The Blog Of TL Wall Accounting

Archive for September, 2012

Payday Loans, Structured Settlements & Other Dangers

We recognize that there are times in almost everybody’s life when cash is low. You get worried because you have bills to pay and you need to put food on the table and it seems like you have very few options.

One of the new things out on the market, which really isn’t all that new, is something known as payday loans. These are loans that some financial institutions will give you when you’re waiting on your next paycheck but you need some cash now. The loans can be as little as $20 and the skies the limit on the other hand. On the surface this might sound like a good investment in a way to get yourself out of danger, but it’s not.

The truth is that to get these loans you have to sign agreements back and have interest rates as high as 500% or more. Yes, you read that right, 500%. This means that if you need to borrow $20 you might have to pay back $100. As obvious as it seems to almost everyone that’s a bad deal, people can get desperate and sign things without fully understanding what they mean. And don’t even think about missing a payment because you will find interest rates will jack up from there.

Most people who would even think about considering this will tell themselves that they will just pay it off when they get paid. But you can get into the trap of trying to pay off and then finding yourself short again and signing another deal. There have been people who have gotten themselves caught in a loop and been stuck in a deal that has lasted more than three years or so. The problem is that once you sign a contract it’s legally binding, and even if you end up declaring bankruptcy it’s hard to get out from under this kind of debt.

This is nothing new, and neither are things like selling one’s structured settlement, which basically takes advantage of those people who have won large cash awards that a judge has decided needs to be doled out monthly, as well as to take care of pending medical bills, instead of one lump sum payment. You’ve probably seen the commercials on TV where people say they want their money now. What ends up happening is that most of the people who go for these deals end up with as little as 50% of what they would get if they had stayed with the legal arrangement.

To many people, it might seem like a great deal to get $1 million all at once when you had a deal that was going to pay you $2 million, but that’s shortsighted thinking because you probably need at least that $2 million, if not more, for your protection later on down the line.

Here’s the thing. There are no easy ways out of difficulties, and companies that offer things like payday loans and structured settlements are playing upon your fears and willing to take advantage of you. You can get the best financial advice in the world, but if you go either of those routes or any other routes there’s probably not much that anyone will be able to help you with. An accountant might be able to put you on a budget, but it’s going to hurt.

Instead, it’s best if you find yourself in financial difficulties to go talk to an accountant that can help you budget your money, or someone like Consumer Credit Counseling who can help you set up payment arrangements with some of your creditors to get out of debt. You will have greater peace of mind and better control of your finances if you follow either one of these recommendations.

Are You Preparing For Next Year’s Taxes Yet?

I hear you now saying “It’s only September; why would I be ready for next year’s taxes already?”

Many people think that they should wait until the new year has begun to start getting ready for the next year’s taxes. As an accounting firm, we tend to disagree with this for many reasons.

One, what we find is that people will put things off until the last possible moment, and then suddenly start scrambling around trying to pull everything together at the last minute and are unable to find everything they need. Remember, you get to write off your business expenses, but if you’re unsure of all of them you’ll miss out.

Two, if you’ve been writing your mileage down but not properly logging it, if you do it ahead of time that’s one less task you’ll have to deal with later on. Keeping track of it monthly helps you to remember which part of travel was for business and what wasn’t business travel. For instance, if you took a quick trip to an office supplies store and bought something you’ll use in your business, in six months you’ll have forgotten that you did that and missed the opportunity to claim that mileage.

Three, sometimes you forget what items were business expenses after awhile. For instance, if you’re a corporate consultant your business clothes are a legitimate write off, and if you remembered to keep the receipt and write something on it so your accountants know, that’s a good thing. But if you just tossed it into a receipts folder and now it’s months later, you might not remember what that purchase was for unless you went to a specialty shop specifically for clothes.

Four, you might want to think about paying some of your estimated quarterly taxes if your income was high enough so that it’ll reduce some of your tax payments for the new year. This means you’ll have had to be tracking your income as well to make sure you don’t pay too little or too much. And you’ll want to make sure you’ve indicated in some fashion on your bank statements which payments went to that.

Five, bank statements. Sometimes it’s not enough to have them, as you know. For your business account, if you make money in multiple ways and you want to track it all then you probably go through the process of pulling out your statement and going through it marking everything. If you do it ahead of time you’ll save yourself the frustration of coming to certain items and wondering what they were.

These are only some of the things you probably want to think about ahead of time, and with only 3 months left in the calendar year, getting a jump on things would probably ease your mind a bit.