Personal finance: How to manage money during the pandemic | Managing Your Finances During a Pandemic.
Times of crisis can bring uncertainty for many reasons, and the current coronavirus pandemic is no exception.
Whether you have experienced a change in your financial situation because of layoffs, reduced hours or wages or through increased medical expenses, it is important to take stock of where you are and make a plan to ensure financial success now and in the future.
Many organizations are offering support to those impacted by the coronavirus. Knowing where to go for help, what to ask, and how to document your situation is key to successfully managing your finances and recovering once the crisis is over.
Steps to help you manage your money during and after a pandemic.
1. Analyze Available Resources.
If there is one upside to the current situation, it’s that many programs are being offered to help consumers stay healthy, both physically and financially. Identify all available resources and take advantage of those that fit your needs. Beyond any savings you may have put aside for emergencies, community resources, like the ones below, could help you bridge a temporary income gap:
Military relief societies are offering grants or zero-interest loans for service members affected by coronavirus. Contact Army Emergency Relief, Air Force Aid Society, Navy-Marine Corps Relief Society, or Coast Guard Mutual Assistance for more information.
Depending on your situation, you may qualify for unemployment benefits. Check with the Department of Labor in your state for eligibility criteria.
Many banks and financial institutions are offering to help consumers impacted by the coronavirus. Contact your individual lenders to find out what is available to you.
Many school districts are providing free meals for children at school pick-up locations or bus stops. Contact your local school to find out whether this is an option where you live.
National and local service providers have a variety of assistance options, from payment plans to free services. Visit 211 from United Way and scroll down for available resources.
2. Create a Priority-Based Spending Plan.
Once you’ve identified resources you qualify for, evaluate your budget and create a priority-based spending plan. Consider all sources of available income and make a realistic list of your expected monthly expenses, prioritizing the "must-haves."
These are things like rent or mortgage, food, utilities, insurance, transportation and medication. Then, do the math. If your adjusted income adds up to less than your total monthly expenses, anything that is not a priority item will need to be deferred as much as possible until the crisis is over and your financial situation changes.
3. Contact Your Creditors.
If you cannot meet all of your financial obligations, contact your creditors to ask for assistance. Some programs are already in place to help stop evictions and foreclosures, so whether you are a renter or homeowner, contact your landlord or mortgage servicer right away to ask for help.
The same goes for providers of automobile, student and personal loans, including credit cards. Creditors might offer reduced payments and fees, deferred payments through forbearance, or other hardship plans.
When you talk with your creditors, be sure to take notes. Write down.
The date and time of your call.
The name of the representative you spoke with.
What you were offered.
How information will be reported to the credit bureaus.
The plan you ultimately agreed on.
Once you agree on a plan, put together a letter summarizing your discussion and mail it to the creditor. Then, monitor your monthly statements to be sure you are receiving the assistance you discussed.
4. Recover Strong.
Although it is difficult to think about future emergencies when you are in the middle of a crisis, consider making a financial recovery plan for once things get back to normal so that you are prepared to handle the next emergency that may arise.
Once you are back on your feet, revisit your monthly budget and commit to regular savings to build or rebuild your emergency fund. Start gradually and set a goal to save $1,000, then keep saving until you have three months of your living expenses put away to handle future emergencies.
If you have debt, consider implementing a rapid repayment plan to pay it down or consider talking with a credit counselor to see if a debt management plan is right for you.
And please remember, these are unprecedented times, and although you may feel alone, everyone is affected by the current pandemic. Take steps to safeguard your physical, emotional, and financial health, and reach out if you need assistance.
A franchise is a business for which a person is licensed by a large company to operate under its name. As a franchise licensee, you operate a business and, in some cases, a brick-and-mortar location. Even without a physical storefront, starting a franchise requires a fair amount of money. There are several ways to finance a franchise. In addition to using your savings and leveraging your existing assets, there are loans and grants available from many sources. You may need to utilize more than one of the following methods to raise enough capital to start your business.
Part 1 Arranging Financing with the Franchisor.
1. Find out what financing your franchisor offers. The place most franchise licensees will start looking for financing is with the franchisor company itself. Many offer loans through their own finance companies or third party financiers they have business relationships with. This will often cover a significant portion of your startup costs.
Franchisors may also have agreements already set up with companies that can lease you some of the equipment you need to get the franchise up and running.
Each franchise has it's own package in terms of what it will offer new franchise licensees. Check into what your company offers.
This information may be available online or in other documents provided with your franchise application, or you may need to request it.
2. Look into down-payment and collateral requirements. Franchisors will require you to demonstrate that you have some collateral that will allow them to recoup their money, should your franchise fail. Many also require that you put up a down-payment of money that you have NOT borrowed from other sources.
McDonalds, for example, typically requires new franchise licensees to pay 25% of the costs of a franchise out of pocket, in cash. This ensures that franchises only go to people who have the necessary resources to make payments.
3. Apply for financing. Complete the necessary forms to apply for financing from the franchisor. Again, these will vary based on the company. Information about how to apply for financing may be included in the Franchise Disclosure Statement, or you may need to request it from the company.
The Franchise Disclosure Statement is a document you will receive from the company if your franchise application is approved. It spells out in minute detail the specifics of the franchise agreement. It is mandated by the Federal Trade Commission that all franchisors provide this document to licensees.
Like any other loan application, you will be expected to provide information about your assets, financial history, and net worth.
Part 2 Securing Outside Financing.
1. Apply for a bank loan. Another option consider for financing your new franchise is a standard small business loan from a bank. Especially if you have a good credit rating and are opening a franchise with a positive reputation, banks may be willing to offer you some starting capital.
Typically bank loans of this sort will require you to put up some kind of collateral, such as your home or any stocks or bonds you might own. They will also often want you to pay for as much as 20% of the cost of starting the franchise from your own money, to be certain you are capable of covering major business costs.
These loans usually require you to have already established a relationship with a banker.
2. Apply for an SBA loan. If your bank won't provide you with a loan, you may be able to secure a loan through the US Small Business Administration. These loans are disbursed by banks and credit unions, but are guaranteed against default by the federal government.
SBA loan 7(a) is available to franchise licensees opening any business on the SBA's franchise registry.
You can borrow between a couple hundred thousand and a few million dollars through the SBA. These loans typically have a five-year maturity period, so they work well for startup costs, but not longer-term expenses.
The International Franchise Association provides a directory on their website of vendors that administer SBA loans. The process of applying for an SBA loan, however, is a highly complicated one. Thus, it is usually recommended that applicants secure assistance from an accountant. If you don't have an accountant, your franchisor may be able to suggest someone.
3. Apply for a finance company loan. A recent development in the world of franchise financing is the online loan portal. These are websites that match franchise licensees with private creditors.
Two of the biggest online loan portals are Boefly and Franchise America Finance.
Some franchisors have have relationships with these companies. Ask your franchisor if they subscribe to any of these website.
4. Find investors or business partners. Another option for financing is look for a business partner to share the cost (and profits) of your new franchise. Many franchise licensees also turn to friends or family to borrow money or ask them to invest in the business.
Several small loans from friends or family members, to whom you promise to pay some mutually agreeable interest rate or equity in the business, can go far to cover the costs of starting a new franchise.
Equity means that your investors will be entitled to a share of the profits from the business and have a certain measure of control over its operations (depending on your agreement with them).
However, equity does not have to be repaid (unlike a loan).
You can also advertise in the local press seeking an investor or business partner. However, advertising for investors can be tricky, due to securities laws regulating the solicitation of public investors. Hire a financial lawyer to make sure you are staying on the right side of the law.
Be sure to draw up a formal agreement about the terms of the investment (i.e. how much they are investing, what interest rate you will pay, and over what period you will pay back the loan). This is especially important if you have investors who you don't know well.
Obtaining investment in this way will require accepting investments under the Securities and Exchange Commission's (SEC) Regulation D and the creation of official offering documents that detail the investment in a specific format.
If you are using Regulation D, be sure to hire a financial attorney to guide you through the process. Otherwise, you open yourself up to financial and criminal penalties resulting from violations of SEC regulations.
Part 3 Using Your Own Assets.
1. Use savings and other assets. Most franchise licensees end up covering at least a portion of the startup costs from their own resources. An obvious place to start is with your own cash savings.
Don't go overboard on this. A good rule of thumb is not to invest more than 75 percent of your cash reserves. That way, if an unexpected expense comes up, you have some money to cover it.
2. Borrow against your home. Many people starting a new business will borrow money based on the value of their home to get the business started. Money borrowed on the value of your home is tax-free. There are two ways to do this.
You can get a line of credit based on the value of your home. This is known as a home equity line of credit (HELOC) and is best for when you are unsure of how much money you will need, as the line of credit structure allows you to borrow as needed.
You can take out a second mortgage on the house. This will provide you with a set amount of money that must be repaid as a regular mortgage would.
Be warned that with either of these options, if you find yourself unable to make payments on the money borrowed, you could lose your home.
3. Use your retirement fund. Another common approach to self-financing is to use funds in your retirement account.[16] IRAs and 401(k) plans can be withdrawn from to finance all or part of a franchise business. However, there may be significant fees and taxes involved, depending on the plan type.
If you withdraw these funds as cash, you'll lose a significant chunk in taxes. There may be ways to avoid doing so, but you should seek professional legal and tax help when attempting them due to the complexity and possible negative consequences.
Taking funds out a traditional IRA or 401(k) before the age of 59.5 will result in a 10 percent penalty being assess on the withdrawal. This is in addition to the income taxes assessed on the withdrawal.
So, if you withdraw $100,000 and you are in the 25 percent marginal tax bracket, you would pay a total of 35 percent ($35,000) on your withdrawal, leaving you with only $65,000 for your business.
Withdrawals from a Roth IRA, however, are tax and penalty-free, provided they consist of contributions that have been in the account longer than five years.
Be warned, however, that if your new business fails, your retirement funds will be wiped out.
Part 4 Refinancing Your Franchise.
1.Decide when to refinance. Refinancing is taking on a new loan which pays off any old loans you already have. Most commonly, this is done to reduce interest payments, but could also be an opportunity to borrow additional funds and consolidate that loan with existing ones. You should consider refinancing if.
You can get a loan at a better interest rate.
You want to consolidate multiple loans into a single payment.
You want to change from and adjustable to fixed rate of interest, or vice versa.
You need more capital to update equipment, make improvements, or open an additional location.
2. Look into refinancing options. It is a good idea to frequently look for loans that will offer more favorable terms than the one(s) you already have. This can significantly reduce your interest payments and free up capital for other uses.
Once you've been in business for a while, you may become a more attractive customer to banks and other financiers. This is because over time, you demonstrate your ability to successfully run your franchise. This makes you a less risky investment. That, in turn, can lead to offers with better rates.
Check with your bank, and re-examine the option of an SBA loan, as this is often the least costly option for people who can get one.
3. Weigh the fees against the savings. Refinancing isn't free. There are usually fees, such as closing costs, involved in refinancing any loan.
There may be other penalties as well, based on the details of your old loan.
The question to ask is whether the savings outweigh the fees, time, and effort that go into refinancing. You may find that you can refinance and save a thousand dollars over the life of the loan. You'll need to decide if that's worth the time and effort. Your answer might be very different if you could save ten thousand dollars.
4. Update your business plan. Before applying for a new loan, update your business plan to reflect the current state of your business and your goals for the future. Your new business plan should include.
Strengths and weaknesses of your business.
Major milestones or accomplishments.
Expertise you have developed in running the franchise.
Goals for the next two to five years.
Two years of tax returns.
The payment schedule of your current loan.
5. Apply for a new a loan and pay off the old one. Fill out an application for the new loan. When you receive the funds, pay off the old loan.
Typically, the bank will handle the payoff for you. They will pay off your old loan, and billing will come from the new loan company from then on.
You may be able to refinance with a lender you already have loans from. This can save time and effort and sometimes mean less fees.
Tips.
Be sure to have any investment agreements reviewed by a legal professional prior to accepting money from investors, especially if they are people you don't know well.
Warnings.
It is not advisable to invest money set aside for specific important purposes (such as your children's college fund) in your franchise. As confident as you may be in its success, businesses fail every day. If that happens, there will be no way to recover your money.
Never use money from new investors to pay previous investors. Doing so could inadvertently turn your legitimate attempt to finance a franchise into an illegal investment scheme.
To live a happy and peaceful life with financial freedom, it's very important to manage family finances properly. Failing to manage spending or agree on financial decisions can cause a married couple to fall into endless arguing. To get through the many financial decisions present in married life, you have to coordinate a budget and financial planning with the whole family and keep an open dialogue going about the family's money.
Part 1 Coordinating Family Finances.
1. Talk openly about your finances. While this is important all the way through life, it is especially important to establish financial honestly before you get married. If one partner has a poor credit history or large debts that are not brought up before marriage, it can lead to resentment and problems down the road. Before getting married, you should meet with your loved one and discuss his current financial situation, including how much he makes, where that money goes, his credit history, and any large debts he is carrying. This sets the tone for financial openness in the rest of your lives together.
2. Meet regularly to talk about money. Decide on a time of the month to get together specifically to discuss your finances. Perhaps this meeting can coincide with the arrival of the monthly bank statement or the due date of monthly bills. In any case, use your time at this meeting to assess the previous month's expenditures, mark your progress towards long-term goals, and to propose any changes or major purchases that you want to make. Only by talking about money regularly can you make doing so a comfortable and productive experience.
3. Don't make one person the sole manager of the family's money. Many families choose to allow one person to take charge of all the family's finances; however, this places an unnecessary burden on that person and leads to others' being unaware of the family's current financial situation. In addition, if that person leaves through death or divorce, it leaves the others completely unaware of how to manage or even access the family's finances. Solve this problem by splitting up tasks between you or by managing finances in alternating months.
Both you and your spouse should attend any meetings with financial professionals, such as those with a loan officer or investment advisor.
4. Decide on an account setup. Families have options when it comes to setting up joint accounts. Some choose to keep everything together while others keep their finances mostly separate. At minimum, you should have a joint account to pay for household expenses and your mortgage payment. At the end of the month, you can split these expenses in half and each transfer in an equal amount of money into this account to pay these expenses. Having separate account can prevent arguments that might arise from one person's spending habits.
Just make sure to set limits to how much money each of you can spend each month so that one person doesn't end up spending all of the family's money.
5. Build up individual credit. Even though your finances will be combined, it is still important for each of you to have a strong credit score. Doing so will ensure not only that your credit will be good when you apply for credit jointly, but also that your credit history will remain intact if you split up. A simple way to manage this is by having separate credit cards, each established only in the name of the spouse who uses it.
Part 2 Using a Budget.
1. Choose a budget format. Before you create a budget, you'll have to decide how to keep that budget. While many people can get away with just using a notepad and pen, others find it easier to track their spending through a spreadsheet or financial software. There are a number of a free software platforms available online that you can use to establish and track a budget. For example, programs like Mint.com and Manilla offer free budgeting services. If you want full service financial software, try Quicken or Microsoft Money.
2. Assess your current spending habits. For a month, write down a note every time you spend money, even for very small amounts. Record the amount spent and what it was you paid for. At the end of the month, sit down with your spouse and total up both your spending. Add in major expenditures to get a clear picture of where the family's money went that month. Split up expenses by category (home, car, food, etc.) if you can. Then, compare that amount to your combined, after-tax income. This is your starting point for determining a budget.
It may also be helpful to work with your bank statement to make sure you didn't miss any recurring payments or online purchases when totaling your expenses.
3. Come together to create a budget. Look at your compiled spending habits. Do you have a surplus? Or are you spending more than you make? Work from here to identify areas where you can cut back, if needed. If at all possible, try to free up money that can be put into savings or into the retirement fund. Create spending limits on certain categories, like food and entertainment, and try to stick to them over time.
Remember to always leave room in your monthly budget for unexpected expenses, like small medical bills or car repairs.
4. Work to improve and change your budget as needed. Return to your budget regularly to eliminate unnecessary spending or to adjust your budgeted amounts as needed. For example, having a child may cause you to have to completely restructure your budget. In any case, constantly seek out areas where you can cut back and save more. You'll find that you can be just as happy while spending much less than you do now.
Part 3 Saving for Life Goals.
1. Decide on long-term goals together. Have an open conversation about your savings goals, including saving for a house, for retirement, and for other large purchases like a car or boat. Make sure that you both agree that the purchase or expense in question is worth saving for and that you agree on the amount needed. This will help coordinate your savings and investment efforts.
2. Create an emergency fund. Every family should strive to keep an emergency savings fund for when things go south. Who knows when one of you might lose a job or experience unexpected medical problems? An emergency fund can help you avoid future debt and provide some financial security and flexibility. The traditional wisdom is to keep three to six month's salary in a savings account; however, this would be more than enough for some families and not nearly enough for others. Luckily, there are several financial calculators online that you can use to calculate roughly how much you need to save to cover your expenses.
Try searching for emergency fund calculators using a search engine.
There is also an app, HelloWallet, that offers this type of calculator.
3. Reduce your debt. Your first goal should be to pay off your existing debt. Only by paying down student loans, car loans, and other debt can you qualify for more credit as a couple and move forward with saving for other goals. To eliminate debt, work together to pay more than the minimum payment on each loan (as long as there are no prepayment penalties for doing so). Work with your spouse to create a plan and schedule for paying off your outstanding debt. If necessary, have one of you in charge of making sure that debt payments have been made each month.
4. Save for retirement. Couples should start planning for retirement as early as possible. This is because, due to the effects of compound interest, money placed in a retirement fund at a young age will earn much more interest over its life than the same amount of money put in at a later age. Make sure to make every effort to increase your retirement savings, including seeking to max out your employer's 401(k) match (if they have one), maxing out IRS-limits for 401(k) savings, and regularly increasing your retirement savings amounts if you can fit it into the budget.
You should save for retirement before putting money into education funds for your children. This is because there will always be scholarships and grants available for education, but not for your retirement.
If you don't have a combined retirement portfolio, be sure to coordinate your risk profiles and asset allocations.
5. Plan for educational expenses. If you're planning to fund part or all your child's higher education, it's best to start saving early on. Start by investigating options like 529 savings plans, which have special tax benefits for students. Speak with a financial advisor to learn more and get started saving today. If you don't have much time before your child leaves for school, look into government loans and grants, as well as your option in earning federal student aid.
Part 4 Staying on Track.
1. Don't make large purchases without discussing them first. Establish a monetary limit for what constitutes a "major" purchase. Obviously, this will differ between families, but the important thing is that you have a set limit. For any purchases above this limit, decide that the spouse making the purchase must have the approval of the other before going through with it. If either of you ever breaks this rule, be sure to tell the other immediately. Keeping large expenditures private is just asking for trouble.
2. Avoid taking on unnecessary debt. Keep each other on track by avoiding taking on debt for medium-sized purchases like furniture or jewelry. Plan these purchases out beforehand with your spouse so that you can combine your resources and afford the full amount of the purchase. This will save you money on interest payments in the long term. In addition, always check in with each other about credit card debt. It may be in your best interest to help a spouse with her credit card payment if she can't make it; missing a monthly payment will hurt your combined credit, which you will need if you apply for a large loan like a mortgage.
3. Use software to monitor your finances. With all of the budgeting and financial planning software available today, you'd be a fool not to take advantage of these useful tools. For starters, try tracking your monthly budget in a shared spreadsheet like those available in Google Drive. This type of document allows both of you to access and change the sheet as needed. For budgeting, there is are apps available like HomeBudget or Mint, which summarize the family budget and assets into a simple user interface.
There are also apps for keeping track of financial paperwork, like FileThis.
Try a few of these apps out and decide which ones work for you. Most of them are free or inexpensive to use, or at least offer a trial period.
A franchise is a business for which a person is licensed by a large company to operate under its name. As a franchise licensee, you operate a business and, in some cases, a brick-and-mortar location. Even without a physical storefront, starting a franchise requires a fair amount of money. There are several ways to finance a franchise. In addition to using your savings and leveraging your existing assets, there are loans and grants available from many sources. You may need to utilize more than one of the following methods to raise enough capital to start your business.
Part 1 Arranging Financing with the Franchisor.
1. Find out what financing your franchisor offers. The place most franchise licensees will start looking for financing is with the franchisor company itself. Many offer loans through their own finance companies or third party financiers they have business relationships with. This will often cover a significant portion of your startup costs.
Franchisors may also have agreements already set up with companies that can lease you some of the equipment you need to get the franchise up and running.
Each franchise has it's own package in terms of what it will offer new franchise licensees. Check into what your company offers.
This information may be available online or in other documents provided with your franchise application, or you may need to request it.
2. Look into down-payment and collateral requirements. Franchisors will require you to demonstrate that you have some collateral that will allow them to recoup their money, should your franchise fail. Many also require that you put up a down-payment of money that you have NOT borrowed from other sources.
McDonalds, for example, typically requires new franchise licensees to pay 25% of the costs of a franchise out of pocket, in cash. This ensures that franchises only go to people who have the necessary resources to make payments.
3. Apply for financing. Complete the necessary forms to apply for financing from the franchisor. Again, these will vary based on the company. Information about how to apply for financing may be included in the Franchise Disclosure Statement, or you may need to request it from the company.
The Franchise Disclosure Statement is a document you will receive from the company if your franchise application is approved. It spells out in minute detail the specifics of the franchise agreement. It is mandated by the Federal Trade Commission that all franchisors provide this document to licensees.
Like any other loan application, you will be expected to provide information about your assets, financial history, and net worth.
Part 2 Securing Outside Financing.
1. Apply for a bank loan. Another option consider for financing your new franchise is a standard small business loan from a bank. Especially if you have a good credit rating and are opening a franchise with a positive reputation, banks may be willing to offer you some starting capital.
Typically bank loans of this sort will require you to put up some kind of collateral, such as your home or any stocks or bonds you might own. They will also often want you to pay for as much as 20% of the cost of starting the franchise from your own money, to be certain you are capable of covering major business costs.
These loans usually require you to have already established a relationship with a banker.
2. Apply for an SBA loan. If your bank won't provide you with a loan, you may be able to secure a loan through the US Small Business Administration. These loans are disbursed by banks and credit unions, but are guaranteed against default by the federal government.
SBA loan 7(a) is available to franchise licensees opening any business on the SBA's franchise registry.
You can borrow between a couple hundred thousand and a few million dollars through the SBA. These loans typically have a five-year maturity period, so they work well for startup costs, but not longer-term expenses.
The International Franchise Association provides a directory on their website of vendors that administer SBA loans. The process of applying for an SBA loan, however, is a highly complicated one. Thus, it is usually recommended that applicants secure assistance from an accountant. If you don't have an accountant, your franchisor may be able to suggest someone.
3. Apply for a finance company loan. A recent development in the world of franchise financing is the online loan portal. These are websites that match franchise licensees with private creditors.
Two of the biggest online loan portals are Boefly and Franchise America Finance.
Some franchisors have have relationships with these companies. Ask your franchisor if they subscribe to any of these website.
4. Find investors or business partners. Another option for financing is look for a business partner to share the cost (and profits) of your new franchise. Many franchise licensees also turn to friends or family to borrow money or ask them to invest in the business.
Several small loans from friends or family members, to whom you promise to pay some mutually agreeable interest rate or equity in the business, can go far to cover the costs of starting a new franchise.
Equity means that your investors will be entitled to a share of the profits from the business and have a certain measure of control over its operations (depending on your agreement with them).
However, equity does not have to be repaid (unlike a loan).
You can also advertise in the local press seeking an investor or business partner. However, advertising for investors can be tricky, due to securities laws regulating the solicitation of public investors. Hire a financial lawyer to make sure you are staying on the right side of the law.
Be sure to draw up a formal agreement about the terms of the investment (i.e. how much they are investing, what interest rate you will pay, and over what period you will pay back the loan). This is especially important if you have investors who you don't know well.
Obtaining investment in this way will require accepting investments under the Securities and Exchange Commission's (SEC) Regulation D and the creation of official offering documents that detail the investment in a specific format.
If you are using Regulation D, be sure to hire a financial attorney to guide you through the process. Otherwise, you open yourself up to financial and criminal penalties resulting from violations of SEC regulations.
Part 3 Using Your Own Assets.
1. Use savings and other assets. Most franchise licensees end up covering at least a portion of the startup costs from their own resources. An obvious place to start is with your own cash savings.
Don't go overboard on this. A good rule of thumb is not to invest more than 75 percent of your cash reserves. That way, if an unexpected expense comes up, you have some money to cover it.
2. Borrow against your home. Many people starting a new business will borrow money based on the value of their home to get the business started. Money borrowed on the value of your home is tax-free. There are two ways to do this.
You can get a line of credit based on the value of your home. This is known as a home equity line of credit (HELOC) and is best for when you are unsure of how much money you will need, as the line of credit structure allows you to borrow as needed.
You can take out a second mortgage on the house. This will provide you with a set amount of money that must be repaid as a regular mortgage would.
Be warned that with either of these options, if you find yourself unable to make payments on the money borrowed, you could lose your home.
3. Use your retirement fund. Another common approach to self-financing is to use funds in your retirement account.[16] IRAs and 401(k) plans can be withdrawn from to finance all or part of a franchise business. However, there may be significant fees and taxes involved, depending on the plan type.
If you withdraw these funds as cash, you'll lose a significant chunk in taxes. There may be ways to avoid doing so, but you should seek professional legal and tax help when attempting them due to the complexity and possible negative consequences.
Taking funds out a traditional IRA or 401(k) before the age of 59.5 will result in a 10 percent penalty being assess on the withdrawal. This is in addition to the income taxes assessed on the withdrawal.
So, if you withdraw $100,000 and you are in the 25 percent marginal tax bracket, you would pay a total of 35 percent ($35,000) on your withdrawal, leaving you with only $65,000 for your business.
Withdrawals from a Roth IRA, however, are tax and penalty-free, provided they consist of contributions that have been in the account longer than five years.
Be warned, however, that if your new business fails, your retirement funds will be wiped out.
Part 4 Refinancing Your Franchise.
1.Decide when to refinance. Refinancing is taking on a new loan which pays off any old loans you already have. Most commonly, this is done to reduce interest payments, but could also be an opportunity to borrow additional funds and consolidate that loan with existing ones. You should consider refinancing if.
You can get a loan at a better interest rate.
You want to consolidate multiple loans into a single payment.
You want to change from and adjustable to fixed rate of interest, or vice versa.
You need more capital to update equipment, make improvements, or open an additional location.
2. Look into refinancing options. It is a good idea to frequently look for loans that will offer more favorable terms than the one(s) you already have. This can significantly reduce your interest payments and free up capital for other uses.
Once you've been in business for a while, you may become a more attractive customer to banks and other financiers. This is because over time, you demonstrate your ability to successfully run your franchise. This makes you a less risky investment. That, in turn, can lead to offers with better rates.
Check with your bank, and re-examine the option of an SBA loan, as this is often the least costly option for people who can get one.
3. Weigh the fees against the savings. Refinancing isn't free. There are usually fees, such as closing costs, involved in refinancing any loan.
There may be other penalties as well, based on the details of your old loan.
The question to ask is whether the savings outweigh the fees, time, and effort that go into refinancing. You may find that you can refinance and save a thousand dollars over the life of the loan. You'll need to decide if that's worth the time and effort. Your answer might be very different if you could save ten thousand dollars.
4. Update your business plan. Before applying for a new loan, update your business plan to reflect the current state of your business and your goals for the future. Your new business plan should include.
Strengths and weaknesses of your business.
Major milestones or accomplishments.
Expertise you have developed in running the franchise.
Goals for the next two to five years.
Two years of tax returns.
The payment schedule of your current loan.
5. Apply for a new a loan and pay off the old one. Fill out an application for the new loan. When you receive the funds, pay off the old loan.
Typically, the bank will handle the payoff for you. They will pay off your old loan, and billing will come from the new loan company from then on.
You may be able to refinance with a lender you already have loans from. This can save time and effort and sometimes mean less fees.
Tips.
Be sure to have any investment agreements reviewed by a legal professional prior to accepting money from investors, especially if they are people you don't know well.
Warnings.
It is not advisable to invest money set aside for specific important purposes (such as your children's college fund) in your franchise. As confident as you may be in its success, businesses fail every day. If that happens, there will be no way to recover your money.
Never use money from new investors to pay previous investors. Doing so could inadvertently turn your legitimate attempt to finance a franchise into an illegal investment scheme.
To live a happy and peaceful life with financial freedom, it's very important to manage family finances properly. Failing to manage spending or agree on financial decisions can cause a married couple to fall into endless arguing. To get through the many financial decisions present in married life, you have to coordinate a budget and financial planning with the whole family and keep an open dialogue going about the family's money.
Part 1 Coordinating Family Finances.
1. Talk openly about your finances. While this is important all the way through life, it is especially important to establish financial honestly before you get married. If one partner has a poor credit history or large debts that are not brought up before marriage, it can lead to resentment and problems down the road. Before getting married, you should meet with your loved one and discuss his current financial situation, including how much he makes, where that money goes, his credit history, and any large debts he is carrying. This sets the tone for financial openness in the rest of your lives together.
2. Meet regularly to talk about money. Decide on a time of the month to get together specifically to discuss your finances. Perhaps this meeting can coincide with the arrival of the monthly bank statement or the due date of monthly bills. In any case, use your time at this meeting to assess the previous month's expenditures, mark your progress towards long-term goals, and to propose any changes or major purchases that you want to make. Only by talking about money regularly can you make doing so a comfortable and productive experience.
3. Don't make one person the sole manager of the family's money. Many families choose to allow one person to take charge of all the family's finances; however, this places an unnecessary burden on that person and leads to others' being unaware of the family's current financial situation. In addition, if that person leaves through death or divorce, it leaves the others completely unaware of how to manage or even access the family's finances. Solve this problem by splitting up tasks between you or by managing finances in alternating months.
Both you and your spouse should attend any meetings with financial professionals, such as those with a loan officer or investment advisor.
4. Decide on an account setup. Families have options when it comes to setting up joint accounts. Some choose to keep everything together while others keep their finances mostly separate. At minimum, you should have a joint account to pay for household expenses and your mortgage payment. At the end of the month, you can split these expenses in half and each transfer in an equal amount of money into this account to pay these expenses. Having separate account can prevent arguments that might arise from one person's spending habits.
Just make sure to set limits to how much money each of you can spend each month so that one person doesn't end up spending all of the family's money.
5. Build up individual credit. Even though your finances will be combined, it is still important for each of you to have a strong credit score. Doing so will ensure not only that your credit will be good when you apply for credit jointly, but also that your credit history will remain intact if you split up. A simple way to manage this is by having separate credit cards, each established only in the name of the spouse who uses it.
Part 2 Using a Budget.
1. Choose a budget format. Before you create a budget, you'll have to decide how to keep that budget. While many people can get away with just using a notepad and pen, others find it easier to track their spending through a spreadsheet or financial software. There are a number of a free software platforms available online that you can use to establish and track a budget. For example, programs like Mint.com and Manilla offer free budgeting services. If you want full service financial software, try Quicken or Microsoft Money.
2. Assess your current spending habits. For a month, write down a note every time you spend money, even for very small amounts. Record the amount spent and what it was you paid for. At the end of the month, sit down with your spouse and total up both your spending. Add in major expenditures to get a clear picture of where the family's money went that month. Split up expenses by category (home, car, food, etc.) if you can. Then, compare that amount to your combined, after-tax income. This is your starting point for determining a budget.
It may also be helpful to work with your bank statement to make sure you didn't miss any recurring payments or online purchases when totaling your expenses.
3. Come together to create a budget. Look at your compiled spending habits. Do you have a surplus? Or are you spending more than you make? Work from here to identify areas where you can cut back, if needed. If at all possible, try to free up money that can be put into savings or into the retirement fund. Create spending limits on certain categories, like food and entertainment, and try to stick to them over time.
Remember to always leave room in your monthly budget for unexpected expenses, like small medical bills or car repairs.
4. Work to improve and change your budget as needed. Return to your budget regularly to eliminate unnecessary spending or to adjust your budgeted amounts as needed. For example, having a child may cause you to have to completely restructure your budget. In any case, constantly seek out areas where you can cut back and save more. You'll find that you can be just as happy while spending much less than you do now.
Part 3 Saving for Life Goals.
1. Decide on long-term goals together. Have an open conversation about your savings goals, including saving for a house, for retirement, and for other large purchases like a car or boat. Make sure that you both agree that the purchase or expense in question is worth saving for and that you agree on the amount needed. This will help coordinate your savings and investment efforts.
2. Create an emergency fund. Every family should strive to keep an emergency savings fund for when things go south. Who knows when one of you might lose a job or experience unexpected medical problems? An emergency fund can help you avoid future debt and provide some financial security and flexibility. The traditional wisdom is to keep three to six month's salary in a savings account; however, this would be more than enough for some families and not nearly enough for others. Luckily, there are several financial calculators online that you can use to calculate roughly how much you need to save to cover your expenses.
Try searching for emergency fund calculators using a search engine.
There is also an app, HelloWallet, that offers this type of calculator.
3. Reduce your debt. Your first goal should be to pay off your existing debt. Only by paying down student loans, car loans, and other debt can you qualify for more credit as a couple and move forward with saving for other goals. To eliminate debt, work together to pay more than the minimum payment on each loan (as long as there are no prepayment penalties for doing so). Work with your spouse to create a plan and schedule for paying off your outstanding debt. If necessary, have one of you in charge of making sure that debt payments have been made each month.
4. Save for retirement. Couples should start planning for retirement as early as possible. This is because, due to the effects of compound interest, money placed in a retirement fund at a young age will earn much more interest over its life than the same amount of money put in at a later age. Make sure to make every effort to increase your retirement savings, including seeking to max out your employer's 401(k) match (if they have one), maxing out IRS-limits for 401(k) savings, and regularly increasing your retirement savings amounts if you can fit it into the budget.
You should save for retirement before putting money into education funds for your children. This is because there will always be scholarships and grants available for education, but not for your retirement.
If you don't have a combined retirement portfolio, be sure to coordinate your risk profiles and asset allocations.
5. Plan for educational expenses. If you're planning to fund part or all your child's higher education, it's best to start saving early on. Start by investigating options like 529 savings plans, which have special tax benefits for students. Speak with a financial advisor to learn more and get started saving today. If you don't have much time before your child leaves for school, look into government loans and grants, as well as your option in earning federal student aid.
Part 4 Staying on Track.
1. Don't make large purchases without discussing them first. Establish a monetary limit for what constitutes a "major" purchase. Obviously, this will differ between families, but the important thing is that you have a set limit. For any purchases above this limit, decide that the spouse making the purchase must have the approval of the other before going through with it. If either of you ever breaks this rule, be sure to tell the other immediately. Keeping large expenditures private is just asking for trouble.
2. Avoid taking on unnecessary debt. Keep each other on track by avoiding taking on debt for medium-sized purchases like furniture or jewelry. Plan these purchases out beforehand with your spouse so that you can combine your resources and afford the full amount of the purchase. This will save you money on interest payments in the long term. In addition, always check in with each other about credit card debt. It may be in your best interest to help a spouse with her credit card payment if she can't make it; missing a monthly payment will hurt your combined credit, which you will need if you apply for a large loan like a mortgage.
3. Use software to monitor your finances. With all of the budgeting and financial planning software available today, you'd be a fool not to take advantage of these useful tools. For starters, try tracking your monthly budget in a shared spreadsheet like those available in Google Drive. This type of document allows both of you to access and change the sheet as needed. For budgeting, there is are apps available like HomeBudget or Mint, which summarize the family budget and assets into a simple user interface.
There are also apps for keeping track of financial paperwork, like FileThis.
Try a few of these apps out and decide which ones work for you. Most of them are free or inexpensive to use, or at least offer a trial period.
