If You Don't Have a Home-Based Business, Start One Today!

This may be a decade of tremendous corporate profits andeconomic growth, but for the vast majority of North Americans,the 90's have been a dismal, uphill climb. And many economistsbelieve that this next, new millennium won't be getting betterany time soon. Why? Changing business and government attitudes are the reason. Therehas seemingly been more anti-business legislation in the lastdecade than in any other this century. Stronger employment andlabor laws, the Age Discrimination in Employment Act, theComprehensive Omnibus Budget Reconciliation Act (COBRA, whichincludes mandating health insurance for workers for a period oftime after they leave employment), safety laws, much tougherlaws for discharging workers, more liabilities for lawsuits,Family Leave Act, Americans with Disabilities Act (which iscreating immense numbers of lawsuits), along with higher minimumwages and fringe benefits. Just reading this list is exhausting. While these acts have beneficial and protective aspects, theyhave also encouraged businesses to move their facilities. That"sucking sound" popularized by Ross Perot is not just down toMexico, but elsewhere as well. The result has been a dramaticloss of heavy industry in the U.S. The young and the middle-aged alike are realizing that theirdream of "having a job with a company forever" is an illusion.Companies have been downsizing, rightsizing, and capsizing forsome time now, and they continue to do so - more now than everbefore. Even the federal and state governments are getting intothe act with layoffs and attrition of jobs. In addition to all this uncertainty and mutual lack of loyaltybetween companies and employees, even the workers who do notkeep their jobs have no guarantee of promotions due to theshrinking number of management positions. These circumstancesaggravate the already tryingly long commutes in rush hourtraffic and increasingly typical frustrated boss-spelledbackwards, that double S-O-B. Finally, if all this isn't bad enough, under recent tax lawsemployees are shafted more than ever with limits and thresholdsfor their employee deductions and higher social security taxlimits. This results in more couples working than ever beforeand, on many occasions, working more than one job. It is nowalmost impossible to have only one job in the family and makeends meet! Today, many households need three incomes just tosurvive. Sadly, even having more than one job does not produce any majorpositive effect on most people's bank accounts. Why? Because oftax laws. This was well illustrated in 1994 by Jane Bryant Quinnin her Woman's Day article on "How to Live on One Salary." Where The Money Goes Ms. Quinn's example assumed that a man was earning $40,000 peryear. His wife (we will call her Lori) wasn't working. They hadmore month than money. (Sound familiar?) Lori subsequently gotan administrative job for $15,000 per year. You would think thiswould improve the family's financial situation, but when Ms.Quinn examined the economics of getting this extra income, theresults were startling! Lori had to pay federal and state taxes on her new income. Sincethey filed jointly, the family's combined income was whatestablished their tax bracket. She paid $4,500 in new taxes,most of which was non-deductible, for federal and state incometax. Lori had social security withheld from her paycheck at the rateof 7.65 percent, which amounted to an additional nondeductibleamount of $1,148 being extracted from her salary. She also hadto commute to work 10 miles a day round trip, which is probablyconservative for most people. This resulted (in 1995) innondeductible commuting costs of $696. Lori also had some child care expenses, which give a partial taxcredit. Ms. Quinn figured that the amount spent over and beyondthe tax credit was $4,250 per year. Lori also ate out each day with colleagues, spending an averageof $5 per day, five days a week. This results in a nondeductibleexpense of $1,250 per year. (I would love to know where she atefore only $5!) Now that Lori has a job, she has to have professional clothing,this means a hefty dry cleaning bill. Ms. Quinn assumed thatLori's increased expenses here amounted to an extra $1,000 peryear, nondeductible, of course. Finally, with both spouses working, Lori wasn't in the mood tocook dinner every night. They bought more convenience foods andate out more frequently. This resulted in increased food costsof a nondeductible $1,000 per year in minimum. Add it all up and Lori's take home pay was a paltry $1,156 ayear, for which she had to put up with a daily commute, anunpleasant boss, and corporate hassles. (See the followingsummary of all of these numbers, so you can do the math foryourself.) No wonder more and more people are starting home-basedbusinesses. In fact, there are currently an estimated 30 millionpeople working from their homes. This number is expected to morethan triple, to 97 million, by the year 2000, and to keep ongrowing. This has become and will continue to be one of thegreatest mass movements in the U.S. Why a Home-Based Business Makes So Much "Cents" There are many reasons why so many people are favoringhome-based over traditional business. There is no commute (unless you have a really big home), noboss, little if any chance of lawsuits, must lower overhead, noemployees, (or few), and far fewer government restrictions. Infact, many of the laws previously cited don't apply to smallfirms with few or no employees. It is for these reasons,according to Entrepreneur magazine, that 95 percent ofhome-based businesses succeed in their first year and achieve anaverage income of $50,250 per year with many earning much more.There are really two sets of tax laws in this country. One isfor employees, and it allows deductions for individualretirement accounts, 401(k)s (if you have one set up by yourcompany), interest and property taxes on your home (which somein Congress want to do away with ), and charity. Then there arethe laws for home-based business people who conduct theirbusiness either full-time or part-time. They can deduct, withproper documentation ,their house, their spouse, and evenchildren (by hiring them), their business vacations, their cars,and their food with colleagues. They can also set up a pensionplan that makes any government plan seem paltry by comparison. For Lori - and for you - the meaning of all this is simple: Lori earned $15,000 in salary as an employee, but took home only$1,156. She could have netted the entire $15,000 had she earnedit in a home-based business! This is an increase of almost 13 times her take-home pay as anemployee. Notice that Lori is not spending dramatically more money thanshe is currently spending. She would eat out anyway, go on tripsand drive her car the same as before. By having a home-basedbusiness, however, many of their expenses become deductible.This concept is known as "redirecting expenses." With ahome-based business, she can now deduct some of the expensesthat she is incurring anyway. Renegade Strategy: If you don't have a home-based business,start one! In addition to all the benefits mentioned above, Congress willsubsidize you while you are growing your home-based business. Ifyour home-based business produces a tax loss in the first yearor so, you can use that tax loss against any other income youhave. It can be used against wages earned as an employee,dividends, pensions, or interest income-or you can use the lossagainst your spouse's earnings if you file a joint return. If the tax loss exceeds all your income for this year, noproblem. You can carry back the loss two years and get a refundfrom the IRS for up to the last two years of income taxes paid,or you can carry over the loss twenty years. You read it right:You can offset up to 20 years of income! Here's an example: Mike earns $50,000 in a job with the government. If he starts ahome-based business that generates a tax loss of 10,000, he onlypays tax on $40,000. Renegade Tip: You can never lose a properly documented businessdeduction. In fact, if everyone in the U.S., who is employed full-timebegan a home-based business, used the strategies I suggest, eachhousehold could easily save between $2000 and $10,000 in taxeseach year. If all employees in the U.S. did this, the tax biteof the IRS would be reduced by a whopping estimated 300 billiondollars annually. Of course, Congress would have to change thelaws for this to occur. Renegade Strategy: Get LUCK - Labor Under Correct Knowledge. Can You Succeed In a Home-Based Business? Research has constantly shown that it rarely the business thatdetermines success or failure. It is usually the business owner.Why does one person succeed and another fail at the samebusiness?Two words - Knowledge and Action. Some people want the benefits of having their own business, butthey don't take action. The result is business failure. Then there are the people who are always working. The takeaction but still fail. The reason is that they are not takingthe correct actions, the knowledgeable actions, that will bringthe desired results. Again, business failure. It's like drilling for oil. If you set up a drilling rig in yourback yard, it is going to fail at producing oil unless your backyard is in Texas or Alaska. The same rig in a good field willproduce a gusher, because it was placed where oil was known toexist. The point is that most people who get excited about startingtheir own home-based business do so without all the necessaryknowledge. Consequently, many people quit before they acquire,through experience, the knowledge they need, without realizingthat they are getting substantial tax breaks. This leads toanother strategy.... Renegade Strategy: Learn to duplicate the success of others. Duplicating the strategy of others is much quicker and moreeffective than going to the school of hard knocks. It is also known as modeling, which is well-illustrated by theway The McDonalds Corporation blazed a trail to success thatmany have since followed. In the early 1950's McDonald's and other start-up companiesdiscovered that they could grow many times faster than theconventional firms through franchising. Instead of the companyinvesting millions of dollars to build new stores, they letindependent franchise do it for them. It seemed like a great idea, but at first no one figured out howto make it succeed on a consistent basis; therefore, the mediaattacked relentlessly and continually. News articles featureddestitute families who had lost their life savings throughfranchising schemes. Virtually every state attorney general inthe U.S. condemned the new marketing method. Some congressmeneven tried to outlaw franchising entirely. Over the years, however, Ray Kroc and his management team atMcDonald's developed a turnkey franchise business team atMcDonald's franchise. The newfound success-from thesystem-turned public perception of franchising around. Today,virtually every franchise business models-to some extent-thefranchise business system created by McDonald's, makingfranchising one of the most respected ways of doing business inthe world. Modeling is simply learning what other successful people havedone to achieve success in a specific area, and then doing thesame thing. Someone said that "education is the shortcut toexperience." With modeling, you literally leverage your ownlearning with the collective years of learning throughexperience of many others. Modeling the success of others savesboth time and money and reduces frustration and stress. The light at the end of the tunnel, for you and millions ofothers today, is the financial opportunity that starting yourown business offers. If you have one going already, then makesure you are enjoying the many financial advantages to whichyour smart choice entitles you. The tax advantage alone can makea home-based business the single best financial move you couldever make.