Alternate name: Spending plan One popular budgeting method is the 50/30/20 budget. You use 50% of your income for needs (such as rent and utilities), 30% for wants (such as shopping and eating out), and 20% for savings (such as an emergency fund, paying down debt, or building up your retirement fund). How Does a Budget Work? The purpose of a budget is to help you track your spending so you can use your money to reach your goals....
Before you establish a business partnership, you should investigate the various types of partnerships that are available and how each of them works. What Is a Business Partnership? A business partnership is a legal relationship that is most often formed by a written agreement between two or more individuals or companies. The partners invest their money in the business, and each partner benefits from any profits and sustains part of any losses....
The application provides the lender with important information about the borrower. Applicants will typically be asked to include the following information on a credit application: AddressPhone numberSocial Security numberEmployer identification number (EIN) for business loansCredit references The information provided on the credit application will make it easy for the lender to send the customer to collections or pursue legal action if the loan is granted and the borrower defaults on payment....
It’s often more cost-effective for companies to hire debt collectors than to continue to spend their own time and money to try to get you to pay. Many businesses work with debt collectors, such as: Medical officesCredit card companiesUtilitiesPhone companiesLoan servicersOther businesses Usually, a business will try to contact you for several weeks or months to get you to pay your debt. If you do not, that’s when the account gets sent to debt collection....
The United Nations has some rules for distinguishing between developed and developing countries. The World Bank has stopped using these terms in favor of others, such as “low-income” or “lower-middle-income” economies, based on gross national income (GNI) per person. Alternate name: Low-income economy Alternate definition: Countries with a per-person income of less than $1,045 in 2020 are considered low-income. The International Monetary Fund’s (IMF) definition is based on per-person income, export diversification, and the degree of union with the global financial system....
Direct rollover of a retirement plan distribution is not a taxable event. As a result, it allows you to move your money without incurring any tax penalties, and your money keeps growing tax-deferred until you withdraw it. To help you better understand direct rollovers, we’ll delve further into what they are, how they work, and outline some alternatives for handling your retirement account. Definition and Examples of Direct Rollovers A rollover generally occurs any time you move all or part of your funds or assets from one type of retirement account to another qualified retirement savings plan, such as a 401(k) to an IRA, within 60 days....
Below, we’ll delve further into what a factor rate is, how it works, and how to calculate it. Definition and Examples of Factor Rates A factor rate is used to calculate the borrower’s cost of taking out a loan—including principal amount and total interest—and is expressed as a decimal. It is typically used when businesses seek out short-term funding such as merchant cash advances. For example, Joe Smith Extrusion Company takes out an advance that has an associated factor rate of 1....
Definition and Examples of a Fannie Mae HomePath Property Through the HomePath property program, Fannie Mae sells homes it obtained following foreclosure and deed-in-lieu of foreclosure. Fannie Mae HomePath properties include single-family homes, townhouses, and condominiums. They are usually more affordable than non-foreclosure homes and come with a variety of noteworthy benefits, including down payments as low as 3% and closing-cost assistance. How Fannie Mae HomePath Properties Work Through HomePath.com, you can view all of the Fannie Mae HomePath properties along with detailed descriptions and recent photos....
For tax purposes, a full-time student is someone who attends school, ranging from elementary school to college, among other types of educational institutions. To qualify as full-time based on the IRS definition, that person needs to meet their school’s full-time requirements, which could be a certain number of courses or hours. They also need to attend school under these full-time requirements for at least part of the month for five months within a calendar year, although these do not have to be consecutive months....
Homestead exemptions are state laws. There can be significant differences from state to state. Learn whether you qualify for a homestead exemption and how it can help you. Definition and Examples of Homestead Exemptions A homestead exemption is a special condition that may apply to your home under state law. It can lower the value of your home for property taxes or protect you in some legal proceedings. Alternate name: Homestead protection...
Alternative Name: Loan pre-approval A loan commitment letter, also called “loan pre-approval,” actually promises that you can receive a loan. It promises that the lender is satisfied with your loan application and has checked your credit history and credit score. You have gone through any necessary underwriting procedure, and they are ready to make the loan to you. For example, if you apply for a mortgage and are approved, you can shop for a home and make an offer....
A lump-sum distribution can also happen: When the plan participant diesOnce the participant turns 59½Because the participant leaves the employer that is sponsoring the retirement planAfter a self-employed individual becomes permanently and totally disabled Taking a lump-sum distribution is usually one of a few choices that you will have. You can also roll the balance of the account over into another retirement plan, take a partial distribution, or keep the benefit in the current account for as long as the plan or account custodian allows....
For example, an investor might open a margin account with their broker to borrow funds. The investor might have $10,000 in cash but be so confident in an investment opportunity that they want to borrow another $10,000 from their broker. This transaction enables them to then buy $20,000 worth of stock. That $10,000 margin loan equals the debit balance. Eventually, the investor will have to pay back that debit balance....
Examples of NSOs For example, you as an employee might receive stock options that have an exercise price of $10 per share. If you had the option to purchase 100 shares, you could pay $1,000 to exercise those options at $10 per share. If the stock price rose to $20 per share, you could exercise the options for $1,000, then sell the 100 shares for $20 per share, or $2,000. You’d make $1,000 in profit....
For example, assume that today is January 1, and you’re writing a check. In general, you’d put the current date of January 1 on the check, but you could just as easily postdate it a week and write January 8 on the check, instead. How Does a Postdated Check Work? People usually postdate checks when they want the recipient (the person or business receiving the payment, also known as the payee) to wait before depositing the check....
You and your spouse must file a joint married tax return to take advantage of this option. What Is a Qualified Joint Venture? The IRS recognizes that a business owned by spouses is unique, so it made an exception for this type of entity beginning in tax year 2007. The Small Business and Work Opportunity Tax Act makes it easier for spouses to file tax returns without having to file a complicated partnership return....
Keep reading to gain a deeper understanding of how reserve funds work and what they’re typically used for. Definition and Examples of Reserve Fund Reserve funds usually exist in the form of a savings account or some other type of liquid holding place for cash that can be accessed if an unexpected (or anticipated) cost arises. Reserve funds are becoming increasingly popular among investors, but they are also used by financial institutions, companies, and HOAs....
Here’s everything you need to know about a SIMPLE IRA, from how it can help you achieve your retirement goals, to whether it’s the right choice for you. SIMPLE IRA Definition A SIMPLE IRA is an employer-sponsored retirement plan offered within small businesses that have 100 or fewer employees. Small businesses may favor SIMPLE IRAs because they are a less expensive and less complicated alternative to a 401(k) plan. But some distinct rules apply to these accounts....
A non-income earning investor must be married and file joint taxes with their spouse to qualify for a spousal Roth IRA. Before you open one, it’s important to learn how they work, ways they differ from traditional IRAs, and the conditions that apply to married investors. Definition and Example of a Spousal Roth IRA A spousal Roth IRA acts as a typical Roth IRA except that it is set up for a married investor who doesn’t earn taxable income....
Small business owners, accountants, or bookkeepers accustomed to double-entry-style accounting use this tool, which can serve as a powerful graphic aid to ensure accounts balance out. Whether you’re doing manual or electronic accounting for your small business, you should make T-accounts a habit to double-check your financial standing. Below, we’ll delve further into how this accounting tool works. Definition and Example of T-Accounts A T-account is a graphic representation of the accounts in your general ledger....
