8 Things You Need to Know About Money

By William J. Lynott

Money, and your ability to manage it, can make or break your business. Here are tips for becoming a better manager of the money flowing into your practice.

1. Don’t Overpay Your Quarterly Estimates
It may feel satisfying to discover that Uncle Sam owes you money at tax time, but don’t be fooled. The IRS gets the last laugh when you overpay your quarterly estimates, because you’ve handed them an interest-free loan at your expense. “The least expensive way for you to pay your tax liability is to try to have estimated payments come out as close as possible to the amount owed,” says certified public accountant Jay Blumenthal, from Abington, Pennsylvania.
2. Don’t Pay Your Income Taxes by Credit Card
Should you take advantage of the pay-by-credit-card program now offered by the IRS and a number of states? On the surface, this option may seem attractive to some therapists. It enables you to postpone your payment, and even pay in installments to the credit card company.
Here’s the catch: you’ll be charged a “convenience fee” of about 3 percent of your tax bill. This is in addition to any interest charged by the credit card company for installment payments. The bottom line: don’t do it.
3. Pass Up Credit Life Insurance
Credit life insurance is expensive—more than most other types of insurance. Although such a policy does offer some protection to the borrower, the prime beneficiary is the lender. If you die before you pay off the loan, the proceeds of the policy go directly to the lender. Nothing goes to your estate, even though you paid the premiums. Most financial advisors advise against credit life insurance.
4. Reconsider Debit Cards 
Be aware of the difference between credit and debit cards. When you use a debit card for your business or personal transactions, the bank deducts the money from your account immediately, so there’s no grace period for paying your bill. If you pay off credit card balances in full each month, the last thing you need is a debit card; use the credit card instead and enjoy up to 30 days of free use of someone else’s money.
5. Beware of Consolidating Credit Card Debt
Debt consolidation comes in several varieties including debt consolidation loans, balance transfers to a zero-percent credit card, and home equity loans or lines of credit. But these are not cure-all options.     
 “Consolidating debts may be only digging yourself into a deeper hole,” says certified financial planner Brent A. Neisner, of Greenwood Village, Colorado. “Before you take that serious step, you should ask yourself how you got into debt trouble. Overspending almost always involves emotional and psychological issues that aren’t going to go away by treating the symptoms.” Find more information on debt counseling at the National Foundation for Consumer Counseling: www.nfcc.org.    
6. Use Your Money to Make Money
Open a money market account at your bank and have it linked to your business checking account to allow for phone or online transfers. Deposit all your daily receipts into the money market account where they will immediately start drawing interest. Never deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash only as needed to cover checks written.
7. Don’t Pay Bills Too Early
Hanging on to cash as long as possible keeps that money available to draw interest or to work in the business. Take the time to set up a system that provides for paying bills only when they’re due. (Of course, don’t go overboard and jeopardize your credit standing by paying bills late.) Pay your bills just before they’re due to get the best use of your money.

8. Don’t Be Afraid of Credit
Extensive use of credit for personal affairs can be problematic. When it comes to business, however, careful use of credit can be one of your most effective money management tools. Spread the cost of capital purchases out over time. Remember, the costs of borrowing are legitimate tax deductions for businesses.

William J. Lynott has an extensive background in management consulting, marketing, and finance. He’s written more than 900 articles appearing in a wide range of consumer magazines, trade publications, and newspapers in 17 countries. Contact him at lynott@verizon.net.

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