Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.
Setting Yourself up for Retirement
Whether you’re 21 or 60, it’s important to know whether you are saving enough for your retirement. There is no time like the present to ensure you are allocating enough funds for your retirement account. With folks routinely living into their 80s and 90s, it’s more important than ever to ensure your money lasts your lifetime.
Millennials have the advantage of having time on their side. They can benefit from compounding and the long-term trends that can make a real difference over the course of several decades. But it’s never too late to improve your savings plan and your retirement prospects.
In this article we’ll answer the question, “How much money do I need to retire?" and more.
When Do People Retire?
According to Gallup, the percentage of Americans who expect to retire at age 66 or older has risen dramatically, from 21% in 2002 to 41% in 2018. People expect to live and work longer than ever, so it’s never been more important to know when to stop working and how to carefully plan for the big event.
For persons born in 1960 or later, the Social Security full retirement age is 67. You will receive 70% of your monthly benefit if you retire at age 62, and 86.7% at age 65. However, you’ll get the maximum monthly benefit if you wait until age 70. These milestones might be an important consideration if your Social Security benefit will be a sizable portion of your retirement income.
How Much Do You Need to Retire?
Experts often say your target annual income after retirement should be about 80% of your pre-retirement figure. That is, if you were making $100,000 a year at retirement, you’d want annual income of $80,000 in retirement. Naturally, Social Security might not get you there, which means you must supplement your resources with a retirement savings plan. The sooner you start saving for retirement, the easier it will be to attain your target.
For example, if you require $80,000 a year and think Social Security will provide about half, your retirement plan will need to supply the remaining $40,000 (assuming you don’t work during retirement). If you expect to live for 25 years following retirement, you would need $1 million in savings if you didn’t earn any return on your savings. Luckily, you can expect a return that reduces your savings target. However, you must also contend with inflation, which will eat into the value of your savings.
If you earn 4.5% on your retirement savings and inflation is 2.5%, you’ll earn a real return of 2% each year. In our example, an annuity calculator puts your retirement savings goal at $796,557. Using a future value calculator, you can figure how much to sock away each year to hit your goal. For example, if you start investing $6,000 a year for 30 years and earn a 9% annual return (the long-term return on stocks since 1926 is 10%), you will have $817,845 at retirement, more than enough to meet the example target. You can use the calculator to figure out your annual savings goal based on your age and expected annual return.
If all that seems too complicated, try using the 4% rule. Simply divide your required annual payment by 4% to get your target savings amount. In this example, a required annual income of $40,000 divided by 4% gives you a target of $1 million. That’s a little higher than the calculator amount, which means you have more breathing room if you earn less than the expected average annual return.
Which Retirement Plan Is Best?
Generally, the best retirement plan is one in which your employer can make contributions, such as a 401(k) or 403(b). With these, you can contribute up to the annual limit and your employer can provide either matching funds or a non-matching amount. Your contributions are tax-deductible and not included in your taxable income — you pay taxes when you withdraw your money later.
In 2019, you can contribute up to $19,000 to your 401(k) ($25,000 if you are 50 or older). Your employer’s contributions are limited by the total contribution cap of $56,000 (or $62,000 if you are 50 or older). You must begin taking required minimum distributions (RMDs) by age 70, unless you are still employed. If so, you can continue to contribute and postpone RMDs until you retire. RMDs are based upon the account balance and your life expectancy, as estimated by the Internal Revenue Service.
If you are a business owner or self-employed, you can open a Solo 401(k) with similar limits. With these, you can’t postpone RMDs beyond age 70, even if you continue to work.
Another good alternative is an Individual Retirement Account (IRA). In 2019, you can contribute up to $6,000 a year ($7,000 if you are 50 or older). IRAs have tax-deduction and RMD rules similar to 401(k)s. You are allowed to have a 401(k) and an IRA at the same time, but the deductibility of your IRA contributions will begin to phase out if your modified adjust gross income (MAGI) exceeds a set amount. For 2019, the phase-out begins at $64,000 for single filers and $103,000 for joint filers.
Roth versions of IRAs and 401(k)s are available. These do not provide a tax deduction for contributions, but if you follow the rules, your withdrawals are tax-free. Roth accounts have no RMDs. Traditional and Roth accounts penalize withdrawals 10% before age 65 (for Roth, the penalty applies to withdrawn earnings, not contributions). They also offer some exemptions from the early-withdrawal penalty if you use the money for certain purposes.
Conclusion
Your retirement finances are not set in stone. You have options at any age. The important point is to understand how much you will need to live on and adjust your lifestyle accordingly. Naturally, the earlier you start saving for your retirement, the better off you’ll be. You can use online calculators to figure how much you’ll need to sock away to make your retirement comfortable.
Using a tax-sheltered retirement account makes saving easy, because you postpone taxes until you retire. Make a commitment to your retirement plan now and reap the rewards in your golden years.