Financial Security For Dummies. Eric Tyson
When your employment income drops, the one silver lining is that your federal and state income tax owed for the year will be lower. You may actually have effectively overpaid those taxes earlier in the year when you had your full employment income and income taxes were withheld and paid on your behalf presuming you would be employed for the whole year at your full employment income.
UNDERSTANDING THE RISKS OF SMALL BUSINESS
This chapter focuses on personal crises and challenges, so you may be perplexed over why I would be talking here about starting or running your own small business, which many people aspire to do. The reason is quite simple — running a small business has many challenges, both personally and financially. And while I’m an optimistic person, I’m also realistic and know from years of observations that minor small-business problems can mushroom into big problems in short order.
Here are some tips to help get you started and increase your chances for long-term success and minimize the chances for big problems:
Prepare to ditch your job. To maximize your ability to save money, live as Spartan a lifestyle as you can while you’re employed; you’ll develop thrifty habits that’ll help you weather the reduced income and increased expenditure period that comes with most small-business start-ups. You may also want to consider easing into your small business by working at it part-time in the beginning, with or without cutting back on your normal job.
Develop a business plan. If you research and think through your business idea, not only will you reduce the likelihood of your business’s failing and increase its success if it thrives, but you’ll also feel more comfortable taking the entrepreneurial plunge. A good business plan describes in detail the business idea, the marketplace you’ll compete in, your marketing plans, and expected revenue and expenses. Small Business Development Centers (http://AmericasSBDC.org), are located in each state with branches statewide to assist with business plans and multiple aspects of small business. They offer great services that are underutilized. And most have highly educated and trained staff. You've already paid for most of their services with your tax dollars. Business plan assistance, marketing, and social media training are offered at no fee. Seminars such as QuickBooks training are the most reasonably priced around.
Replace your insurance coverage. Before you finally leave your job, get proper insurance. With health insurance, COBRA regulations require many employers to allow you to continue your existing coverage (at your own expense) for at least 18 months. According to the U.S. Department of Labor: “The law generally applies to all group health plans maintained by private-sector employers with 20 or more employees, or by state or local governments … In addition, many states have laws similar to COBRA, including those that apply to health insurers of employers with less than 20 employees (sometimes called mini-COBRA).” You can also shop for health insurance on your own and, depending upon your household income, may qualify for a reduced price (subsidized) policy. With disability insurance, secure coverage before you leave your job, so you have income to qualify for coverage. If you have life insurance through your employer, obtain new individual coverage as soon as you know you’re going to leave your job. (See Chapter 11 for more details on insurance.)
Stay on top of your income tax obligations. When you run your own business, it’s 100 percent on you to make your income tax payments, which you’re required to do through quarterly estimated tax payments. Equally importantly is to reserve and set aside that tax money so that you have it ready to use when the payments are due. I’ve seen too many small-business owners dig themselves into big financial holes and in the worst cases end up in financial ruin because they failed to plan for and make their quarterly estimated income tax payments.
Establish a retirement savings plan. After your business starts making a profit, consider establishing a retirement savings plan such as a SEP-IRA. Such plans allow you to shelter up to 20 percent of your business income from federal and state taxation.
Facing a medical crisis
Our personal health is often taken for granted when things are fine, which thankfully for most people is nearly all the time. But a health challenge, typically unforeseen, can turn your life and emotions upside down.
To keep your sanity and to ensure your best health, here are some important steps to take and points to keep in mind:
Check your coverage. Make sure your health insurance coverage is being paid and in force. While insurance companies can’t boot you from your coverage for a medical problem, you can lose your coverage if you haven’t been paying for it. If your coverage has lapsed or you simply never bothered to get coverage thinking you wouldn’t need it, get signed up pronto!
Take time off from your job. We have enough stressors in our lives even when all is good with our health. Adding the uncertainty of the possible paths of a medical problem can easily cause any normal person to feel overwhelmed. If you work for an employer, they may offer sick days and/or personal days.Currently, there are no federal legal requirements for paid sick leave except for temporary COVID-19 paid leave law. More than a dozen states mandate some sick pay beyond temporary COVID-19 requirements. At the federal level, the Family and Medical Leave Act (FMLA) allows for up to 12 weeks of unpaid sick leave for either the employee or a member of their immediate family for particular medical conditions. “Employees are eligible to take FMLA leave if they have worked for their employer for at least 12 months and have worked for at least 1,250 hours over the previous 12 months, and work at a location where at least 50 employees are employed by the employer within 75 miles,” according to the U.S. Department of Labor. For more on these and other safety nets, please see Chapter 4.
Enlist and embrace support. It can be difficult to be objective and calm when your health is on the line. Having a spouse, relative, or other close friend assist you with your research and serve as a sounding board for decisions can be useful and calming. When it’s your health problem, dealing with important medical decisions can feel isolating and lonely, so finding a trusted person willing and able to share some of the burden and thinking can be invaluable. Just be sure that the person you’re trusting will keep your information and situation confidential and that they understand what you’re hoping to get from their involvement.
Seek second opinions and do some research. There is rarely just one clear-cut course of action to deal with a particular medical problem. Be sure you ask any medical provider what treatment options exist for your problem and their opinion of the pros and cons of each. Doctors are often rushed and may make you feel that you can’t ask a lot of questions. If necessary, schedule another office visit or ask a time-constrained doctor when you can follow up with them by phone. Recognize that medical providers have conflicts of interest, make mistakes, and have imperfections.You should also do some of your own research, but please understand the dangers of unvetted things you may read online that any person with a computer can choose to publish on a website. Check and vet your sources!
Caring for elderly parents unexpectedly
As your parents age, they may need help with a variety of issues and living tasks. An illness or accident such as a fall can be a triggering event. Although you probably won’t have the time or ability to perform all the help your parent(s) may need, you may end up coordinating some service providers who will. Here are key issues to consider when unexpectedly needing to care for aging parents:
Get involved in their healthcare. Your aging parents may already have a lot on their minds, or they simply may not be able to coordinate and manage all the healthcare providers who are giving them medications and advice. Try, as best as you can, to be their advocate. Speak with their primary care doctor so you can understand their current medical condition, the need for various medications, and how to help coordinate caregivers. Visit home-care providers and nursing homes and speak with prospective care