Four simple tips for organizing your finances

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In our busy lives, it’s sometimes tough to corral our financial records. Bills, paycheck stubs, tax returns, and bank statements can disappear into dusty attic corners and bulging desk drawers. Important insurance policies can hide out beneath bins of holiday ornaments and electrical supplies. Mortgage documents can sneak into old books or ensconce themselves in nooks and crannies throughout the house.

Take the time now to coax those papers out of hiding. Here are four suggestions for getting organized.

1. Find a system that works for you. Many people use a computer program such as Mint,  Intuit’s Quicken or Microsoft’s Money to track everyday spending and bank accounts. Others use pencil, paper, and a shoebox. Some people use file folders, labeled for various expenses and accounts; others scan into a computer.

The key is to use whatever system makes sense to you and helps you maintain your finances with a reasonable amount of effort.

2. Dedicate a space and a time. To ensure that bills are paid on time, bank statements are reconciled, and important documents are properly filed, set aside a specific location in your home for financial tasks. It may be a place where you keep a computer or filing cabinets or shoeboxes. Once that area’s set aside, pick a time each week (or each day, if you’re really zealous) to pay bills, enter financial information into check registers, and organize documents.

3. Keep the important stuff in a safe. Don’t leave your only copies of wills, tax returns, stock certificates, or emergency contacts in a pile on the desk. Such documents should be tucked away in a safe deposit box or home safe. Ask your attorney or financial advisor to store the signed copy of your will in a secure location.

4. Don’t keep documents forever. Many papers (such as regular household bills) can be shredded soon after receipt. Other documents, such as those supporting the cost of investments and real estate, should be retained longer for tax purposes. A good general rule for tax returns (and documents that support the returns) is seven years. When it’s time to discard those old pieces of paper, fire up the shredder.

If you’d like additional guidance in organizing your finances, give us a call.

Don’t lose out on the 2014 gift tax exclusion

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Time is running out for making 2014 tax-free gifts. You have only a few more months to use your annual gift tax exclusion for this year, or it’s gone forever.

Each year you can make gifts up to a certain dollar limit to an unlimited number of people, free of any gift tax. For 2014, the dollar limit per recipient is $14,000. These gifts do not reduce your lifetime exemption from gift and estate taxes.

Why would you want to make annual tax-free gifts? There are a number of possible reasons. Tax-free gifts are often used in estate planning as a way of steadily reducing the value of a taxable estate during the owner’s lifetime. Another strategy is to transfer income-producing assets to children or other family members who are in a lower tax bracket. If done carefully to avoid the “kiddie tax,” the result can be a lower overall tax bill for the family unit.

If you fail to use this year’s exclusion, it is not carried over to future years. To qualify as a 2014 gift, the transaction must be completed by December 31, 2014. If you are writing a check as a 2014 gift, do so in time for the recipient to deposit it before year-end.

Check with us if you would like more information about making tax-free gifts in your situation.

Avoid these six mistakes in selling your business

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Most entrepreneurs eventually think about selling their businesses, whether as a prelude to retirement or to pursue other activities. In doing so, they often underestimate the effort required for a satisfactory outcome and overestimate the value and salability of their enterprises. If you’re contemplating selling, here are some common mistakes to avoid.

1. Overestimating the value of your business.

Your price should be based on the fair market value of the business in its current form. Buyers won’t care about the work you’ve put into building your business or your unique vision for its future.

2. Failing to account for the nature and make-up of your business.

The values of most businesses proceed from a mixture of variables. If your business includes significant equipment, real estate, intellectual property, or other such assets, their values should be separately established before being factored into the overall price. If you’re selling a service or professional firm, much of its value may depend on the experience and skills of your managers and employees. In such a case, the price may vary according to the expected retention of key individuals.

3. Failing to base your sale price upon independent appraisals.

Even if you think you know the value of your business, you should obtain two or more outside appraisals from professionals familiar with your industry. If the appraisals conflict with your opinion, they’ll provide a much-needed reality check. If they confirm your opinion, they’ll become a useful sales tool.

4. Not hiring a professional business broker to handle the sale.

Owners are often too personally invested (and/or eager to sell) to effectively negotiate sales of their businesses. A broker familiar with your type of business will know what issues are important to buyers and what characteristics to emphasize or de-emphasize, without becoming emotionally involved.

5. Neglecting to work with the buyer to ensure a smooth transition.

Nobody likes being thrust into unfamiliar circumstances without preparation. Notifying your managers, employees, and customers in advance and doing all you can to allay their concerns will serve your own best interests, as well as being the honorable thing to do. Discontent on the part of any of the affected parties could result in conflicts, reduced revenue for the buyer, withheld sale payments, and litigation.

6. Being unwilling to help finance the sale.

If you’re unwilling to take back a note, your sale price is limited to the buyer’s cash and ability to obtain outside financing. At best this could limit the number of potential buyers, and at worst it could limit your sale proceeds. (Conversely, if you finance too much of the sale price, you’ll increase the risk of default.)

Selling your business is too important to attempt without professional help. If you’re considering selling, call us for an appointment to help formulate your plan.