Starting a home-based business

It can be great to be your own boss. But there are challenges, too. Make sure you think it through before setting up on your own.
Home-based businesses are a growing part of the corporate landscape -- there are more than 11 million home-based businesses in the U.S. today, according to a recent study by the Independent Insurance Agents and Brokers of America.

But before starting one up, think it through. It’s great to be able to wear your pajamas to work, but you need to earn a decent income and there’s a lot more to operating your own home-based business than meets the eye. The U.S. Department of Labor lists some useful websites for home-based businesses or people who are self-employed.

To begin with, you need to have lots of initiative, self-confidence and marketing skills, as well as perseverance. Nobody’s going to be putting work in your in-basket anymore -- you’ve got to get out there and find it. Good contacts as well as the ability to sell yourself and your goods and services are essential. Once you’ve got the work, you’ve got to be disciplined enough to get up and get at it every morning so that you meet deadlines and delivery dates. You also have to persevere when business is slow and the checks are few and far between.

Good organizational skills and business smarts are other must-haves. You need to set up a business plan, arrange financing, price your products or services competitively, and make sure you don’t get so caught up in a project that you let marketing, bookkeeping and other essential tasks slip.

If you are ready to set up your own business, here are some of the pros and cons of working for yourself out of your home.

Pros

Flexible working hours. This one’s a biggie, especially if you have kids. It also allows you to capitalize on your personal peak working times and to goof off on a sunny day (provided you have the discipline to make up the lost time after sundown or on a rainy Saturday).
Being your own boss. No one will be looking over your shoulder or stepping on your toes. No one can fire you (except your clients). You have the freedom to put as many of your own ideas into effect as you see fit, and you get the benefit and experience of participating in every aspect of a business operation.
Cost savings. Working out of your home, you won’t have much overhead and your transportation costs will be lower than if you were commuting. You should also enjoy a reduction in what you’re paying for work clothes and outside meals. Depending on the age of your kids and nature of your occupation, a home business can also help you save on childcare.
Tax benefits. The IRS says you can deduct certain costs (mortgage interest, repair charges, utility bills and real estate taxes among them) associated with your home’s maintenance if you have a home office. Consult a tax advisor to find out whether these deductions apply to you.
More control. The ability to dictate how you can spend your time (and how much of it you wish to spend on work) is important.
Cons

Financial challenges. You have to find funding for your start-up, and also figure out how to weather ups and downs in your income, especially at first. That means exploring financing options such as lines of credit, refinancing your mortgage to get cash out of your home, private investors and family loans. Until the business is established, you may also have to consider options such as continuing part-time work at a regular job until the business is established, selling your second car or renting out space in your home. It’s a good idea to make a personal budget as well as a business plan, so you can anticipate cash shortfalls and estimate how long it will take until your business brings in enough for you to pay your bills.
Keeping your work separate from the rest of your life. When you work in the same place you sleep, work can encroach on your personal and/or family life. Keeping the line between the two worlds distinct can be a challenge. You might want to consider: getting two phone lines (one personal, one business); making a strict schedule for yourself that limits working hours, and putting your office in the basement or other, separate part of the house.
Long hours. With no colleagues to back you up, you’re the one who has to burn all the midnight oil.
It gets lonely. As much as the water-cooler chatter might have distracted you at the office, you may miss it in the silence of your home office.
More administrative headaches. Tax deductions are one thing, but accounting for all of your expenses in the kind of detail the IRS requires can be time-consuming. Unless (or until) you can afford a bookkeeper to look after this chore, you may spend a fair amount of your time on clerical tasks

How to avoid real-life credit disasters

We've all heard horror stories of credit card fraud and runaway debt. Here are some tips on how to protect yourself.
Borrowing money wisely can help you accomplish goals you’d otherwise be unable to attain, such as owning a home or getting an education. But credit can also get you into trouble if you’re not aware of its potential dangers. Here are some examples drawn from real life, along with tips on how to make sure they don’t happen to you.

Fraud and scam artists
Tom received a call from a man who identified himself as a member of the anti-fraud department of his credit card issuer. “Did you recently purchase an item from XYZ Marketing for $450?” the man asked. When Tom said no, the caller continued: “That’s what we thought. This company is currently under investigation for fraud. We’ll process a refund immediately, but I need to verify the three-digit code on the back of your card.” Tom read the number, and the caller confirmed it was correct. A week later, Tom received his statement in the mail. It included a brand-new charge for $450.

Tom was the victim of a scam designed to trick people into revealing the verification code on their credit card. Many merchants cannot process transactions unless you provide this three-digit number, which ensures that you have the card in your possession. To protect yourself, never reveal your credit card information to someone who calls to request it, no matter what story they feed you. Most legitimate credit card companies do not do this with their customers, and if you suspect foul play, hang up and call your credit card issuer back to verify the call. Same goes for your bank account -- never reveal your account details or PIN number. If you suspect you have been scammed, call you card issuer or bank immediately to report it.

Delinquent co-signers
Paula had been divorced for six months when she applied for a mortgage. When the lender checked her credit report, they declined her application because her line of credit was five months in arrears. Paula protested that her ex-husband had agreed to pay off the line of credit as part of their divorce settlement. The loans officer explained that while he was sorry, there was nothing he could do.

Paula discovered the hard way that divorce does not get you off the hook for credit accounts held jointly with a former spouse. Even though Paula’s husband agreed in writing to pay off the line of credit, the lender is not obliged to recognize that agreement -- Paula was still legally responsible for the debt. If you are in the process of divorce, make sure that any joint credit accounts are closed and refinanced during the settlement. That way, if your ex doesn’t pay his or her share, you’re not responsible.

Mortgaging tomorrow to pay for today
Colin made a good salary and felt he deserved the finer things in life -- a luxury SUV, a big house with a swimming pool and dinners at expensive restaurants. His philosophy was always “buy now, pay later.” He bought his home and vehicle with no money down and charged everything to his credit cards, making the minimum payment each month. Then Colin was downsized out of his job, leaving him $300,000 in debt with no way to pay it off. In the end, he was forced to declare bankruptcy.

Smart borrowers use credit with an eye to the future and are careful not to live way beyond their means. Colin spent years racking up high-interest debt to finance a lifestyle he could not afford. Even if you’re not a spendthrift, you may still end up in trouble if you never pay more than the minimum payment on your credit cards or if you’re constantly borrowing from one account to pay off another.

Already feeling over your head in debt? Talk to a credit counselor or financial planner who can walk you through some options for regaining control of your finances, including a debt consolidation loan.

Fly Your Dreams With Adverse Credit History Loans

Is your adverse credit making it difficult finding a loan? Not a problem, as your adverse credit is no more a barrier getting the loan. Adverse credit is added to your credit history when a person taking a loan fails to make timely payments or did not make any payments at all, fall under this category. Even you may attach adverse credit history with arrears, bankruptcy, CCJs, IVA.

The main problem arises when a person with adverse credit requires loan. Adverse credit makes him think twice about his chances of getting loan. But with adverse credit history loans it is of no issue. Adverse credit history loans are availed to both homeowners and tenants. The two types of adverse credit history loans are secured and unsecured.

People with adverse credit history should make up their mind set that the loan they are going to opt will come with high rate of interest but with secured option the rate of interest is lowered. The amount of secured adverse credit history loans ranges from £3000 to £75,000 with the term of 3 to 25 years. The security provided can be your home, car, property papers etc.

On the other hand, the unsecured adverse credit history loans come with slight increase in rate of interest as compared to secured one. The amount of unsecured adverse credit history loan varies from £3000 to £25,000 with a term of 3 to 10 years. The borrowers applying for unsecured adverse credit loans are required to provide documents of their monthly income showing the steady flow of money to satisfy the lender of getting back the loaned amount he offered you.

The amount of adverse credit history loans can be used for various reasons like debt consolidation, home improvement, purchase of car, making interior or exterior changes and many more.

The other factor which makes the borrower take adverse credit history loans are it helps to turn the status of the borrower in the loan market. In case of his sticking to the repayment term shows his credibility and reliability in returning the amount.

Like other loans, some initiatives are needed to get the best adverse credit history loans. Don't confine yourself to only one lender. But have a look at other sources too. The internet is a good option for a swift loan searching on adverse credit history loans. This helps you to get comparative quotes, repayment terms and low interest rates.

Thus adverse credit history loans are affordable to each one. The interest rate offered is according to the pocket of borrower as the competition in market makes it easy to deal with.

Things to consider if you're lending money to family

Considering loaning money to one of your family members? Here are a few easy tips for lending money to family.
It’s natural. You love your family members and want to help them out whenever possible. However, when your son, daughter, brother or sister come to you in need of money, how do you draw the line between a loan and a donation? Here are a few easy tips for lending money to family and still keeping your financial and emotional integrity in tact:

Make sure you are financially sound before lending to others
Of course everyone would like to be able to help a child buy their first home or pay off their college education. But, if the reality is that you can’t financially swing it – then don’t. Do your research about what lending may mean for your finances and your credit score and also consider speaking with your financial advisor about making such a move. There is no reason to put your financial security at risk when there are a multitude of other viable financing options out there. (For more information, read Working with a financial planner.)

Draw up a contract
Sure, it sort of takes the intimacy out of it, but drawing up a legal contract is nothing short of a smart idea when lending money. Not only does it provide a sense of security and formality to the agreement, it also helps to organize the process, making it easier for everyone involved. In creating a contract, everything is out on the table, including loan length, loan payments and loan terms and conditions. It’s simply a good foundation to help you and your borrower get the most out of the loan.

Get a competitive interest rate
As a loving family member, you may want to give your kids or siblings a break in their borrowing interest rate. You don’t have to rake them over the coals, but you do have to consider the interest you are losing by not having those funds in your own investments. With this in mind, you should research interest rates to determine what is competitive by market standards, what you feel comfortable with in terms of your relationship and what is going to keep your finances working for you. Also keep in mind that if you charge an interest rate below a certain threshold determined by the Internal Revenue Service (IRS), your loan may be considered a gift and subject to certain taxes. The minimum interest rate required by the federal government is known as the Applicable Federal Rate.

Learn the tax ramifications
When lending money to family members, you are not only doing them a favor, you are also making an investment. That is, you will make money on the funds you loan. Just as the IRS requires that you use a reasonable interest rate, they also require that you declare any money you earn on a loan in your income taxes. Keep in mind that you are entitled to “gift” another individual up to $12,000 annually tax free. (Note that $12,000 is the annual exclusion for 2006 and 2007.) You may want to factor this into your mortgage contract agreement. (To learn more, please see your attorney or accountant or visit www.irs.gov.)

Don’t risk your relationship
When it comes down to it, no investment is worth your relationship. To this end, it is important to seriously discuss this endeavor and its long-term consequences – both good and bad – before entering such an arrangement. If you decide that going forward with the loan is a good idea, remember to keep the communication channels open after the loan contract has been drawn up and signed to avoid any tension or surprises down the road.

Credit card terms

Credit card terms can be confusing. But it's important to understand them when you're applying for a credit card.
Credit cards have become a standard part of most people’s lives. However, if you’re applying for a credit card for the first time, it can be a bit intimidating. Understanding a few of the most typical credit card terms can help make the process go more smoothly.

Annual fee: An administrative fee that a credit card issuer may charge your account each year.

Annual Percentage Rate (APR): The yearly cost of a loan to the borrower. It’s similar to the interest rate. However, it also includes other charges and fees so as to reflect the total cost of the loan.

Credit card: Any card used to borrow money or buy goods and services on credit.

Credit limit: The maximum amount that can be charged on an account at any given time. If your card has a $10,000 limit, you cannot charge more than $10,000 on it.

There are many different credit cards on the market to choose from. Take time to find the one that’s right for you. And remember, owning a credit card is a serious responsibility. Get a card that has a credit limit you can afford. And remember to use it wisely so you won’t get trapped by credit card debt.

Family loans

Make sure keeping it in the family doesn't bankrupt your relationship.
If you need an extra few thousand dollars to make a down payment or to purchase a house, or are facing tuition fees or a car purchase, borrowing from a family member may be a good option. Thousands of Americans go this route every year. In fact, the person-to-person loan market, including private mortgages, is $65 billion annually. If you’re thinking of borrowing from or lending to someone near and dear, think through the impact it will have on your relationship first. Be sure to put key terms of the loan in writing and consider getting professional advice if the amount of the loan is substantial.

Family loans are tempting for several reasons:

they usually require less security, or none at all
the interest is often lower, or non-existent
the terms are more flexible
the lender is less likely to require a detailed business plan
If you’re the borrower
It’s convenient to get a family loan. But, if things go sour, relationships can suffer. Even though the Bank of Mom and Dad is the lender, you should treat the loan just as seriously as if it were an arm’s-length transaction.

If you’re the lender
You need to avoid putting your own financial future at risk. As a general rule, don’t lend more than you can afford to lose -- there’s always the possibility you won’t be paid back. It’s OK to say no. Refusing a family member’s request for money now won’t be as painful as dealing with payment problems in the future.

Take an interest
There are tax implications for certain person-to-person loans. As always, you should check with a tax consultant to determine the requirements in your situation. However, as a general rule, there are no tax implications for either party for loans under $10,000. But you may be required to charge interest on loans of more than $10,000. And with interest-bearing loans -- even if the rate is very low -- the lender must declare the interest as taxable income. If the borrower is using the money for business purposes, he can generally deduct the interest when calculating profit.

Get it in writing
For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests.

Talk to an expert
If the loan is substantial, or if it’s going to be used for a risky business venture, it’s a good idea to seek the advice of a lawyer or accountant. This will help both parties consider key issues objectively and reach a decision everyone is comfortable with. To save on fees, you may want to prepare a draft agreement yourself and simply ask a professional to review it. Software such as Quicken Family Lawyer can help you draw one up.

For smaller loans, you may not need a formal legal agreement, but you should put the key terms of the loan in writing. These include:

a repayment schedule, including dates, amounts and interest (spreadsheet programs such as Excel include templates that make this easy)
a description of how the money will be used
some explanation of how problems will be resolved if they arise
In a dispute, these documents protect both parties from any attempt to misrepresent the original terms. And if the borrower is unable to repay the debt, the paperwork will help the lender write it off as a non-business bad debt for income-tax purposes. For best results, retain a qualified attorney to represent your interests