advise you to create a company brochure. But what if the fee didn’t include the cost to actually create it? You’d have to pay again. Total stinker. You wouldn’t even get your Raisinets.
  • Rounds of edits. Most marketing plans include 2 or 3 rounds of edits. Find out the pricing for each additional round (the 3rd or 4th). Use your edits wisely so you don’t have to spend extra money.
  • Communication updates. So many marketing people are highly creative and have amazing ideas. But occasionally they seem to fall off the face of earth and are nowhere to be found. Make sure your marketing person gives you weekly status updates, so you can track your progress. It’s the worst feeling in the world to pay for marketing, and get no status updates! Try paying as you go for marketing help. That way the marketing person has skin in the game and will need to show up.
  • The scope of the project. You need to be clear on what you are specifically paying for. For example, if you are paying for a website design and a logo, that is all you will receive. If it turns out that you need a Facebook business page, that will be more money. Just make a list of what you are paying for, so you can get what you pay for and stay on track. Wait a minute – don’t make a list. Ask your marketing person to give you a proposal and an outline of what you will get.

There you have it. No more marketing money getting stuck in the vending machine. It’s time for you to get your Raisinets.

Justin Krane, is a Certified Financial PlannerTM professional and the President of Krane Financial Solutions.  His savvy, holistic approach to financial planning allows clients to unite their money with their lives and businesses with sound financial decisions. Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to create a bigger vision for their business with education and financial modeling. Follow Justin on Twitter @justinkrane.

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Should You Pay Down Your Debt or Invest in Your Business?

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You want to pay down your debt, but your income has been about the same amount for the past two years. Ideally, you’d like to redesign your website, hire an employee to assist you at your business, buy a MacBook Pro, and begin establishing a social media presence. But your credit cards and any other outside debt are killin’ you. Much of this may be linked back to the fact that you could be spending around $200 a month in additional interest which could be going towards trademarking a logo design or buying some software you really need.

You feel stuck because you are not sure what to do – pay down the debt or invest in your biz? If you rack up more debt, you will just dig a bigger hole for yourself. If you make the minimum payment on your debt, you won’t chip away at reducing it. Total deer in the headlights moment.

Everyone’s financial situation is different and what I’m about to tell you is general advice, not personalized. If you had me in a headlock and gave me a noogie and said, “Justin, help! What should I do? Pay down debt or invest in my business?” My answer would be… drumroll please… to do both!

Paying down debt or investing within your business means you will have some extra cash and you have a choice. If you don’t have the extra cash, then you will need to review all of your expenses, both business and personal, and see where you can cut back without it affecting you big time.

But if the only way to pay down debt is to grow the sales of your company and not cut your expenses, then you have no choice but to make smart bets and invest in your business. Smart bets are where you have a pretty good shot at making a 3x return on your money within 3 to 12 months.

A smart bet is also investing a small amount of money that won’t break the bank. Once you test and you see if the investment pays off, then you can go bigger. And what do you do with the profits? Take the cash and pay off that debt.

Here’s what you need to know and understand:

  • What’s the value of each client/customer you have?  Let’s say your average client relationship is worth $1000.  Would you spend $300 to make $1000? Of course! But you don’t know for sure if you will get the client. So you really need to think of the odds and what a customer is worth to you.  Remember, make small bets and test.
  • What’s the rate of interest you are paying on your cards?  Let’s pretend it is 10% interest. Think of it this way: if you paid off your debt, you would be effectively making 10% on your money. That’s because you wouldn’t have to pay interest anymore.
  • Can you lower your borrowing costs? If your rate is 10% on your credit cards, and you can take out a home equity line (HELOC) at a lower rate, that might make sense. You are lowering your borrowing costs. Most of the time, you can deduct the interest on a HELOC. Please consult with your tax advisor to make sure this is the case. Also, you should be able to lock in a rate to protect you in case interest rates rise. An additional option is to work on transferring a pre-existing balance onto another credit card. There are usually fees involved when it comes to doing this but your credit score may go down in the long run.
  • You need to be aware of how you feel about debt. Are you willing to be strategic and borrow money when your gut says it makes sense? Do you feel comfortable borrowing money at 3% to try and make 5%?  Or does owing people money give you the freakazoids?

Justin Krane, CFP®, CIMA® President/Principal

Justin Krane, is a Certified Financial PlannerTM professional and the President of Krane Financial Solutions.  His savvy, holistic approach to financial planning allows clients to unite their money with their lives and businesses with sound financial decisions. Using a unique system developed from his studies of financial psychology, Justin partners with entrepreneurs to create a bigger vision for their business with education and financial modeling. Follow Justin on Twitter @justinkrane.

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Guest Post: 4 Things You Need to Know About Taxes and the Fiscal Cliff

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Taxes schmaxes – I am so over the fiscal cliff. These on-again off-again talks were insane and it’s crazy to me that the negotiations came down to the 11th hour. Post signing the legislation of the fiscal cliff deal, here are the top 4 things you need to know about taxes and the fiscal cliff.

1. All tax rates stay the same. Congress added a bracket. The only tax bracket that changes is the top rate, which was 35% and is now 39.6% for individuals making over $400,000 and $450,000 for married filing jointly.

2. No more payroll tax holiday for employees. The social security FICA tax paid by employees was reduced from 6.20% to 4.20% up to the annual wage base of $113,700. Similarly, the rate for self employed individuals was reduced from 12.40% to 10.40%. In 2013, that is now gone, and the employee’s portion of the payroll tax goes back up to 6.20%. This change affects everyone, whether you are an entrepreneur or an employee. For example, if you make $100,000 you will pay $2,000 more in taxes.

3. Dividends and long term capital gains are still taxed at a rate of 15% (0% for low income investors). But the rate jumps to 20% for individuals making more than $400,000 or married filing jointly of $450,000.

4. The estate tax exemption stays at $5 million (indexed to inflation). It does NOT drop back to $1 million. The estate tax rate goes to 40% from 35%.

Disclaimer: Consult your tax professional for more information pertaining to your taxes and specific financial situation.

Planning your finances doesn’t have to come down to the last hour. Be proactive. Don’t kick the can down the road. Plan and create your financial future. After all, it’s your money.

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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9 Ways to Work with a Bookkeeper for Your Business

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You love being the CEO of your business, but what happens when you have to be the CFO?

Dealing with your business finances can be overwhelming.   If you want to take your company to the next level, you are going to need to have some major clarity around your business finances.  You need to lift up the hood of your business money and see what is going on in there.  That way, you can make better financial decisions, have more control over your business, and focus on your life without being worried about your company finances.  How cool would it be if your stress level went down?!

Here’s the key – you don’t have to be a numbers person to do this.  You just need a system for dealing with your business finances. The first place to start is to hire a bookkeeper.  Your bookkeeper will enter financial data into software, create financial reports for you, and help you manage your cash flow.  Your bookkeeper will explain your numbers to you in a way that you can understand them and you’ll feel really empowered to take control of the money for your business.

Here are my 9 to dos that you should consider when working with a bookkeeper.

1. You need your bookkeeper to communicate with you.  For the first few months, it’s best to meet face to face.  Afterward, tell them that you would like a call or an email from once every two weeks.  One of the calls can be a check-in to see if you need anything.  The other call needs to be a review of two reports: a profit/loss statement and a balance sheet.  Your bookkeeper must teach you how to read these two reports.  Once you understand how to read a basic profit/loss and balance sheet statement, ask your bookkeeper to teach you how to read a statement of cash flows so you understand how to work with key lines in each report.

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Guest Post: Where Do You Get Stuck With Money?

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As a Certified Financial Planner™ practitioner, new clients come to me because they want advice on specific issues like:

What can I do to get better control of the cash flow in my business?
How can I develop a budget that allows me to spend and save?
Can I afford to get office space?
Am I on track to retire?
How should I invest my portfolio?
How can I get ahead in my financial life?

I bring up the definition of insanity – doing the same thing over and over and expecting a different result. As I begin to answer these questions, my clients realize that most financial decisions they must consider somehow relate to making a change. They become more aware of what’s getting in their way and begin to reflect on the notion that something has to change.

Our human brain is wired to resist change because we like the status quo. But sometimes making a change is the right thing to do.
Financial planning forces us to prepare and anticipate for change – which usually can improve our financial lives. Financial planning also gets us closer to reaching our goals – buying that vacation house, feeling financially secure in retirement, starting a new business, or even starting a new hobby.

James Prochaska, a Ph.D., writes about the 6 stages of change in his book Changing for Good (James Prochaska, John Norcross and Carlo DiClemente. New York, NY: William Morrow and Co. 1994). Take a peek below and think about some issues that you are stuck on – and which stage of change you think you may be in.

1. Precontemplation – We have no intent to change. We are in denial. People are putting pressure on us to change. We think its too late to change. For example, we need to quit smoking, save more, take less risk, spend more time talking about our finances with our financial planners, or spouses.
2. Contemplation – We are getting around to acknowledging that we have a problem and are willing to think about what we should do to solve it. This could still take us months or years to make a decision. We may even know what we need to do but we aren’t ready to do it yet. For example, we know that we need to renew our gym membership and get back in an exercise routine.
3. Preparation – We are almost there. We will be making this change in a few weeks. We are developing an action plan and may even rehearse it. For example: We are going to ask for a raise by the end of the year. We are going to do our financial planning by the end of this month.
4. Action – We are taking action based on some type of gameplan we developed. We are making our move and doing something about it. An example would be meeting with our estate planning attorney to create a family living trust, or rebalancing our portfolio based on our financial goals.
5. Maintenance – This stage is where we need to stay in the zone, keep the same new routine, and maintain our desired level of change. It’s where we need to meet with our financial planner every quarter to make sure we are on track and moving towards reaching our goals.
6. Termination – This is where this new change is so deeply rooted in our lives that we don’t go back to our old ways of doing what we changed. It’s a new routine behavior like balancing our checkbook every week, or stretching before and after we exercise.

Life is a journey and change is a constant in your life. The next time you are trying to make some type of transition, especially a financial one, consider reviewing these 6 steps. You’ll be more aware of where you are with regard to change in any direction, and you will understand what it will take for you to get to the next level.

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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Guest Post: Do You Have Business Liability Insurance?

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Business liability insurance isn’t a luxury; it’s a necessity for your business in the event of a potential lawsuit.

Say you’re a physical therapist with your own business. You’re crushin’ it in your biz and then boom! Out of nowhere, one of your old clients sends you a letter and is suing you because he tripped and fell inside your waiting room. Your heart is racing and the last thing you need is to deal with this.

So you call your attorney and he asks you if you have business liability insurance. You’re thinking: did I ever buy that? Time literally stops. You remember reading about it but you know you never got around to buying it.

I don’t want this to be you. Hard work and a really bad lawsuit that is the result of not having business liability insurance can put you out of business. As a business owner, you will need this insurance and there are several types of insurance that you can buy to best fit your business too.

Business liability insurance protects you from liability arising from accidents, injuries, libel, and slander. The policies also cover the legal fees to defend the lawsuit. Some of your vendors or customers may even require you to have this before they do business with you.

If you sell or manufacture a product, than you most likely need product liability insurance. Product liability insurance will cover you if there is a lawsuit that results from someone using your product. The insurance will protect you even if you are negligent and liable for damages. Many wholesalers and retailers of your product will require you to have this type of insurance if you are the manufacturer. Also, many wholesalers and retailers are encouraged to have product liability insurance s well. The insurer also pays the costs to defend you.

If you are in a service based business, you may need a general business liability policy and a professional liability insurance policy. Professional liability insurance is more commonly known as Errors & Omissions (E&O) insurance. E&O insurance protects you if someone sues you claiming they lost money or were somehow damaged as a result of the service you offer. The insurer also pays the cost to defend you.

If you are a home based business owner and work out of your house, most homeowner’s policies won’t cover liabilities or losses from your business activities.

Here’s what you should do to protect yourself as an entrepreneur :

1) Get a referral for an insurance broker. They are independent insurance professionals and can shop the best policy from the best insurance company that’s right for you. If you go to your local State Farm or Farmers or Allstate agent, they may be able to offer it to you, but they can only sell you their company’s policy.

2) Tell your insurance broker the nature of your business. Ask him/her to identify your potential exposure, should you ever have to pay a claim.

3) Do 25 jumping jacks. You still reading this?

4) Tell your insurance broker what your sales and profits are.

5) Look into how much everything is. I have seen policies for business liability insurance that cost under $1000 a year for $1 million dollars of coverage. It’s not that expensive. Review this with your insurance broker.

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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5 Things Employers Should Consider When Offering a 401k

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Starting this July, 401k participants will receive more disclosures about the fees they are paying inside their 401k plans.

The Department of Labor wants more transparency and disclosure on what kind of fees employees are paying inside their 401k plans. Why? Because many employees have no idea how much they are paying in mutual fund fees. A recent survey by AARP said that 71% of people saving for retirement thought they didn’t pay any investment fees whatsoever.

The fees inside a 401k are either paid by the plan sponsor (you – the employer) or by the participants, which are the employees. Over the last few years more of the fees have been paid by the employees. According to a report issued by the Investment Company Institute and Deloitte, employers are moving more of the plan charges onto their employees. For instance, employees are now paying for 91% of plan expenses, which is a substantial increase from 2009 when they paid 78% of such charges.

So how does this happen? Say an employer wants to start a 401k and calls a bunch of mutual fund families to get some pricing quotes to see how much it will cost to set up and administer. Most of the bids come back at $5000 a year. But one comes back at $1000 a year. Why is this one so much cheaper? Because the fund is making the money on the back end – higher mutual fund fees. So the employer goes with the cheaper option, and the little guy ends up paying more in fees.

A report issued last month by the U.S. Government Accountability Office highlighted that many employers aren’t really aware about the fees charged by retirement plan providers (the mutual funds). The most obvious known fee is the expense ratio inside the mutual funds offered inside the 401k plans. Many 401k plans do not offer enough low cost mutual funds such as index funds. That’s because they are usually not as profitable (to the fund company) as an actively managed fund is.

Not sure what the difference between an index fund and actively managed fund is? Further explanation along with the five things to consider if you offer your employees a 401k program and what it means for them are below.

1) Offer index funds inside your 401k plan (for an explanation of index funds vs. actively managed funds, click here)

2) Be proactive. Tell your employees about the upcoming information they will receive about the fees they are paying.

3) Calculate the average expense ratios of the funds in your 401k.  Shop your pan and see how competitive your current 401k is.

4) Remember that if you are most likely a plan fiduciary, which means you are personally liable if you breach your duty as a fiduciary to the plan participants and beneficiaries.

5) Consult with 3rd party professionals like plan administrators and ERISA attorneys to make sure your 401k plan is compliant.

Some Additional Statistics to Keep in Mind…

In the 1990s, when the average stock mutual fund was making 10% year after year, no one was complaining about mutual fund expenses inside 401k plans.  Everyone was making money.  But today, stock market returns have averaged 3.77% for the past 10 years.  Mutual fund fees inside 401ks have decreased over the past 10 years.  According to the Investment Company Institute, the average expense ratio for a stock fund in 1997 was 1.04%.  In 2011, the average fee was 0.93%.

Remember: higher fees mean lower returns for 401k participants.

If the average investor made 3.77% net of fees and the average fee paid by the investor was 0.94%, the average investor paid nearly 20% of his/her profits in fees.

The trend is for more transparency in 401k fees that people will pay.  Get in front of this and be proactive.  Remember what Wayne Gretsky said – “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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Guest Post: 6 Things I Wish I Knew Starting Out as an Entrepreneur

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Today we’re featuring a special guest post from Justin Krane at Krane Financial Solutions! Ready to make the leap of faith and start your own business? It may be one of the riskiest moves you choose to make but the rewards will be in spades after. Justin Krane tells us today about his entrepreneurial journey and the six things he wished he had known starting out.

It was another business conference, and I was in the room with another 300 financial planners. The room was really cold, the AC was maxed, I had forgotten my sweater and I was freezing!

It was a scenario I’d been in so many times but I had no idea that this session would change the direction of my life.

Out comes the motivational speaker guy. I started to tune him out until I realized he was blind. His name was Jim Stovall, a former Olympic weightlifting champion who had gone blind over time. He told us that he had changed his life because he had changed his mind.

I was thinking, here was this amazing athlete to whom fate had dealt quite a blow and yet he wasn’t bitter. Instead he was brimming with life because he’d made a mental adjustment. The longer he spoke, the more he made me realize that I was playing a mediocre game in life, and that I was resistant to doing anything about it. It was like he was speaking directly to me.

Back then, I wasn’t happy working for a large financial services firm. I had been there for 13 years. But secretly, I wanted independence, autonomy and to feel the thrill of running my own business. The problem was I had no idea how to run a business!

As a Certified Financial Planner ™ professional I obviously knew how to financially plan. So I decided to put those skills to work for my own future business. I made some assumptions and forecasted my future results as an entrepreneur. I based my planning on 3 scenarios: best case, medium case, and worst case. I modeled out my revenue, as well as fixed and variable expenses.

I’m not ashamed to admit that I was freaking out when I was planning this stuff. I kept asking myself: Do I have what it takes to be a successful entrepreneur?  Am I willing to forego a steady paycheck in order to have my own business?

I decided to go for it. I felt like a young bird jumping out of the nest, learning to fly right away. There were no training wheels or life jacket.  And for the first few weeks, it was a wild ride that lasted well into the first year.

Today, I am still a Certified Financial Planner, but I have developed a niche where I work with entrepreneurs. I help them unite their money with their life and business. My goal with all my clients is to help them get an amazing return on their lives.

It’s gotten easier the longer I’ve been an entrepreneur. But looking back, here are the things I wish I had known when I first became an entrepreneur:

1)      Love what you do. Do the things in your business that you love to do – the things you are really good at.  While making money is important, you have to focus on what you love, otherwise you will burn out. There will most likely be parts of your business that you really don’t like to do. Farm that stuff out. Delegate. If you don’t have the money to hire staff, start small. Hire a virtual assistant. Spend a few bucks to take something off your plate.

2)      Diversify your revenue streams. Create a business model where there is more than one way that you can make money.  Get leverage and scale.  Create a product or a system that gives you passive income. Do not trade hours for dollars.

3)      Be conscious.  A financial planner talking about consciousness?  Yes.  You have to be aware of what it is that you want. Think of it this way. You are either taking steps towards your goal or away from it. I have a sign in my office that says more of the same equals more of the same.  If you want a different result, do different things.  Be conscious about what it is that you are really doing every day. One way to do this is to share your ideas with a peer group like a mastermind.

4)      Educate yourself. Study successful entrepreneurs. What have they done that has made them successful? How do they think? How do they create? What makes them smart? For example, Mark Zuckerberg created Facebook to make a social impact. He cares about how people communicate and share information.

5)      Spy on your competition. Know what your competition is doing. What’s working for them? What is their messaging and branding telling you? How can you be different from them? There is plenty of business to go around.  Your competition may be your co-opetition. There may be a way you can cross promote each other’s services. Set up Google Alerts for the top 5 people in your industry.

6)      Spend at least 50% of your time marketing.  Yes, put valuable content about your services or products in the market place. No one knows you. So you gotta get out there and make it happen. People need to hear and see what you are offering. Block time and set aside a few days each week that is solely dedicated to marketing.

Decide to be an amazing entrepreneur.  Challenge yourself to kick some butt!  You’ll love the journey.

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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