This is a great post with some great tips in it. Read it and take it to heart. I plan to.

[Update: Added ghetto hand-drawn image below.]

One of my friends has been carefully watching her spending for the last few months. When she started tracking her spending, she noticed that she was spending an unbelievable amount going out every week. So she came up with a clever solution to control her discretionary spending.

She set up a separate bank account with a debit card. At the beginning of each month, she transfers, let’s say, $200, into it. When she goes out, she spends that money. And when it’s done, it’s done.

This is a nice take of the envelope system, where you decide how much you’re going to spend in each category and literally put cash in different envelopes. You can transfer from one envelope to another, but once your money runs out, that’s all you can spend for the month.

Tip: If you set up a debit account like this, call your bank and tell them you don’t want them to allow you to spend more than you have in your account. Tell them, ‘If I only have $30 in my account and I try to charge $35 on my debit card, I don’t want your system to let me.’ Some banks can handle this request. (Schwab Checking can do this by turning off overdraft/margin protection, while Wells Fargo can’t at all because they suck and are useless.) If you don’t do this, you’ll run up tons of overdraft fees.

Source for Post I Will Teach You To Be Rich.

June Walker provided this great guest post. And how timely is this topic? With tax season just around the corner, I ask June to give us a few tax savings tips. I am hoping I can convince her to be a regular contributor on Home Office Warrior.

Seven Tax Saving Tips for Home-Based Indies

All you self-employed home-office-workers, whether your income skyrockets in the 100s of thousands of dollars or you’re closer to $500 per year, Uncle Sam treats you all the same. That’s right, amount of income earned by an indie who works from home carries no weight with the IRS. You all must follow the same rules.

Here are seven ways to simplify complex IRS rules to fit your work-at-home style.

1. Use two offices. Forget the old husband’s tale that home office is an audit red flag. The IRS has lightened up on this. Even if you work out of two or three places, if used exclusively for your work they are all legitimate deductions. Yes, both your home office and the spare room at your country place where you do your three-hour morning blogging routine every weekend are deductible business expenses.

2. Work at home to increase your business transportation deduction. If you do most of your work outside your home office you may still deduct costs for the area of your home used exclusively and regularly for your business, no matter how small the area. And by having two work places you’ll increase your deduction for auto use or public transportation costs.

Here’s why: The IRS does not allow a deduction for commuting from home to work and back. But it does allow a deduction for getting from one workplace to another. If you work in your home office and then drive to your other workplace you are now driving “from one workplace to another.” You’ve increased your business miles and the amount of your auto deduction, or made your subway trip a business expense.

3. Careful, no office sharing allowed. Keep in mind the all-important IRS exclusive use rule: that your office must be yours and yours only. If you’re the writer for Clyde Client and your spouse handles the graphic design side of Clyde’s website and both you and your spouse use the same office – sorry, no home office deduction.

The way around that: make one spouse the employee of the other. By the way – there are a whole lot more benefits to hiring your spouse.

4. Hire your spouse. Even if your honey only helps you out with printer jams or errand running or fact checking, pay him for it. Putting him on your payroll opens up a vast array of deductions. You can provide generous employee benefits and deduct the costs of those benefits from your self-employed income. What kind of benefits? Well, for one thing, you can give him a medical plan that covers his family – that’s you and the kids. That would make your doctor bill a deductible business expense.

5. What’s a business relationship? Are you allowed to deduct a gift basket of fruit to Grandma? Of course you are — if Gram has some connection to your business. Did she show you how to hook up your scanner? Make curtains for your office?

You’re an indie business and even though you may have a personal relationship with someone, that does not rule out also having a business relationship. This is particularly pertinent in gift-giving. Of course, if you bought your client a basket of fruit as a birthday present you would treat it as a business gift deduction. But what about the friends with whom you have a business connection? If dinner at a friend’s house was planned so that she could help you with your promotion brochure, then the chocolate you arrived with is a business gift.

6. Deduct your laundry and dry-cleaning. Spill ink or red wine on your white silk blouse while attending an awards event? Dry cleaning and laundry while on a business trip are deductible expenses. You may also deduct the costs of the first dry cleaning bill after you return home. But don’t get too creative and save all your winter’s dirty clothes for cleaning the day after you return from a 3-day writers’ workshop.

7. Discuss these ideas with your tax pro before incorporating them into your business. That’s the most important tip of all. If your tax pro isn’t aware of them … time to get a new pro!

For more info on how to simplify your tax and financial life, and save you money check out my book, Self-employed Tax Solutions.

June Walker, tax and financial advisor to solo entrepreneurs worldwide since 1979, is an advocate of simplicity, order and ease in understanding a tax system that is complex, confusing and often unfair to independent professionals.

To learn more and to receive a complimentary List of Typical and Unusual Self-Employed Business Expenses please visit June Walker Online or her blog, June Walker.

One blog which I have come to enjoy and try to read whenever it hits my RSS reader is Get Rich Slowly. This blog is great for the simple fact its tagline is right on. “Personal finance that makes cents.”

And today’s post is no exception. The disability insurance maze: how to select and purchase a policy hit my RSS reader this morning. As we are warned, it is a very long post, but its an important topic. I could not agree more about its importance. Disability insurance is one of those items many of us overlook. And this type of insurance is really important for the self employed and the home office warrior.

Take the time to read this great post and take it as a serious issue we should consider.

Can I deduct a portion of a houseboat as office space is a question which was asked of June Walker: Tax & Financial Advisor to the Self-employed since 1979. I have expressed before how much I like the information contained in June’s blog before and she does it again with this post.

June’s answer to the question is; “yes, you may take a deduction for the costs for a home office on your houseboat. Rules apply same as they do to any other type residence.”

If you have not visited June’s blog, you really should do so. And if you are not subscribing to her RSS feed, you should be. This is a great source for tax and financial planning information for the indie as she calls the self-employed.

There has been some talk these days that 401(k)s are a tax trap. CNNMoney.com had an article about this very subject today called, Are you a sucker to invest in a 401(k)?

The short answer, no. The key for anyone working from a home office is to set up some form of savings. Especially retirement plan. Usually we are our only answer for a pension plan. It is up to us to make sure we are taken care of in our retirement.

From Contributing Editor, John Gay at Christian Money Talk.

Your health insurance coverage probably came in handy several times over the past year. It all seemed so simple at the time–you paid a deductible, and your insurance usually kicked in the rest. But what do you do at tax time? Just what are you taxed on, and what can you deduct on your federal income tax return?

Your income taxes may be affected by two aspects of your health insurance plan–the premiums and the benefits. Here’s what you need to know.

You don’t include employer-paid premiums in your income

For tax purposes, you can generally exclude from your income any health insurance premiums (including Medicare) paid by your employer. The premiums can be for insurance covering you, your spouse, and any dependents. It doesn’t matter whether the premiums paid for an employer-sponsored group policy or an individual policy. You can even exclude premiums that your employer pays when you are laid off from your job.

What if your employer reimburses you for your premiums?

If you pay the premiums on your health insurance policy and receive a reimbursement from your employer for those premiums, the amount of the reimbursement is not taxable income. However, if your employer simply pays you a lump sum that may be used to pay health insurance premiums but is not required to be used for this purpose, that amount is taxable.

In most cases, you won’t be able to deduct the premiums you pay

The deductibility of health insurance premiums follows the rules for deducting medical expenses. Usually, the premiums you pay on an individual health insurance policy won’t be deductible. However, if you itemize deductions on Schedule A, and your unreimbursed medical expenses exceed 7.5 percent of your adjusted gross income (AGI) in any tax year, you may be able to take a deduction. You can deduct the amount by which your unreimbursed medical expenses exceed this 7.5 percent threshold.

For example, if your AGI is $100,000, then 7.5 percent of your AGI is $7,500. If your unreimbursed medical expenses amount to $8,000 and you itemize deductions, you’ll be able to deduct $500 worth of your expenses.

Unreimbursed medical expenses include premiums paid for major medical, hospital, surgical, and physician’s expense insurance, and amounts paid out of your pocket for treatment not covered by your health insurance.

If you’re self-employed, special deduction rules may apply

In addition to the general rule of deducting premiums as medical expenses, self-employed individuals can deduct a percentage of their health insurance premiums as business expenses. These deductions aren’t limited to amounts over 7.5 percent of AGI, as are medical expense deductions. They are limited, though, to amounts less than an individual’s earned income. The definition of self-employed individuals includes sole proprietors, partners, and 2 percent S corporation shareholders.

If you qualify, you can deduct 100 percent of the cost of health insurance that you provide for yourself, your spouse, and your dependents. This deduction is taken on the front of your federal Form 1040; the portion of your health insurance premiums that is not deductible there can be added to your total medical expenses itemized in Schedule A.

Your health insurance benefits typically aren’t taxable

Whether we’re talking about an employer-sponsored group plan or a health insurance policy you bought on your own, you generally aren’t taxed on the health insurance benefits you receive.

What about reimbursements for medical care? You can generally exclude from income reimbursements for hospital, surgical, or medical expenses that you receive from your employer’s health insurance plan. These reimbursements can be for your own expenses or for those of your spouse or dependents. The exclusion applies regardless of whether your employer provides group or individual insurance, or serves as a self-insurer. The reimbursements can be for actual medical care or for insurance premiums on your own health insurance.

Note that there is no dollar limit on the amount of tax-free medical reimbursements you can receive in a year. However, if your total reimbursements for the year exceed your actual expenses, and your employer pays for all or part of your health insurance premiums, you may have to include some of the excess in your income.

Read the disclosure.

Copyright 2008 Forefield Inc. Reprinted with Permission.

By: Robert Kraft

Whether you’re a home office warrior, professional service provider, or other small business owner or entrepreneur, you need to think about getting disability insurance. Don’t worry – I don’t sell insurance, and this is not a sales pitch. But my law firm has represented thousands of Social Security disability claimants, and we’ve seen how hard it is to get those government benefits. If you’re relying on Social Security disability to carry you through any hard times, you need a reality check.

Don’t think that a disability can’t happen to you. Studies quoted by the Social Security Administration show that a 20-year-old has a 30% chance of becoming disabled before reaching retirement age. Most disabilities result from illnesses, not injuries. So you’re not immune just because you drive safely and don’t go mountain climbing. What would happen to you, your family, and your business if you were unable to work for a year or more? Perhaps it would help if you thought of this as “income insurance” rather than as disability insurance.

This short blog post isn’t the place for an in-depth explanation of the various types of long-term and short-term disability policies sold by private companies. Your insurance agent can explain the details to you, but there are a few basic things you need to know. First, and most important, there are varying definitions of disability in private policies. The cheaper policies define disability as the inability to do any job for which you are qualified by education, training, or experience. The better, more expensive, policies define disability as the inability to perform your own previous job. These are called “own-occupation disability” policies. There are further definitions having to do with whether you have to show you are unable to perform ANY of your past duties, or ALL of your past duties. These definitions are absolutely critical. Get the best policy you can afford – one that will pay you if you can’t do ANY of your own prior work. This is especially important for business owners, because we typically don’t perform manual labor. If you lose your eyesight, you can still perform many of the tasks of your previous job, but you may not be able to keep your business running profitably until you can be trained to deal with this loss.

A typical disability policy will pay 40% to 70% of your previous income. None will pay 100%, because there would be no incentive for you to ever go back to work. Other policy options include the length of the waiting period from the time you become disabled until the time the policy starts to pay, and the length of time the policy pays your benefits. The shorter the waiting time, the more expensive the policy. The longer the payout – two years, five years, up to age 65, or for the rest of your life – the more expensive the policy. Check with your business groups or professional associations to see if you can get a policy discount through them. Talk with your insurance agent to learn about the importance of guaranteed insurability and non-cancellable clauses.

So why can’t you just rely on the Social Security disability system to take care of you, and save the expense of buying a private disability policy? There are several reasons, including governmental incompetence, and the unfairness of the Social Security laws. About two-thirds of all Social Security disability applications are denied at the initial application level. Many of the denials are for good reasons, but some seem to be totally random. We frequently see clients who are very obviously disabled, yet have had their claims denied. The good news is that such denials can be appealed (within 60 days). There is then a reconsideration stage, at which most of the appealed claims are again denied, and again with a 60-day right to appeal. The third level is the Administrative Law Judge (ALJ) hearing, and this is where claimants typically hire lawyers for representation.

The unfairness of the laws (not that I’m biased) comes about in the definition of disability and the evidence allowed by the Social Security Administration. Social Security disability is all or nothing. You’re either 100% disabled or you’re not disabled at all. There is no partial disability under the Social Security system. To qualify for disability benefits, you must show that you are unable to perform ANY job available in the national economy. Note especially that this is ANY job – including taking tickets at a movie theater or watching the security console in a building lobby. And note that the job only has to exist somewhere in the national economy, NOT in your city or state. Just because you can’t perform a job paying anywhere near your previous income, or a job utilizing your advanced education or experience, will NOT qualify you for Social Security disability benefits.

At the ALJ hearing, the Administration can provide a medical expert to testify that you are not as disabled, physically or mentally, as you claim, and can provide a vocational expert to testify that there are jobs available somewhere that you can perform. You have the right to provide your own qualified experts for testimony.

If you are successful in convincing the judge that you deserve benefits, you may have a long delay before actually receiving the favorable opinion. Then your benefits will start after a five-month waiting period, and will continue until you qualify by age for Social Security retirement benefits, or until the Social Security Administration does a random reevaluation of your claim and decides you are no longer disabled.

The amount of your monthly benefits will depend on the earnings you have paid into the system, but the 2008 maximum is $2185 per month. If you are able to do some small amount of work, but not hold down a full-time job, you are permitted to earn up to $940 per month without losing your regular monthly disability benefits. So at the very best you’re hoping for about $37,500 per year combined benefits and paychecks. This $37,500 figure is unrealistically high for most beneficiaries, and even that amount would leave most home office warriors short of the money they were accustomed to making each year.

Bottom line, Social Security disability benefits are a great safety net for many people, and a vital part of our nation’s economy. But for the entrepreneur, whether home office warrior or small business owner, these benefits are inadequate, even if you can jump through all the hoops required to qualify. Please talk with your insurance agent about getting a private disability policy or “income policy” to help you better cope if disability strikes.

Robert A. Kraft, of Kraft & Associates, has practiced plaintiff ’s law in Dallas since 1971. In that time he has represented many thousands of clients in almost every type of injury and disability claim. Robert publishes blogs at Bob Kraft’s P.I.S.S.D., Personal Injury and Social Security Disability Blog and the Immigration-Law-Answers-Blog.

The beginning of every new year also begins ‘financial aid season’ for those parents whose children will attend college in the fall.’ Considering how expensive colleges have become and the amount of financial aid that can be gained (or lost) through this process, parents should educate themselves as much as possible about this process.

The Los Angeles Times recently published an article containing the tips to help parents avoid the most common mistakes when filling out financial aid forms.’ You can read the whole article by clicking here, but a summary of the tips is listed below:

• Buckle down and apply
• Don’t procrastinate
• Ignore retirement assets
• Don’t repeat assets
• Note exemptions
• Benefit from divorce
• Save that password

Source:’ ‘Parents Often Fumble on Financial Aid Forms‘ by Kathy M. Kristof, published in the Los Angeles Times.

Source for Post South Carolina Family Law Blog.

Part One:’ What you should know about your family’s financial plan in case of a family catastrophe and how to prepare now.Every married woman and man should insist on knowing specifics about the family’s financial plan. Even if you feel that numbers are not your thing, remember that it’s easier to understand these things now, before a catastrophe happens, than while you’re dealing with difficult times. These simple steps may alleviate some of the stress you’ll face:

1. Open at least one checking, savings, or money market account in your own name. If it’s a joint account, list your own name on the account, Mary Smith, versus Mrs. John Smith.
2. Get a credit card in your own name. This will help you establish a history of credit which may be essential if you find yourself on your own.
3. With your spouse, review your wills, life insurance, trust agreements, and other important documents. It’s important to know where these documents are located and how to get to them in case of an emergency.
4. Participate in meetings with your financial advisor, attorney, and accountant. Don’t be afraid to ask questions and know how to get in touch with these professionals.
5. Know how to read your financial statements. Again, don’t be afraid to ask questions, and if you’re unsure of something, ask your financial advisor. That’s part of the service for which you are paying and your financial advisor wants you to be comfortable with your investments and financial plan.

This information is provided by Aimee Waite, Financial Advisor, with Raymond James & Associates, 101 W. Broad Street, Greenville, SC 29601. If you would like to contact Aimee in regards to your financial planning, you can reach her at 1-800-922-2364 or Aimee.Waite@RaymondJames.com.Source for Post South Carolina Family Law Blog.

Perhaps one of the greatest potential advantages of an S corporation is the potential to reduce the self-employment tax the owner(s) might pay (while also avoiding the “double taxation” of a C corporation).

Sole proprietors must pay “self-employment” tax to cover both halves (employer and employee) of FICA (social security) and Medicare. This tax amounts to 12.4% on net self-employment income up to the social security wage base ($97,500 for 2007) plus an additional 2.9% on all net self-employment income (no cap).

An S corporation treats the owner(s) as employees also and must therefore pay a “reasonable compensation” to the owners. This reasonable compensation, however, does not have to equal the entire amount withdrawn from the business by the owner. To the extent that the reasonable compensation falls short of the total amount distributed to the owner, a tax savings will result since no self-employment or payroll tax is due on “owner distributions.”

Example: If your net business income as a sole proprietor is $97,500 in 2007 but you pay yourself a reasonable compensation of $60,000 (be careful here– you must be able to substantiate reasonable compensation for services rendered), an S Corporation would allow you to pay $5,737.50 less in payroll taxes.

Note: this isn’t quite as good as it looks because you give up a tax deduction for 1/2 of the self-employment taxes paid as a sole proprietor and your ultimate social security benefit would be reduced. Additionally, you will likely have a FUTA (unemployment tax) liability as an S corporation and additional bookkeeping and payroll expenses.

You should discuss the issue of “reasonable compensation” with your CPA and attorney in light of the additional features of an S corporation to determine if it is a viable entity for your business.

Also be aware that there has been much talk in the past (and again recently) of doing away with this advantageous tax treatment afforded to S corporations. Any choice of business entity should take all factors into consideration, not just the tax implications.

Read the DISCLOSURE.