Listen Money Matters - Free your inner financial badass. All the stuff you should know about personal finance.

Running a small business has many tax benefits, but it has many tax pitfalls too. To make sure none of us get on the wrong side of the IRS, we will discuss small business tax questions with Johnny Horta. LMM’s resident tax expert schools us on small business taxes for all our side hustlers out there. If you run a small business, you’ll have more write-offs than if you are an employee.  The downside is, you have to pay all 15.3% of your FICA and social security taxes rather than paying 7.65% while your employer picks up the other half. If you’re self-employed, it’s a good idea to set up a Simple or SEP IRA.  A Simple allows you to defer up to $12,500 and a SEP, up to $53,000.  This can help lower your tax burden while helping you save for retirement. If you’re just starting out, it’s a good idea to schedule a consultation with an accountant or a tax attorney.  Just ask for a certain amount of time, an hour maybe and ask what they charge for that.  Be sure to have a list of questions to make the most of the time. According to the IRS, you are a business if you make money for three of five years. Otherwise, it’s classified as a hobby. Lots of people want to use a home office deduction.  But to do so, the office has to be “regularly and exclusively used as a home office for the business.”  So if you work on your computer by day and watch Netflix on it by night, sorry, you’re out of luck. When you decide how to set your business up, sole proprietorship, LLC, etc., the most important thing to consider is the likelihood that you’ll be sued.  If it’s small, a sole proprietorship will probably be suitable. Remember, Johnny will answer your questions live via our webinar February 2. Show Notes Horta Tax and Financial Services:  Connect with Johnny on Facebook. IRS:  Get some answers here before spending money on an accountant. LMM Get Involved:  Find out the details for our upcoming tax webinar with Johnny February 2 at 8:30 pm Easter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Charles Wheelan is a lecturer in economics at Dartmouth and has authored five books.  He joins us to discuss statistics, politics, and the economy. Economics is the study of how we allocate scarce resources.  Poverty, health, education, are all affected by how we allocate resources so understanding that can help us to do a better, more fair job at that allocating. To make money, you have to produce value.  Part of the reason for stagnant middle-class wages is because the value it used to produce is now being produced more cheaply, either through technology or outsourcing to countries where wages are very low. Money is not the only factor in economics.  Sometimes money can stop people from doing something.  Organ donation for example.  Tying it to money makes people less likely to do it. Sometimes altruism is a greater driver than monetary gain. Most people will stay where you put them.  Many people don’t save for retirement.  Some companies now automatically enroll new employees in 401K plans.  The employee is free to exit the plan or change it but most people will just default to what the company chose. Sometimes a small guaranteed incentive is less effective than a larger, but not guaranteed one.  Getting $5 each time you go to the gym is less attractive to people than going to the gym and being entered into a raffle to win a car.  This is why people play the lottery. Statistics are useful because they can be used to infer patterns.  Recognizing and using the patterns can make you more money, or just help you to do things better.  Which will probably earn you more money! Most people are pretty poor at appreciating probability.  So we worry about Ebola but cross against the light.  But the odds of getting Ebola are much smaller than the odds of getting hit by a car. Charles is a passive investor, an Index Fund guy.  So the Dartmouth professor shares the LMM philosophy of buy and hold!  The longer your horizon, the smoother the booms and busts level out for you. Charles is very politically active.  He advocates for a Centrist Party, where people who feel alienated by the Republicans and Democrats can join together.  We need something better in the middle, where most of us dwell. It was great to interview a guest who understands economics and is actively trying to improve the short comings of our current two party system.  Show Notes Amazon:  Charles Wheelan’s books. Mint:  The easy way to track your spending. Betterment: The smart way to invest. Learn more about your ad choices. Visit megaphone.fm/adchoices

Are you looking for a way to invest in real estate without all of the hassles of becoming a landlord? Then REIT investing might be just what you’re looking for. But what the f**k is REIT investing? Real estate can be an important addition to your investment portfolio, but it seems out of reach for many of us. We don’t even live in our own house, we rent. So how are we going to ever own real estate? There is a way! What is are REIT Investments? A REIT or Real Estate Investment Trust is a company that owns, manages or bankrolls income-producing real estate. The rent generated from the properties is distributed to shareholders in the form of dividends. REIT is similar to a mutual fund and trade on the major market exchanges. It allows individual investors to pool their money and own real estate that they wouldn’t be able to afford on their own. When you own stock in a REIT, you own a small sliver of the apartment or office buildings they own just like when you own stock in a company you own a tiny piece of that company. Due to the nature of real estate investing, REITs typically do better in low-interest rate environments and when there are higher rates it is usually a bumpy ride for the REIT market.  To qualify as a REIT, a company has to adhere to specific guidelines put in place by Congress. These guidelines include:  * Is considered a corporation according to the IRS revenue code * Is managed by a board of directors * Has at least 100 shareholders * Have no more than 50% of its shares held by five or fewer individuals * Has at least 75% of its assets in real estate, US Treasurys, or cash * Generates at least 75% of its net income from real estate * 95% of its income must be passive like rent * At least 90% of its taxable income is paid to shareholders via dividends  There are two kinds of REITs. Equity REITs About 90% of REITs are equity REITs. Equity REITs buy, manage, build, remodel, and sell real estate. The revenues from these REITs come mainly from rental income. The types of real estate properties include residential, retail, office, industrial, and hotels. Equity REITs often specialize in a specific property types. Residential REIT’s invest in single-family homes or apartment buildings and retail REITs invest in shopping and strip malls. Mortgage REITs Mortgage REITs only make up about 10% of REITs. A mortgage REIT lends money to real estate buyers or buys existing mortgages or mortgage-backed securities. The revenue from these REITs come from the interest paid on the mortgage loans. Mortgage REITs often specialize too, either in residential or commercial mortgages. How to start investing in REITs The ultimate goal of any investment is to make money so how do you make money on a REIT?  REIT stocks let investors invest in real estate the same way they invest in any other industry, by purchasing stocks through a mutual fund or ETF on the stock market. When you are a shareholder in a REIT, you earn a portion of the money generated by that investment. REITs are exempt from corporate taxes as long as they adhere to the Congressional guidelines we outlined above. Because a REIT’s income is not taxed, there is more money for shareholders. Shareholders though do have to pay capital gains taxes on the dividends at their ordinary income tax rate. Investors can deduct 20% of REIT dividends though lowering the maximum tax rate from 39.6% to 29.6%. REITs often provide high dividends, and those dividends can increase over time as the REIT’s properties appreciate in asset value. eREIT If a $3,000 minimum, the initial investment is too rich for your blood, there is a company in the REIT arena called  Learn more about your ad choices. Visit megaphone.fm/adchoices

Tax time is nearly upon us.  Past guest, contributing writing, and tax expert Johnny Horta joins us to explain the vagaries of the US tax system. Until we get a flat tax (which will never happen) taxes will continue to be a monumental pain in the ass.  So we brought on a guest to give us some expert advice.Show Notes Keegan Ales Mother’s Milk:  A dark, creamy milk stout. Left Hand Brewing Milk Stout:  A creamy, sweet stout. Horta Tax & Financial Services:  Contact Johnny for expert advice. W4 Calculator:  Plug in your numbers to see what your withholdings will be. Learn more about your ad choices. Visit megaphone.fm/adchoices

Jen McDonough paid off $212,000 in four years.  She works now as a motivational speaker and has authored three books.  Meet The Iron Jen. Jen’s world changed when one of her children developed a chronic medical condition.  As the medical bills piled up, other bills fell behind. Jen found herself unable to afford $20 worth of groceries. That’s the low point that caused Jen and her husband to really tackle their debt and change their relationship with money. Show NotesThe Iron Jen:  Leveraging adversity to reach your potential.  You can also find Jen’s books here. Mint: The easy way to budget. Betterment: The smart way to invest. Learn more about your ad choices. Visit megaphone.fm/adchoices

Making and failing to fulfill the same old New Year’s resolutions?  LMM will teach you new ways to make sure this time they actually stick. Once the hangover subsides, we are all gung ho to really stick to our resolutions.  But by February (at the latest), we’re back in the same old habits.  Despair no more!  Meet the Impossible List! The impossible list is not so much a bucket list as an evolving, active guide for what you want to do with your life. You need to have goals, but you need to track them too.  And improve upon them.  So you ran a 5K, congrats!  Maybe now that evolves into doing a triathlon. Show Notes Wild Devil:  An India pale ale. Hitachino Nest Beer:  A fermented ale. The Power of Habit:  How to harness the power of habits. Learn more about your ad choices. Visit megaphone.fm/adchoices

Starting a new thing is exciting.  But some of us quickly lose our initial enthusiasm.  We’ll discuss how to see things through to the end. What does make you stick with something?  Sometimes it’s the time and money you invested in it.  Sometimes it’s because there are already so many tombstones in your idea graveyard and you can’t stand the thought of adding another.  Show Notes Garun Icelandic Stout:  Intensely rich with notes of chocolate and licorice. I Don’t Feel Like It: Thomas’s video about getting over that mindset. Betterment: The easy way to invest. Learn more about your ad choices. Visit megaphone.fm/adchoices

Your morning routine can make or break your day. It can set you up for a good mood and good productivity or send you screaming back under the covers. Not all of us are morning people.  But you don’t have to be one in order to organize a routine that will set you up for a productive day. Thomas is a freak who starts his day at 5:50 and finishes thirteen habits practically before the sun comes up.  He wasn’t born that way which means any of us could do the same.  It’s a routine that has evolved over time. How does Thomas get up so early?  He has monetized sleeping in.  If he doesn’t get up, he stands to lose $30.  Not worth it. These don’t all have to be monumental habits.  It can be something as simple as taking your vitamins every morning.  Or just getting up fifteen minutes earlier so you can relax into your day rather than rushing around all flustered. They don’t have to number into the teens either.  Start small.  Wake up early and drink a cup of warm water with the juice of half a lemon in it.  Lemon water is crazy good for you and is a small, easy thing that will make a big difference. We have a series of podcasts and articles that list some great productivity apps.  There is nothing wrong with having a little help and prompting until the things you want to get done become habits. Remember, start small but keep at it.  Once you become a morning person with good habits, you will notice lots of positive changes in your life. Show Notes Buffer: A social media scheduling tool. Dogfish Head World Wide Stout:  A dark, roasty ale. HabitRPG:  A super geeky way to help you build habits. Photo Credit:  https://www.flickr.com/photos/redheadeb/2861685318 Learn more about your ad choices. Visit megaphone.fm/adchoices

Listen, Money Matters is back!  We have a new host, former guest Thomas Frank of College Info Geek.  We’re excited to kick of Season Two. We missed you! There have been some changes to LMM since our last episode but we are more committed than ever to being your one stop, go to resource for all things finance. If you’ve been a listener to the show for awhile, you’ll remember Thomas Frank from episodes about money mindfulness, how to choose the best cell phone plan, and our round table discussion dedicated to saving money on college. Thomas is a recent college graduate and has run the site College Info Geek, a blog, podcast, and youtube channel that teaches you to get the most out of college life.  Thomas has run the site for a little more than four years.  For the past two, it has been his full time job and he makes a good living from it. Thomas is just 23 years old and will bring a bit of a younger perspective to our show.  He is also ruthlessly efficient with his time and crazy productive which is something we think will bring value to our audience. Getting over “I don’t feel like it” has been what pushed Thomas forward.  The work doesn’t have to be perfect in the beginning, you just have to get it out there.  That is the hardest part, fine tuning can come later.  Building the habit is what matters. A goal for LMM in Season Two is to make this a community project.  We reached out to some listeners who will be contributing to the show and site in various ways.  If you would like to be involved, e-mail us at listenmoneymatters@gmail.com. We will be using Slack, a team chat site where we can all communicate in one place. We appealed to you for donations and we were overwhelmed and grateful.  Along with the donations were many e-mails encouraging us to continue with the show.  Once Andrew broke even, he gave the remaining donations to Donor’s Choose. It’s a site that helps teachers fund materials for their classes that the schools don’t have the money to provide. Some things we’ll be doing going forward include an investing book, animated videos, courses organized from our existing material, and what we really look forward to is matching members of our audience in a mentor/mentee relationship.  If you are interested in that, please e-mail us.  Also let us know what you want out of Season Two.  This is your show too. We’re so glad to be back.  Here’s to a new season and a new year. Show Notes Mint:  The easy way to budget. Betterment:  The smart way to invest. Slack:  An open communication system that brings your team together in one place.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Insurance can be confusing so we interview two experts, Todd Berkley and John Young to help us navigate Obamacare and  HSA’s. The affordable care act is a good thing for a lot of previously uninsured Americans but knowing which plan to choose can be tricky. HSA’s can be a great place to park tax free money but can also be confusing.  We get some expert help from our two guests. If you meet the income requirements to receive a subsidy, you must purchase your insurance through Healthcare.gov. If you are not eligible for a subsidy, you are free to purchase insurance on the open market. A web based entity can help if you are wading into the open market.  Todd and John highly recommend plans with an HSA. We discussed HSA’s in depth with Todd and John in Episode 171. They are a great tax shelter. Right now, the penalties for not having health insurance range from $95 to 1% of your income.  The penalties are levied against your tax return.  Next year the penalties are going to go up substantially. There are so many acronyms and strange terms in health insurance!  EPO, HSA, deductible, out of pocket, what do they all mean?   This site has a handy list that defines some common terms normal people aren’t familiar with. A catastrophic plan is available for people thirty and under.  It’s not great insurance but if you get hit by a bus, having it can keep you from going bankrupt.  Most of these plans are not HSA qualified though. Todd and John are hopeful that Millenials will change the way health insurance works.  There is too much double speak and obfuscation the way things stand.  This stuff doesn’t have to be so confusing and Millenials will stand up and demand that things are simplified. I know this stuff is confusing but medical expenses are the number one cause of bankruptcy in this country which is just shameful.  Make no mistake, you can go bankrupt even if you are insured but having insurance does decrease the odds of it happening to you. Show Notes Ask Mr HSA:  Todd’s site to help answer all your HSA questions. Betterment:  The simple way to invest. Learn more about your ad choices. Visit megaphone.fm/adchoices