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Rescuing Your Retirement Step 1: Where Are You Now?

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Even if you have a home business and are self-employed, you should have a retirement account. I have a Roth IRA, and am planning to open a solo Roth 401k. It's especially important to prepare for the future when you are dependent almost entirely on yourself for that future.

You might be worried about your retirement (I am a little, but I have a long time horizon), so CNN Money has a great article on rescuing your retirement. We'll look over these ideas in the coming days.

Where are you now?

The first step to rescuing your retirement is to know where you are right now. You need to know the following:

* What is your retirement account worth now? You may not want to look, but this is important.

* How much will you keep putting in? You should keep putting something in your retirement account, even though it can be discouraging.

* What is your retirement time horizon? The longer you have, the more likely you are to recover — and recover well.

* Do you have other sources of retirement income? (Possible reverse mortgage, spouse pension, Social Security, savings, annuities, life insurance, etc.)

You can even work the numbers in a retirement calculator to help you plan. But getting an idea of where you are now can be helpful as you move forward with your planning process to make sure that you have what you need to retire.

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Work from Home Ideas: Getting Creative

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One of the great things about home business is that you can do things that are possible from…home. Jean Murray at Home Biz Notes has a great list of creative work from home ideas. If you have some sort of creative talent, you can use it to start a home business. Here are some of the ideas Jean suggests:

Catering. If you cook well, you can cater. You can make the meals in others' facilities in some cases as well. Just be aware that you may need to hire wait staff for some occasions. Or you can run of those gourmet baked goods mail delivery services. Just make sure you have the proper licenses and permits.

Decorating. Jean points out that projections put the interior design industry at increasing by 19% in the coming years. That's pretty good. If you have an eye for decoration and detail, you might be able to sell your services. This goes for organizational skills (like putting closets in order) as well.

Sewing/upholstery. My mom tried in vain to get me interested in sewing while I was growing up. However, if you are talented in this area, you can make any number of items — including dresses made to order. Crochet, knitting and quilting can also be done from home. My sister in law actually creates crochet patterns that she sells online — along with the items she has made!

Writing/publishing. My home business is freelance writing services. With the current economy, many people are looking to outsource content creation. And, with the Internet, you can serve clients from around the world. Desktop publishing is also something you can do: newsletters, books, catalogs and more can all have their layouts done remotely. Graphic design is another related field that you can do from home.

What other creative endeavors make good work from home ideas?

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Weakening the Effects of Computer Vision Syndrome

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The 'Glasses Apostle' in the altarpiece of the...Image via Wikipedia

For most people, a home business means a lot of time in front of the computer. And, if you are a freelance writer (as I am), that time is even more likely to be a lot. That means that you might feel eye strain and other problems. However, there are some things you can do to help ensure that your vision doesn't suffer as much from heavy computer use. Computer use won't permanently damage your eyes, but you can get eye strain, focus problems and experience discomfort. Family Health Guide offers these tips for reducing the load on your eyes:

* If you need lenses or glasses to see the computer screen, wear them.

* Blink on a regular basis. You may have to force yourself to remember to do this.

* Every 20 minutes, look at something new 20 feet away, and do it for 20 seconds.

* The monitor should be 16 – 30 inches away from your eyes, depending on what you find comfortable.

* The top of the monitor should be at your horizontal eye line, or slightly below.

* Keep your monitor clean.

* Tilt the monitor slightly away from you.

* An adjustable chair can help you change your eye position relative to the monitor.

* Document holders placed close to the monitor should be used for data entry.

* Make sure your work station is comfortable.

Managing your computer use so that it keeps your eyes comfortable is an important part of your home business. You want to be able to work efficiently and effectively, without being slowed down by eye strain.

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Changes to Business Taxes in 2008

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Yesterday, I mentioned that the economic stimulus bill included some measures designed to help small business in these times of economic turmoil. There are also some changes to the way business taxes will be figured for 2008. Here are some of the things to be aware of for your home business when figuring your 2008 taxes:

Self-employment tax

This one is actually a bit of a bummer. The amount of your income from your home business subject to Social Security tax used to be $97,500. Now it is $102,000 starting in tax year 2008.

Deferred compensation plans

It used to be that deferred income from compensation plans was made in the year of the deferral. Now, however, things have changed. Unfortunately, the rules are complex and difficult, and different situations are taken into account. You should probably check with the IRS or a tax professional to see what your situation requires.

Mileage rate

If you drive a lot for your home business, you can deduct some of your expenses. In 2008, the new mileage rate is 50.5 cents per mile for the first six months, and 58.5 cents per mile for the second half. This rather generous change was due to the spiking gas prices last summer. Look for the mileage rate to come down in 2009, I think.

Write-offs for business purchases

For 2008, the amount you can write off has increased. You can write off a total up to $800,000. Additionally, the new allowance (for tax year 2008 only) for property and/or business equipment is $250,000.

If your home business is organized as an S-corporation, you should also consult the IRS or a tax professional about the new income situation — which includes losses to the S-corp. when selling stocks or real estate in volatile 2008.

You can learn more about 2008 tax rules at IRS.gov, or buy contacting an accountant or other tax professional.

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Economic Stimulus: Help for Small Business

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President-elect Barack...Image by Getty Images via Daylife

Today, Barack Obama signed the economic stimulus bill into law. The bill includes help for small business — even help for home business in some cases. Here are some of the items that should help small business owners:

* Measures to get the loan market moving again.

* Loss accounting to help reduce tax liability.

* Expensing for property purchases like computers, cars and trucks, and machinery.

* Incentives for hiring some unemployed workers (military veterans or high school dropouts).

* Capital gains tax breaks for those who invest in small business.

There are also loan programs, including microloans from the Small Business Administration, as well as a special loan program. CNN Money describes the loans meant for small business stabilization:

For companies in need of quick relief, the bill offers a "small
business stabilization financing," which gives them money to pay off
existing loans. Under the program, the SBA can issue or back loans of
up to $35,000; businesses can then use the money to make up to six
months of payments on previous loans. Interest on stabilization loans
will be fully subsidized, and the loans won't have any payments due for
the first year. Borrowers must repay them within five years.

Do you think these measures will help small business and stimulate the economy?

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Definition: Self-Employment Tax

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If you have a home business, chances are that you also have to pay self-employment tax. Wikipedia explains how self-employment tax is charged in the United States:

The self-employment tax in the United States is currently set at 15.30%
which is the equivalent of the combined contributions of the employee
and employer under the FICA tax.
The rate consists of two parts: 12.4% for social security and 2.9% for
Medicare. The social security portion of the self-employment tax only
applies to the first $97,500 of income for the 2007 tax year. There is
no limit to the amount that is taxable under the 2.9% Medicare portion
of the self-employment tax.

As you can see, it is still a requirement to pay Social Security and Medicare taxes as well. This can be discouraging for some, especially since home business owners are also still responsible for income tax, which is different from the self-employment tax. Here are some of the entities that have to pay self-employment tax:

* LLC (if not being treated as a corporation)
* Independent Contractor
* Partnership member
* Sole Proprietorship

If you are operating as a C-corp or an S-corp, then you do not have to pay self-employment tax. But you still have to pay income tax on your earnings.

It is a good idea to consult with a tax professional or an accountant to discuss which arrangements are most likely to help you get the best possible tax situation.

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This is When I Work. Yes, I WORK.

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Ah, time for the semi-regular rant about working from home being actual…work. One of the difficulties with having a home business is that many people assume that you can drop everything to do whatever it is they want you to do. Part of my problem is that so often I do.

Setting regular work hours for my home business

The other day, my husband pointed out that he now recognizes that when I'm working from home, I do actual work. I'm not just dabbling here. He thinks that I should enforce my work hours on others as well.

He's probably right.

While I do need to be flexible in terms of emergencies and days when my son is home from school, it is still important to have general hours devoted to my home business. I like the morning hours. I'm more energetic and productive before lunch.

So my goal now is to tell folks who want something from to wait until after lunch.

Do you have regular work hours for your home business?

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Home Business: When is the Right Time to Raise Prices?

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Many home business owners start out charging less than their peers. As a freelance writer, when I first started out, I made a lot less than I do now. But with experience comes higher pay — I could drop projects that didn't pay well and focus on better-paying clients.

But not every home business owner has the same luxury. After all, if you are selling products or some services, then you have to decide when it's appropriate to raise prices. And right now, even if you are confident that you are worth more, raising prices may not be practicable. Home Biz Notes addresses this issue rather well, I think:

Some experts say you should make small increases more frequently, to
get customers used to the idea that you are going to keep raising
prices.  Other experts say you should make increases less frequently,
but make them substantial.

In today’s volatile economy, raising prices may mean losing
customers. People stopped spending in September 2008, and it will take
a lot for them to get going again. They don’t want to pay a lot,
particularly for services, and people know that the cost of living is
not increasing right now, so if your costs aren’t going up, why are you
raising your prices?  What a dilemma!

An article a few years ago in Entrepreneur Magazine
suggests raising prices when it will have the least impact or be least
noticed.  That is, when people are in the mood to buy.  If you have a
seasonal business, increasing your prices at the beginning of the
buying season might be expected and less resisted.

You can see that there is a range of thought on the issue of when to raise prices for your products and services. In the end, though, it comes down to what your customers and clients expect — and are willing to pay.

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