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  • What Is a 1099 Form? Everything You Need To Know

    What Is a 1099 Form? Everything You Need To Know

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    A 1099 form is a document that businesses use to report various types of government payments to both the IRS and payees.


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    This includes payments for services, dividends, interest, rents, royalties, and other types of income. There are various 1099 forms, each with specific instructions for filling them out.

    If you’re an entrepreneur or small business owner who wants to stay compliant with the IRS, it’s critical to understand what a 1099 form is and how it applies to your business. Read on for an overview of the different types of 1099 forms and how to navigate the filing process.

    What is a 1099 form, and what is it used for?

    A 1099 form is an information return that reports taxable income other than wages, salary, and tips.

    For example, if you’re self-employed or earn rental income, you’ll likely receive a 1099 form.

    The 1099 form reports what’s referred to as miscellaneous income, and there are many different types of 1099s.

    Here’s a quick run-through of some of the other common 1099 forms and what they report:

    • Form 1099-B: Proceeds from broker transactions
    • Form 1099-C:Cancellation of debt
    • Form 1099-DIV: Dividends and distributions from investments
    • Form 1099-H: Health insurance premiums that the taxpayer pays
    • Form 1099-INT:Interest income earned throughout the year
    • Form 1099-K: Merchant card and third-party payment transactions
    • Form 1099-NEC:Nonemployee compensation
    • Form 1099-Q: Distributions from qualified education programs
    • Form 1099-R: Distributions from pensions or annuities
    • Form 1099-S: Proceeds from real estate transactions
    • Form 1099-SA:Distributions from health savings accounts (HSA)

    All that said, the most common type is the 1099-MISC, used to report income earned from rental property, providing services as an independent contractor, or earning royalties. If you receive a Form 1099-MISC, you’re considered self-employed (an important fact to remember).

    While this may seem like a lot of extra work, being self-employed has some benefits, such as the possibility of deducting business expenses on your tax return.

    Be sure to speak with a qualified tax professional if you have questions about filing your taxes after receiving a 1099 form.

    Related: Time To Send Out 1099s: What To Know

    Is a 1099 a tax return?

    A 1099 form is not the same as an income tax return. It’s an informational form that reports specific types of income and other financial activities. Essentially, you use the information from the 1099 forms to complete your taxes.

    The Internal Revenue Service (IRS) requires businesses to file 1099 forms for almost any payment over $600 made throughout the year. That includes payments for services, mortgage interest, royalties, and other miscellaneous income.

    The payee doesn’t need to issue a 1099 form for any payments under $600; nonetheless, both the issuer and recipient must report this income on their tax returns.

    Related: Selling $600 or More on Peer-to-Peer Apps? Expect a 1099-K

    1099 vs. W-2

    A 1099 is an IRS form that shows an individual’s income from specific types of payments.

    A Form W-2 is a tax form that reports the wages an individual has received.

    The primary difference is that 1099 forms are issued to non-employees, whereas W-2 forms are issued to employees. Businesses are responsible for reporting employee wages on W-2 forms, while self-employed individuals (think freelancers and independent contractors) must report payments outlined on their 1099s.

    Additionally, self-employed individuals may receive 1099s and W-2s, depending on the work they perform.

    Generally, W-2 forms report wages from full-time employment or an employer/employee relationship, whereas 1099 forms report income from freelance work, contract labor, royalties, or rent payments.

    Unlike 1099s, W-2 forms withhold federal income taxes (and state taxes) from employees’ wages. Therefore, individuals need to note whether their income was reported as a W-2 or 1099 to know what taxes they must pay.

    Related: W-2 or 1099? Why It Pays To Classify Your Employees Correctly

    Who needs to file a 1099 form?

    A 1099 form reports income from freelance work, rentals, investments, and other alternative sources. In most instances, if you earned more than $600 from any of these sources during the year, the person who paid you must send you a 1099 form by January 31st. You will then use this form to complete your taxes.

    When reporting your income on your taxes, use the correct 1099 form.

    For example, if you received payment from freelancing, you should generally fill out a 1099-MISC.

    Note that you’re responsible for paying taxes on all of your income, regardless of whether or not you receive a 1099 form.

    Speak to a tax professional if you have any questions about whether or not you need to file a 1099 form. They can guide you through all the reporting requirements and help keep you above board.

    Related: How Do I Give a Temporary Employee a 1099 Form?

    When are 1099 forms due?

    For businesses, 1099 forms are due by January 31st of the year following the calendar year when payments were made. This applies both to copies to be sent to contractors and the IRS.

    For individuals, 1099 forms must be received by January 31st, following the calendar year during which payments were made. All relevant 1099 forms should be reported on individuals’ tax returns by April 15th of the same year.

    If an individual does not receive a 1099 form from a business or other payer, they should still report the income on their tax return. Individuals should keep track of their income throughout the year in case 1099 forms are not provided.

    Failure to meet these deadlines can result in expensive penalties. Businesses that fail to file 1099 forms on time face a minimum penalty of $50 per form, with a maximum of $290 per year. The specific penalty depends on the form type and the time passed after the deadline.

    The IRS can also impose additional penalties for what it finds as intentional or negligent filing errors.

    How do I file a 1099 form with the IRS?

    If you’re an independent contractor or self-employed individual, you’ll need to file a 1099 form with the IRS come tax time.

    Here are three things to know about 1099 forms and how to file them with the IRS:

    1. A 1099 form reports income not subject to withholding tax.

    This includes interest, dividends, royalties, and payments made in exchange for services (including rent, commissions, fees, and tips). The payer of this income should send a 1099 form to both the payee and the IRS.

    2. There are many types of 1099 forms (more than 15), each for a different type of income.

    The most common is the 1099-MISC, used to inform the IRS of miscellaneous income. You would file a 1099-MISC if you received income such as rental income or freelancing income during the year. Other common 1099 forms include the 1099-INT (for interest income) and the 1099-DIV (for dividend income).

    3. When it comes time to file your taxes, you’ll need to include your 1099 forms with your return.

    You’ll also need to send a copy of each form to the IRS, so be proactive about keeping the informational report handy.

    Here are some tips for filing your 1099 forms correctly:

    • Review each form you receive and make sure the information is accurate.
    • Choose the correct filing method, whether direct entry, paper filing, or digital e-filing.
    • Double-check your work to ensure all your forms are filled out completely and accurately.
    • File your forms with the IRS and report them on your tax return by the deadline.

    Correctly filing your 1099 form is essential for ensuring that you comply with the IRS and local tax agencies. It also helps to protect you from any potential penalties and audits.

    Related: New IRS 1099 Rule for PayPal and Venmo Targets Very Small Businesses and Will Cause Misreporting and Errors

    Common mistakes people make when filing 1099 forms

    Perhaps the most common mistake is failing to report all the income they receive. While this can be fraudulently intentional, unintentional misreporting can happen if you forget to include income from a side gig, lottery winning, or receive cash payments instead of a check or money order.

    If you don’t know whether to report a specific type of income, it’s generally best to err on the side of caution and include it. Otherwise, you could face IRS penalties or miss out on potential tax credits.

    Another common mistake made on the business end is incorrectly reporting the taxpayer identification number (TIN) of the person or business you paid. The TIN can be either a Social Security number (SSN) or an employer identification number (EIN).

    If you report an incorrect TIN, the IRS might flag the return as inaccurate and send you a notice asking for clarification. As such, you always want to double-check the TIN before filing your return.

    Lastly, some taxpayers fail to file their 1099 forms (and other information returns) by the established deadline. The deadline for paper filings is February 28th, and the deadline for electronic filings is March 31st.

    If you miss the deadline, you may be subject to late fees and interest charges from the IRS. By avoiding these mistakes, you can ensure that your 1099 filing process goes smoothly (or at least increase the chances of a smooth process).

    Related: Save Yourself Money and Avoid These Top Tax Filing Mistakes

    Are there penalties for not filing a 1099 form on time or incorrectly filing one?

    The IRS imposes various penalties for businesses that fail to file 1099 forms on time or file them incorrectly. Perhaps the most significant penalty is the failure-to-file penalty, assessed at a rate of 0.5 percent of unpaid taxes per month; a business will be subject to this penalty if it fails to file a 1099 form within 30 days of the due date.

    Moreover, if a business files a 1099 form more than 60 days after the due date, the penalty can increase to $435 per form.

    In addition to the failure-to-file penalty, businesses may also be subject to a failure-to-pay penalty if they don’t pay the amounts shown on the 1099 forms by the due date. This penalty is equal to two percent of the unpaid tax liability and accrues monthly until the total amount gets paid.

    Finally, businesses may be subject to interest charges on any unpaid taxes.

    How can I get help if I’m having trouble filing my 1099 form correctly?

    If you struggle to fill out or file your 1099 form correctly, there are a few places to turn for help.

    IRS website

    The IRS website has a wealth of helpful resources to answer most tax filing questions.

    You can call them if you can’t find what you’re looking for on the website. They have customer service representatives who can help answer your questions and get you on the right track.

    Remember that IRS employees and those who work for other financial institutions are often overwhelmed with calls, especially during tax season, so you may need to plan for long wait times.

    Tax professionals

    Another great resource is your tax preparer or accountant. They can guide you through each step of the process and ensure everything is filed correctly.

    Your tax professional can also help you get the maximum amount on your tax refund. If you don’t have a tax preparer or accountant to rely on, make it a priority to find one as soon as possible.

    Tax filing software

    Finally, there are many software programs available that can help you file your taxes. These programs can walk you through the process in an easy-to-use interface.

    If you’re overwhelmed by the different options on the market, read online reviews highlighting each product’s features and costs. Then, choose the best tax software for your needs and budget.

    Getting help with your 1099 form can be easy, whichever route you choose. Research the plethora of resources available to help you get everything filed correctly and on time.

    Ready to file a 1099 form?

    1099 forms are important documents for both the IRS and taxpayers. Businesses and individuals should understand who needs to file them, when they are due, and how to get help filing them correctly.

    Filing deadlines are strict, so it’s best to start gathering your information early and contact a tax professional if you have any questions.

    Take a look at Entrepreneur’s Finance articles for more information like this.

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    Entrepreneur Staff

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  • Current Procedural Terminology (CPT): How It Works and What It Means

    Current Procedural Terminology (CPT): How It Works and What It Means

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    Current Procedural Terminology, perhaps better known by its abbreviation “CPT,” is the coding system the medical field uses to document healthcare services during a procedure.

    This system is extensive and can be confusing for those unfamiliar, but it’s essential to understand the basics, whether you’re a full-time medical professional or a patient.

    Below, you’ll learn the meaning of CPT, how it works, and the different categories to be aware of. You’ll also find tips for navigating this complex system.

    What is current Procedural Terminology (CPT)? FAQs answered

    CPT sometimes stands for curricular practical training, cognitive processing therapy, or carriage paid-to.

    However, below will discuss Current Procedural Terminology (CPT) as the acronym used to report medical procedures and healthcare services.

    This medical coding is developed and maintained by the American Medical Association (AMA) and used by health insurance companies, hospitals, and other healthcare providers to process claims and reimbursements.

    CPT codes are divided into three sections: evaluation and management, surgery, and radiology. Each section has its own set of codes for performance measurement for specific procedures.

    Healthcare providers and billers should be familiar with the CPT code system to ensure accurate billing.

    Related: A Day in the Life of a Medical Claims Biller

    How does CPT work?

    CPT officially launched in 1966 and is now in its fifth edition. AMA evaluates the coding annually to gauge whether a new CPT code is necessary. The CPT system has three levels of codes: Category I, Category II, and Category III.

    Category I codes, the most common, are used to report general medical procedures and services.

    Category II codes report more specific procedures and services, including those requiring special training or equipment.

    Category III codes are used for emerging technologies and procedures that are still being evaluated.

    Codes from all three categories can be used to bill for physician services. The AMA developed the CPT Editorial Panel to ensure that codes are accurately assigned to procedures. The panel comprises doctors from various specialties who regularly review and revise the CPT code set.

    There is also an annual review process during which new codes can be proposed and existing codes revised. The CPT system is constantly evolving to keep up with medical technology and practice changes.

    How Is the CPT code set categorized?

    Remember that evaluation and management (E/M), surgical, and radiology services comprise the three primary CPT categories.

    E/M codes are for office visits, hospital visits, and other outpatient services. These codes account for the level of care provided and the time spent with the patient.

    Surgical codes are for procedures performed in an operating room or another setting; they include information on the type of procedure, the body area involved, and the anesthesia used.

    Radiology codes are for diagnostic tests and procedures such as X-rays, MRIs, and CT scans. They describe the type of test or procedure performed and any special circumstances that may be involved.

    Related: Top 5 Healthcare Tech Trends Poised for Growth in 2022

    How can you find the right CPT code(s) for the procedure or service you’re billing for?

    When billing for a healthcare procedure or service, providers must use the correct CPT code (or codes) so that insurers can reimburse them for the cost. Billers can find the right CPT code(s) by searching AMA’s online CPT code database.

    To search, simply enter key terms related to the procedure or service. For example, if you’re billing for a skin biopsy, you might enter “skin biopsy” or “Biopsy, skin.”

    The results typically include a list of codes that match your search terms and a description of each code.

    Once you’ve identified the appropriate code (or codes), you can include them on your insurance claim form. Billers can typically ask a supervisor or another experienced medical billing professional for help if they don’t know which codes to use/

    How can you understand CPT codes on a bill?

    If you’re reading a medical bill for yourself, a family member, or someone else, you may see CPT codes listed for the services rendered. It’s helpful to understand what each code means to ensure everything is accurate and no mistakes have been made.

    For example, a bill with the five-digit code “99213” indicates a type of office visit. The number of the code reveals the level of service provided: a 99213 is for an established patient with a visit between 20-29 minutes, while a 99214 indicates an established patient with a visit of 30-39 minutes.

    Understanding CPT codes on your medical bill can help you identify errors or inconsistencies that may have occurred. If you’re ever unsure about what a code means, you can refer to the CPT codebook or get in touch with your provider’s billing staff for further clarification.

    Related: Startup Expenses for a Medical Claims Billing Service

    How do modifiers work?

    CPTmodifiers are two-digit codes that provide additional information about a medical service or procedure. They are used to indicate a modified procedure or to report a change in the usual circumstances of service.

    When submitting claims to insurance companies, it’s crucial to use the correct modifier code for accurate reimbursement. Failure to use a modifier can result in claim denial in some cases.

    There are many different types of CPTmodifiers, each with a specific meaning.

    Some of the most common modifiers include:

    Modifier 25: Indicates a separate and distinct procedure performed on the same day as another procedure

    Modifier 50: Indicates a procedure performed bilaterally (on both sides)

    Modifier 51: Indicates a procedure performed with multiple units

    CPTmodifiers are only sometimes required but are often essential to receive full reimbursement. When in doubt, check with the patient’s insurance company to see if a modifier is needed.

    Other important facts about using CPT codes in healthcare billing and reimbursement transactions

    By now, you likely understand CPT codes and their role in healthcare billing and reimbursement transactions. But as with anything related to healthcare billing, CPT is complex and requires you to learn continually.

    Here are a few other things to remember:

    • CPT codes can describe the services provided, not the diagnosis. The diagnosis is reported using ICD-10 codes.
    • CPTmodifiers may be needed to describe the service provided more accurately.
    • Always use the most specific CPT code possible. If there is doubt about which code to use, it’s generally better to err on the side of caution and choose the more specific code.
    • Bundling edits are in place for many CPT codes. This means specific codes cannot be billed together because they’re considered part of the same service.
    • Remember that CPT coding is just one part of the healthcare billing and reimbursement process. Other important considerations include documentation, billing software, and payer policies.

    Along with deepening your understanding of CPT, it’s best practice to keep your patients’ medical records organized. Many offices now use digital technology like EMR for its efficiency and convenience, and many of these electronic systems have built-in features to make billing with these codes easier and more intuitive.

    Related: It’s Time To Digitize Your Medical Records

    Are there any limitations to CPTfunctionality?

    There are certain limitations to CPT codes to be aware of as a healthcare professional. Here are some of the most prevalent ones:

    Specificity

    The first limitation is that the code must be specific to the service provided and accurately describe the procedure or service performed.

    For example, a diagnosis code cannot be used for a procedure code, nor can a procedure code be used for a diagnosis code. A minor coding mistake can cause issues for the healthcare provider, especially regarding reimbursement.

    Necessity

    CPT codes can only be used for medically appropriate and necessary services. You can’t use CPT codes for experimental or investigational treatments, procedures, or services.

    Accuracy

    You must choose the correct code level when reporting a procedure, meaning that you select the code that best describes the service provided. Choosing an inaccurate code level might lead to an improper payment or even an investigation by Medicare.

    Submitting claims

    It’s essential to consider the limitations of any coding system when billing for services or submitting claims.

    For example, CPT codes are only meant for medical procedures — not non-medical services such as administrative tasks.

    Also, selecting the correct code that accurately describes the service provided can be daunting due to the sheer number of codes available. You’ll want to carefully consider and research when selecting CPT codes for billing purposes.

    Moreover, CPT codes must adhere to certain limitations to accurately describe the service. It’s up to the provider or biller to select the correct code and ensure that all services are medically necessary.

    Remember to take the time to familiarize yourself with CPT codes and become aware of their limitations before submitting any claims for reimbursement.

    Related: The Best Ways To Attract Clients for Your Medical Claims Billing Service

    Now that you know about CPT codes

    CPT codes are an important part of healthcare billing and reimbursement. It’s essential to use the correct code when submitting a claim to ensure that you’re being appropriately reimbursed for the services you’ve provided.

    By understanding how CPT codes work and using the search tips above, you should be able to find the correct code(s) for your procedure or service quickly and easily.

    For more informational content, explore Entrepreneur’s wealth of business-centric resources here.

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    Entrepreneur Staff

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  • Step-by-Step Guide on How To Buy a House in 2023

    Step-by-Step Guide on How To Buy a House in 2023

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    Buying a home is an integral part of the American dream. There’s something special — almost sacred — about the idea of owning your own property where you can raise kids and grow old with your spouse before passing on that property to your descendants.

    The trouble is, buying a house is fairly complicated, particularly in the modern market. Let’s break down how to buy a house in 2023 step-by-step.

    Related: Forget Everything You’ve Read: Buying a House is NOT For Suckers

    Step 1: Do tons of research and figure out your financials

    As a first-time homebuyer in 2023, your first priority should be to do a lot of research. Buying a home may be the most expensive purchase you’ll ever make in your life, so it will be in your best interest (both personally and financially) to pick the perfect home and area and to consider your financials carefully before pulling the proverbial trigger.

    Specifically, you should determine:

    • What kind of home do you want in terms of its square footage, features, inclusions, etc.
    • Where do you want to buy a home. Generally, homes in suburban areas or metropolitan areas are more expensive. Prices can also increase given factors like proximity to good schools, whether or not the home is in a good neighborhood, etc.

    Figure out the kind of home you want to buy and where you want to purchase a property before going any further. Don’t start home shopping without establishing your non-negotiables.

    Related: 5 Tips for First-Time Home Buyers

    When is a good time to buy a home?

    The best time to buy a home is during a “buyer’s market.” Put simply, this means that there is more favorable market pressure toward homebuyers compared to sellers. Generally, this means there is a surplus of available homes, meaning homebuyers have more choices. Since there is high supply and high demand, sellers have to meet buyers more in the middle and negotiate more to close deals.

    All of these factors combined mean that home prices should be lower than average (or at least lower than they have been in recent months).

    In contrast, a seller’s market means that home prices are higher given a high demand and low supply. You may have fewer options for available houses, and you’ll have to pay more because sellers have more bargaining power.

    Try to time your home purchase so it’s during a buyer’s market. If you aren’t sure when that is, ask a realtor or real estate agent. They may be able to advise you on whether to purchase a home now or wait down the line.

    So, will 2023 be a good time to buy a home? To get a clear answer, you have to look at the current data, trends and predictions for the coming year.

    Recently, home prices across the U.S. have increased to astronomical levels. Data from Zillow, the leading online marketplace for real estate by user volume, shows that average U.S. home prices have risen by 29% since the beginning of the Covid-19 pandemic in 2020.

    In 2022 alone, mortgage rates skyrocketed from 3.22% in January to 7.08% by the end of October. While it’s impossible to know for sure how mortgage rates will move next year, many are making predictions. On the low-end Fannie Mae predicts an average range of 6.2% and 6.6%, while others, such as the Economy Forecast Agency (EFA), predict rates to hit 7% in the first quarter of 2023 and top out above 11% by the fourth quarter. However, increasing home inventory and fewer recent home purchases in major markets could indicate an incoming market correction.

    In other words, you might consider waiting for a few months or until the middle part of 2023 before buying a home to see if prices decrease.

    Related: This Is Why You Should Be Investing in Real Estate Right Now

    How much money do you need to buy a house in 2023?

    Take a hard look at your budget and figure out how much you can spend on a property. To get a mortgage, you need at least 3% of a home’s asking price for a down payment. Think of this as a lump sum good faith payment to show a home seller that you are serious about paying off your mortgage over time.

    If you’re a veteran, you may be able to access special mortgage loans that don’t require a down payment. These loans are the exception rather than the rule. In addition, it’s wise to make as much of a down payment as possible toward the home’s value because it will lower your interest rate and how much you have to pay each month on your mortgage.

    Your monthly mortgage payment is largely tied to your initial mortgage agreement (at least for conventional loans). If you want your monthly payments and mortgage rates for homeownership to be low, put down as much cash as you can toward the purchase price, even if you use credit cards. However, it’s important to do a cost-benefit analysis to see if you’re gaining (or losing) by paying with a credit card. There are certainly risks, but there can be benefits as well.

    This is also true for property taxes, PMI or private mortgage insurance, and other costs.

    Related: Mortgage Rates Hit a 16-Year High of 6.75%. Here’s What That Means for the Industry.

    Don’t forget to consider closing costs, either. Closing costs usually equal 3% to 6% of a property’s total, and they cover various fees to close a real estate deal, like attorney fees, title insurance costs, etc.

    For example, say that you want to purchase a home worth $350,000. In most cases, you’ll need a down payment of at least 3% of $350,000, which is $10,500. After the down payment, you’ll have to account for closing costs. To split the probably costs down the middle, plan for 4.5%. 4.5% of $350,000 is $15,750. In total, this means you’ll need around $26,250 to purchase that $350,000 house.

    You can try negotiating closing costs and securing a loan for a smaller down payment. However, it may be wiser to save more than you need so that you can comfortably outbid other interested parties and purchase the home quickly.

    Related: 10 Ways to Prepare Yourself for a Big Purchase

    Step 2: Talk to a real estate agent

    The best way to buy a house in 2023 and beyond is to contact a knowledgeable real estate agent. Real estate agents are homebuying experts who know the local market and can take you to houses that meet your needs in your target area.

    Say that you want to find a home with three bedrooms and two bathrooms, and a big yard for your dog. Rather than looking through online listings and driving around yourself in search of a stellar property, you can speak to a real estate agent and explain this, plus tell them all your other necessities or desires.

    The real estate agent will then look on the market and multiple listing services (MLS) for your area to find appropriate homes. They’ll draw up a list, contact the sellers and invite you to tour those homes so you can pick the best one.

    In short, real estate agents make finding the perfect home much easier and faster.

    Do you always need a real estate agent?

    No, and skipping a real estate agent could save you some money in terms of closing costs (real estate agents usually take a commission, which is a percentage of the home’s asking price). However, cutting the middle man means you’ll have to do much more research and find appropriate homes for your needs.

    Generally, it’s only advisable to skip hiring a real estate agent if you already have a property in mind and know the homeowners personally.

    Related: 11 Things You Need to Know About Real Estate Negotiations

    Step 3: Contact lenders for preapproval for your mortgage

    Mortgage pre-approval is an important part of the home-buying process that you shouldn’t skip in 2023. If you are preapproved for a mortgage, your lender — such as a bank or credit union — says they’ll most likely underwrite a loan for you based on your credit history, financial profile or history with their branch.

    Getting preapproval also accelerates the mortgage lending process. If you find a home you love and need a loan quickly to purchase it before another prospective homebuyer, being preapproved will let you get your funding faster to secure the purchase.

    Note, however, that preapproval only counts toward mortgages up to a certain amount. A bank might preapprove you for a loan for $400,000, but not $500,000.

    Regardless, a preapproval letter shows you have earnest money to put toward a property and will help you in your house hunting in any real estate market.

    What if you can’t get preapproval?

    You may not be able to qualify for home loan preapproval based on factors like low credit score, no financial history with a given institution, etc.

    If that’s the case, don’t lose hope. You can always boost your credit by waiting a few months and making your utility payments on time. You can also contact other lending institutions for preapproval.

    If you don’t have much of a credit history but have other beneficial attributes, like veteran status, you can try to qualify for federal loans from the U.S. Federal Housing Administration or FHA. FHA loans and VA loans are good means for borrowers who have low debt-to-income ratios but less than stellar results in their credit reports.

    Step 4: Begin looking for and touring homes

    At this stage, you should start looking for and touring homes that are on the market, usually with the help of your real estate agent.

    Remember that you don’t have to accept the homes your real estate agent has prepared or outlined for you. If none of the homes fit your needs, ask them to find another property. Real estate agents won’t do this forever, but many are genuinely interested in getting you the best deal and finding the perfect property for you and your family.

    Related: 7 Secrets Luxury Home Buyers Need to Know

    As you look at homes in 2023, listen to your real estate agent’s advice. They might tell you whether a certain feature or amenity is difficult to find and may offer advice regarding when you should purchase.

    If, for instance, your real estate agent says you should make an offer on a given house quickly because it is highly competitive, listen to them. Otherwise, you might miss out on an attractive property because you were too hesitant.

    Step 5: Choose a house and make an offer

    Your next step is to decide on the house you want to purchase and make a competitive offer to the seller. Of course, what constitutes a competitive offer in 2023 can vary heavily from place to place and market to market.

    What’s a good offer?

    Generally, you should try to make a competitive offer based on the prices of surrounding homes or the listing price stated by the seller. But there are exceptions to this unspoken rule.

    In many cases, you can make a slightly lower or cheaper offer for a house if you offer to pay most or much of the cost in cash. This is advantageous for the seller because they get access to the money immediately. Paying in cash isn’t an option for many Americans, however.

    Speak to your real estate agent about what they think a good offer would be. They may be able to offer insight into the market competition, whether other buyers might be able to offer more money than you, etc.

    U.S. News & World Report predicts existing home prices will decrease by about 5% nationally and up to 10% or more in high-priced areas; however, not everyone expects prices to fall everywhere. Lawrence Yun, the senior vice president of research at the National Association of Realtors, believes “there’s a chance that half of the country may witness price increases, while the other half will see price drops.”

    If other buyers are interested in the same house, you may have no choice but to “highball” your offer to sway the seller to your side.

    Related: Report: It’s Getting Harder and Harder to Become a Homeowner

    Step 6: Negotiate with the seller

    Purchasing any house in 2023 requires some haggling and negotiating. Don’t be afraid of this, as it’s a necessary part of the process! Most negotiations revolve around who will pay for most of the closing costs.

    Closing costs

    As noted earlier, closing costs include various fees, insurance payments, and commission fees for involved realtors. Generally, closing costs are paid for by the party that benefits most from them – for instance, you’ll pay for your real estate agent’s commission, while the home seller will pay for the inspection (see more below).

    You can negotiate with the home seller to cover some or all of your closing costs, however, if you have other benefits to bring to the table, such as buying the house with cash, being able to close the deal quickly, and so on.

    Related: 5 Steps to Master the Art of Negotiation

    Step 7: Schedule an inspection and appraisal

    No matter how much money you offer, it’s a good idea to schedule a home inspection and home appraisal at the earliest opportunity. In 2023, ensure you schedule the inspection first.

    A home inspection involves a licensed inspector coming out to the property and making sure that it is in good condition, that its foundations are secure, and that there aren’t any major problems that the home seller failed to disclose to you beforehand (and that might cause you to rethink your offer or offer less money).

    Once an inspector has finished their work, they will create an inspection report for you to review. Make sure the inspection doesn’t reveal any major issues before moving on.

    Next, schedule an appraisal. This process is also carried out by a licensed professional. The appraiser essentially checks the prices and values of similar homes in the area, called “comps,” to make sure that the seller has listed their home for a competitive, fair price.

    If the appraisal report says the home should be worth much less than it is listed for, go back to the bargaining table and try to get the seller to lower the price. The seller may try to push back against this.

    If the seller isn’t willing to sell their property for a reasonable, fair price, walk away from the bargaining table and look for a different property. Even in a seller’s market, there’s almost certainly another house that will be perfect for you and your family that you don’t have to overpay for.

    Are these steps really necessary?

    Yes. You should never buy a home if the seller wants you to skip the inspection and appraisal steps. It could be a sign that they are trying to trick you into purchasing a bad property or a home with a lot of things wrong with it that will require you to sink even more money into it in the future.

    On top of that, most mortgage lenders require you to complete an inspection and appraisal and include that paperwork with your loan application. No mortgage lender wants to finance the purchasing of a home that has a lot of problems, which may make it difficult for the mortgagor to pay back their loan.

    Step 8: Apply for a loan

    If everything looks good so far, it’s time to apply for a loan from a bank, credit union, or other financial institution. Applying for your loan should be quick and simple if you have already gotten preapproval. Still, be sure to complete the paperwork carefully and comprehensively so you don’t miss anything.

    If all goes well, you’ll get your loan approved in a matter of days, allowing you to finalize the offer with a home seller and move to the final steps of the process.

    Once more, if you don’t qualify for any mortgage loans, try to improve your credit in the meantime or seek out alternative means of financing.

    Related: 10 Questions to Ask Before Applying for a Bank Loan

    Step 9: Contact other necessary professionals

    At this stage, you need to contact other key professionals in the real estate industry. In prior years and in 2023, the process involves a few major parties.

    Real estate attorney

    You’ll want a real estate attorney to look over the closing documents and ensure there aren’t any loopholes for any party to exploit. Real estate attorneys can work with flat fees or commissions, so investigate how much you’ll have to pay for this particular closing cost.

    Title insurance company

    You’ll also need to contact a title insurance company. The title insurance company ensures your purchase (specifically, the title for the property) so that you’re protected if you discover or are made aware of a problem with the title later.

    For example, if you purchase a property from an apparent owner, only to discover that they didn’t have the true title to the property when you made a purchase, your title insurance will protect you from financial fallout.

    Homeowners insurance company

    Don’t forget to contact a homeowners insurance company as well. Homeowners insurance is usually necessary if you want to be financially covered from losses or damages to your home, especially from disasters like fires or floods.

    Architect/contractor

    If you plan to renovate or change the property in any way before moving in, now’s the time to contact your preferred architect or contractor.

    Step 10: Check the property one last time

    You’re almost done. Now it’s time to do a last walk-through and check out the property before finalizing the purchase.

    Don’t skip this step in 2023! Always check your property one last time before buying it just to make sure that the seller has not tried to hoodwink you in some way. Make sure that all the appliances and electrical outlets work, and ensure that there aren’t any issues with the yard, doors or windows.

    If you notice something wrong with your dream home during the final walkthrough, ask the seller to fix it before the closing date.

    Step 11: Close the deal

    In contrast to the rest of this process, closing the deal when purchasing a house is pretty straightforward. Your real estate attorney will bring the paperwork to the final meeting with the home seller, and you and the seller can sign the documents that note the transfer of ownership.

    Your attorney will also usually be happy to take these documents down to your local county clerk’s office so they can be filed properly. They may or may not charge an extra fee in addition to their commission for this labor, however.

    Now you should receive the keys to your new home and be the official owner!

    What about financing in 2023? Because there are large sums of money involved in buying a house, that money is held in a third-party escrow account, usually selected by your mortgage lender. As soon as the deal goes through, the money is transferred from the escrow account into the home seller’s bank account or other intended destination.

    Related: 5 Tips for Millennial Home Buyers

    Step 12: Move in

    You shook hands with the home seller, signed all the paperwork and finalized the transaction. Once you get your keys from your real estate agent or the home seller, congratulations – you’re ready to move into your new house!

    Summary

    If you’re interested in buying a house in 2023, you have a lot to consider. Buying a house might seem like a lot of work, and it requires plenty of preparation beforehand. But in the end, you can buy a house so long as you have the right financing and a plan in mind. Follow the steps above, and your home purchase in 2023 will go smoothly.

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  • Contribution Margin: What It Is & How To Calculate It

    Contribution Margin: What It Is & How To Calculate It

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    To run a company successfully, you need to know everything about your business, including its financials. One of the most critical financial metrics to grasp is the contribution margin, which can help you determine how much money you’ll make by selling specific products or services.

    More importantly, your company’s contribution margin can tell you how much profit potential a product has after accounting for specific costs.

    Below is a breakdown of contribution margins in detail, including how to calculate them.

    What is a contribution margin?

    A contribution margin represents the money made by selling a product or unit after subtracting the variable costs to run your business.

    Consider its name — the contribution margin is how much the sale of a particular product or service contributes to your company’s overall profitability. It’s how valuable the sale of a specific product or product line is.

    Related: How to Price Your Staffing Services

    In a contribution margin calculation, you determine the selling price per unit (such as the sales price for a car) and subtract the variable cost per unit or the variable expenses that go into making each product.

    You may need to use the contribution margin formula for your company’s net income statements, net sales or net profit sheets, gross margin, cash flow, and other financial statements or financial ratios.

    What does a contribution margin tell you?

    The contribution margin is one of the critical parts of a break-even analysis. A break-even analysis is a financial calculation weighing costs of production against the unit sell price to determine the break-even point, the point at which total cost and total revenue are equal. Break-even analysis can help you with risk management

    Break-even analyses are useful in determining how much capital you’ll need for a new product and calculating how much risk will be involved in new business activities. They are often used to determine production cost and sales price plans for different products, such as:

    • How much you should price specific products for.
    • How many products you need to sell to turn a profit (the number of units can determine whether you have a low contribution margin or high contribution margin).
    • How much product revenue you will generate.

    The contribution margin further tells you how to separate total fixed cost and profit elements or components from product sales. On top of that, contribution margins help you determine the selling price range for a product or the possible prices at which you can sell that product wisely.

    Other things the unit contribution margin tells you include the following:

    • Profit levels you can expect from the sales of specific products.
    • Sales commission structures you should pay to sales team members.
    • Sales commission structures you should pay to agents or distributors.

    How to calculate a contribution margin

    Luckily, you can calculate a contribution margin with a basic formula:

    C = R – V

    “C” stands for contribution margin. “R” stands for total revenue, and “V” stands for variable costs. With these definitions, the equation goes like this:

    Contribution margin = total revenue – variable costs

    Note that you can also express your contribution margin in terms of a fraction of your business’s total amount of revenue. The contribution margin ratio or CR would then be expressed with the following formula:

    CR = (R – V) / R or contribution margin = (total revenue – variable costs) / total revenue

    Fixed costs vs. variable costs

    Crucial to understanding contribution margin are fixed costs and variable costs.

    Fixed costs are one-time purchases for things like machinery, equipment or business real estate.

    Fixed costs usually stay the same no matter how many units you create or sell. The fixed costs for a contribution margin equation become a smaller percentage of each unit’s cost as you make or sell more of those units.

    Variable costs are the opposite. These can fluctuate from time to time, such as the cost of electricity or certain supplies that depend on supply chain status.

    Contribution margin example

    Imagine that you have a machine that creates new cups, and it costs $20,000. To make a new cup, you have to spend $2 for the raw materials, like ceramics, and electricity to power the machine and labor to make each product.

    If you were to manufacture 100 new cups, your total variable cost would be $200. However, you have to remember that you need the $20,000 machine to make all those cups as well. The machine represents your fixed costs.

    Now imagine that you make those cups to be sold at three dollars per unit. You can now determine the profit per unit by plugging in the above numbers:

    • SP – TC = Profit per unit, where SP is the sales price, and TC is the total cost.
    • $3 – $2 = $1 profit per unit.

    In this example, the profit per unit is the same as the contribution margin. It’s how much each cup sale contributes to “real” profits.

    How can you use contribution margin?

    You can use contribution margin to help you make intelligent business decisions, especially concerning the kinds of products you make and how you price those products.

    A contribution margin analysis can help your company choose from different products that it can use to compete in a specific niche based on available resources and labor.

    Related: Determining Your Break-Even Point

    For instance, you can make a pricier version of a general product if you project that it’ll better use your limited resources given your fixed and variable costs.

    You can also use contribution margin to tell you whether you have priced a product accurately relative to your profit goals.

    For instance, if the contribution margin for a specific product is too low, that could be a sign that you need to either increase the price as you sell the product. It could also indicate that you need to reduce the variable (i.e., manufacturing and supply-related) costs associated with that product to turn more of a profit.

    Contribution margin compared to gross profit margin

    Contribution margins are often compared to gross profit margins, but they differ. Gross profit margin is the difference between your sales revenue and the cost of goods sold.

    When calculating the contribution margin, you only count the variable costs it takes to make a product. Gross profit margin includes all the costs you incur to make a sale, including both the variable costs and the fixed costs, like the cost of machinery or equipment.

    Related: How to Calculate Gross Profit

    Furthermore, a contribution margin tells you how much extra revenue you make by creating additional units after reaching your break-even point.

    Put more simply, a contribution margin tells you how much money every extra sale contributes to your total profits after hitting a specific profitability point.

    This is one reason economies of scale are so popular and effective; at a certain point, even expensive products can become profitable if you make and sell enough.

    When should you use contribution margin?

    Generally, you should use contribution margin to tell you:

    • If you have priced a product incorrectly.
    • How many products you need to sell to make a profit based on variable costs.
    • Whether you need to reduce operating or labor expenses related to making a product.

    A negative contribution margin tends to indicate negative performance for a product or service, while a positive contribution margin indicates the inverse.

    However, it may be best to avoid using a contribution margin by itself, particularly if you want to evaluate the financial health of your entire operation. Instead, consider using contribution margin as an element in a comprehensive financial analysis.

    Use contribution margin alongside gross profit margin, your balance sheet, and other financial metrics and analyses. This is the only real way to determine whether your company is profitable in the short and long term and if you need to make widespread changes to your profit models.

    Related: Understanding the Difference between Gross Margin and Markup

    You may also use contribution margin as an investor. Investors and analysts use contribution margins for a company’s staple or primary products.

    They can use that information to determine whether the company prices its products accurately or is likely to turn a profit without looking at that company’s balance sheet or other financial information.

    For instance, if a company has a low contribution margin for its essential products, it could be spending more money than it is bringing in.

    Conversely, a good contribution margin may indicate that the company is an excellent operation and uses its resources wisely.

    Related: The 5 Myths of Mastering Profit Margins

    So, what are the takeaways about contribution margins?

    As you can see, contribution margin is an important metric to calculate and keep in mind when determining whether to make or provide a specific product or service.

    Once you calculate your contribution margin, you can determine whether one product or another is ultimately better for your bottom line. Still, of course, this is just one of the critical financial metrics you need to master as a business owner.

    Interested in more resources like this? Check out Entrepreneur’s vast and ever-growing library of guides and resources to help you on your path to professional success.

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  • What is Revenue: Definition, How to Calculate It & More

    What is Revenue: Definition, How to Calculate It & More

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    Businesses are primarily successful based on how much money they make or their revenue. But while anyone can roughly grasp revenue, what it means and why it’s essential, revenue as a business figure is a little more complex, especially when you compare it to other metrics like income.

    Below is a breakdown of revenue in detail and how to calculate revenue using a revenue formula.

    Related: Tracking These 6 Metrics Could Boost Your Sales

    Revenue explained

    Revenue is the money a business generates from its normal business operations, things like gross sales of products and other income streams. It is calculated by looking at the average product sales price and multiplying it by the number of units sold.

    For example, a car dealership’s revenue is the combined sales price for all cars it sells in a given timeframe, like a day, week, month or quarter. Total revenue is the “top line” for gross income metric on a balance sheet or company income statement.

    While revenue is an essential metric, it is distinct from other key metrics such as operating income, gross revenue and total profits. The net profit, for example, is the amount of money you get to keep or count as profits based on the sale of goods.

    Types of revenue

    You can calculate and analyze different types of revenue for your business purposes or for calculating other ratios.

    Related: How to Forecast Revenue and Growth

    Generally, corporate revenue is subdivided according to the divisions or products that make that revenue. For instance, if you have a restaurant, you might divide and analyze your revenue by categorizing your offerings as sides, main dishes and alcoholic beverages.

    Alternatively, a company can distinguish revenue by analyzing cash flow from tangible or intangible products or services. Tangible products are products you can feel and physically sell to customers, while intangible products are usually services, such as internet and cloud services.

    You can further divide your revenue into operating revenue and non-operating revenue. Operating revenue is any revenue from a company’s core business. For instance, if you run a restaurant, your operating revenue is from the food and drinks you sell to customers.

    Nonoperating revenue is any revenue from secondary income sources. If you run a restaurant, your nonoperating revenue could be from sales of loyalty program cards, gift cards or restaurant merchandise, like T-shirts and mugs.

    Nonoperating revenue is critical to incorporate because it can be unpredictable and nonrecurring. You might, for instance, get money through a litigation victory or selling an asset.

    In any case, it’s essential to divide your revenue by source and type to understand where most of your money comes from and make smarter business decisions.

    Revenue vs. Income

    Revenue is distinct from income, even though the two concepts are very similar. At its core, the revenue is all the money you make from your products and services.

    But income is the money you “take home” or have left over after subtracting the necessary expenses to make those products and services.

    This includes the cost of goods and other operating expenses, which get taken out of your revenue. In this sense, income is closer to your gross profits than revenue taken by itself.

    Example of revenue

    Here’s an example:

    • Say you create handmade jewelry for your online store or a platform like Etsy.
    • You have to spend $100 on materials for a single set of earrings.
    • When the earrings are complete, you can sell them for $150. Should you sell the pair of earrings, you’ll make a profit of $50.

    In this sense, your revenue is $150, but your income is only $50. Understanding these distinctions can help you grasp your finances more accurately and responsibly.

    Note that even though income is vital to calculate, it needs to consider the time or cost of labor that is not accounted for in salaries.

    Again, say you run your own business and don’t employ anyone. While you can calculate income by subtracting the material expenses you have, you won’t be able to tally up the cost of your labor unless you pay yourself a salary.

    Why and when is revenue important?

    Revenue is essential because it helps a company understand how much money has been brought in over the last quarter, month or timeframe.

    Businesses can’t make wise decisions regarding employee salaries, product purchasing and other expenses without knowing how much money flows into their coffers.

    Revenue is the top-line income metric because it appears first on any corporate income statement. When you hear “top-line growth,” you can translate it in your head to “revenue growth.”

    It’s contrasted with net income, also called the bottom line income metric. Income, as mentioned above, is a company’s revenues minus expenses.

    Contrasting these two numbers can help companies understand how much money they spent to earn their profits. It’s one of the central accounting principles that should guide your business activities.

    While revenue is significant, it cannot and should not be considered in isolation. Instead, you should look at revenue in conjunction with other metrics so you can understand the total financial health of your business relative to other organizations or your business goals.

    For example, if you have high revenue, such as $1 million per quarter, you might think that you are earning a lot of money.

    But when you compare your revenue to your net income, which is just $20,000 per quarter, you’ll notice that you aren’t taking home a lot of money relative to your expenses or the costs of doing business.

    Armed with information about revenue vs. profit, you can then make decisions such as:

    • Decreasing your expenses in some way.
    • Offering new products or changing the way you price your products.

    Revenue, along with profit margin, is an integral part of forecasting, fundraising from investors and accrual accounting, all of which consider a company’s financial health.

    How can companies increase revenue?

    Companies can increase revenue in a variety of ways. For example, a company can try to reduce its operating expenses by laying off employees, finding better supply chain arrangements or streamlining or simplifying the manufacturing process to make producing each business unit cost less.

    Related: Finding New Ways to Generate Revenue

    Alternatively, companies can increase revenue by increasing the cost of each unit sold. They may increase prices by a certain amount to bring in more money.

    This tactic, while risky, can be successful if a company’s target audience members are willing to spend more money on the same products for one reason or another.

    How to calculate revenue

    You need to know how to calculate revenue if you are to analyze it properly.

    Fortunately, you can use a simple revenue calculation formula to get this metric, no matter how many things you have sold or how much money you have made.

    Note that this revenue formula is helpful and generalized, but service companies, production companies, and other corporations may use different formulas.

    An excellent basic revenue formula to use is:

    Net revenue = (quantity sold X unit price) – discounts – allowances – returns

    Here’s a more detailed breakdown of this formula: net revenue is what you are trying to find.

    The discounts are any discounted prices you have to account for, such as when selling products on sale.

    Allowances are other monetary benefits afforded to customers, such as store credit. Returns are subtractions to your revenue because you give back money to a customer.

    To complete this formula, you first multiply the units sold by the unit price for each unit. Say that you are trying to find the revenue for selling a batch of glasses from your business.

    You sell each glass for $50, and you sell 75 glasses in total. You end up with a revenue of $3750.

    However, you need to subtract any discounts, allowances, or returns that may have impacted that revenue number.

    Say that one of your customers returned 10 of the glasses because they ended up needing fewer. You have to subtract $500 from that total, resulting in a new total of $3250. Remember, this is just your revenue, not your income or profits.

    Essentially, you can always calculate revenue by calculating how much money you made, then subtracting any expenses, discounts or other elements that might reduce how much money you take home or put in the bank.

    When should you calculate revenue?

    You or your accountant should calculate revenue at the end of each quarter at the bare minimum. Revenue is a crucial element of any balance sheet, which collects essential metrics and shows you your company’s financial health.

    However, you can calculate revenue whenever you need to understand the relationship between the money you bring in and the money you spend to make that profit.

    Calculate revenue when you want to learn:

    • Whether you need to increase the prices of your services or products.
    • Whether you should decrease or increase your labor salaries or lay people off.
    • Whether you should reduce the prices of your products to drive sales.
    • Whether you need to take other, more drastic measures to improve the profitability of your company.

    If you have an accountant, they may calculate the revenue for you automatically or regularly. However, it may be wise to calculate revenue regularly.

    Since it’s only accurate for a short period, regularly calculating revenue could help you see how your company evolves or see what “good” revenue looks like compared to “bad.”

    Summary

    Revenue is just one part of a company’s overall balance sheet. While important, remember to be careful about calculating revenue in isolation; instead, consider analyzing it in conjunction with other metrics such as income, gross profits and expenses.

    Running a business and understanding your finances is an ever-evolving, ongoing process.

    Looking for more professional finance articles like this one? Explore Entrepreneur’s Money & Finance resources here.

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  • What Is a Balance Sheet and Why Does Your Business Need One?

    What Is a Balance Sheet and Why Does Your Business Need One?

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    When you want to know a company’s financial health, it helps to look at its balance sheet. But if you’ve never seen a balance sheet before or don’t know how to read one, all you’ll see is a collection of impenetrable numbers and strange terms.

    You’ve likely heard about line items and balance-sheet-related terms like working capital, net income, net assets or bonds payable; however, without a cursory understanding of how balance sheets work, these terms can confuse you.

    This article will solve that by breaking down balance sheets in detail, explaining what a balance sheet is, and how it works, as well as showing you some balance sheet examples.

    Related: Balance Sheet – The Entrepreneur Small Business Encyclopedia

    What is a balance sheet?

    A balance sheet is a detailed financial statement that breaks down all of a company’s assets, liabilities, and equity at a specific time, such as the end of a month, the end of a quarter or the end of a year.

    You can also make balance sheets for “random” points in time to see how a company is doing at any given moment. No matter when you make one, a balance sheet allows you to evaluate a business’s capital structure and determine how profitable it is relative to its expenses.

    Think of a balance sheet as a snapshot exploring what a company owns and owes and how much shareholders invest.

    Balance sheets, combined with other financial statements, allow investors and business owners to analyze business performance and make the wisest decisions possible.

    Related: Financial Statement – The Entrepreneur Small Business Encyclopedia

    What are the major components of a balance sheet?

    All balance sheets are comprised of three primary sections — here’s a detailed breakdown of each:

    Assets

    First, you’ll find a breakdown of the company’s assets. The assets are everything that a company owns that has a dollar value. More specifically, a company can turn assets into cash at some point.

    Current assets can impact a company’s financial position and can include the following:

    • Money in business checking accounts.
    • Physical products and equipment, such as inventory.
    • Prepaid expenses.
    • Short-term investments.
    • Money in transit, like money from invoices.
    • Accounts receivable, which is any money owed to a business by its customers.
    • Cash equivalents, like stocks, bonds, marketable securities, and foreign currencies.

    However, this is by no means a comprehensive list of all total assets, which would also include non-current assets (long-term investments) that a company does not expect to liquify within a given fiscal year.

    Additionally, assets can be tangible things, such as business buildings or equipment.

    Intangible assets include things like intellectual property, copyrights and trademarks. Note that tangible assets are usually subject to depreciation, so they lose value over time.

    Assets may be further broken down into both long-term and short-term assets. You can sell short-term assets relatively quickly, typically in less than a year.

    They include the majority of the assets described above. Long-term assets are things like buildings, land, corporate machinery and equipment.

    Liabilities

    Next on a balance sheet should be liabilities. Liabilities are any of the financial debts or obligations that a company has. Liabilities should be listed by the due date, with the debts or liabilities that are due the soonest listed on top.

    Total liabilities can include but are not limited to:

    • Taxes owed, including upcoming tax liabilities.
    • Accounts payable or money owed to suppliers for items purchased on credit.
    • Employee wages for hours already worked.
    • Loans you must pay back within a year.
    • Credit card debt.

    Liabilities can be broken down into current liabilities and non-current liabilities. These are essentially long-term liabilities that don’t have to be paid back or settled within the year and can include the following:

    • Long-term debt or loans.
    • Bonds issued by a company.

    You’ll need to calculate all liabilities to complete balance sheet accounting equations, practice good bookkeeping and complete or calculate other financial ratios using programs like Excel or others.

    Equity

    Equity is the other significant section of a balance sheet. It’s any money currently held by the company. It can be called shareholders’ equity, stockholders’ equity, owner’s equity or similar names. In any case, this balance sheet section should break down what belongs to business owners and the book or monetary value of any investments.

    Equity can include:

    • Capital in the business — this is how much money the owners have invested into the business.
    • Public or private stock.
    • Retained earnings, which can be calculated by adding up all revenue minus expenses and distributions.

    Note that equity may decrease if an owner takes money out of the company to pay themselves. Equity can also decrease if a corporation issues dividends to shareholders.

    All three of these sections combined to tell you what the company owns, what it can turn into cash if it sells those things and what debt obligations it has or the money it owes.

    Major balance sheet equation

    In a broad sense, every balance sheet’s numbers should add up properly according to the following equation:

    Assets = liabilities + shareholders’ equity

    All of the company’s remaining assets are the same as its liabilities, added with the equity from its shareholders. The company has to pay for all these things by borrowing money (i.e., liabilities) or by taking value from investors (i.e., issuing shareholder equity).

    How does a balance sheet work?

    Balance sheets provide clear-cut, mathematically accurate information about a company’s finances for a given moment. For instance, if a potential investor wants to know whether a company is a good investment, they may request a balance sheet.

    The balance sheet can tell them:

    • What the company owns, and what its general profits are.
    • What the company owes in terms of debt or liability, which can tell the investor whether the company is a risky investment.
    • What the equity in the company is, which tells the potential investor whether investing in the company may provide them with profits later down the road.

    Investors can use different ratios and formulas using the numbers on a balance sheet to determine a company’s financial well-being. These include debt-to-equity ratios and acid test ratios.

    Along with an income statement, an earnings report, and a statement of cash flow, an investor has everything they need to determine the state of a company’s finances.

    Related: A Guide to the Top Three Financial Reports for Small Businesses

    Balance sheets should always balance

    Whether you’re an investor or business owner, remember that a balance sheet should always “balance.” This is where balance sheets get their names.

    Put more simply, the company’s assets should equal liabilities and shareholder equity.

    If for whatever reason, the numbers on a balance sheet do not balance, there are problems, which can include:

    • Inaccurate or incorrect data.
    • Misplaced data (such as one number being put in a spot where it should be somewhere else).
    • Errors with inventory or exchange rate.
    • Miscalculations.
    • Deliberate falsifications on the part of shareholders, company owners, or accountants.

    Why are balance sheets important?

    Balance sheets can be essential for every company, regardless of size or operating industry, because of their many benefits.

    In short, balance sheets help investors and business executives determine risk. Because it is a comprehensive financial statement, it explores everything that a company owns and everything that the company owes in terms of debt or liability.

    In this way, someone looking at a balance sheet can easily assess the following:

    • Whether a company has overextended, such as whether it has borrowed too much money.
    • Whether the company has enough liquid assets to pay off its debts in the event of liquidation.
    • If the company has enough cash on hand to meet current debt obligations.

    Related: Use a Balance Sheet to Evaluate the Health of Your Business

    Balance sheets are also important because they are a prime means to secure investment capital. Business owners usually have to provide balance sheets to potential investors, whether individual investors or large corporations like banks and credit unions. No investor is likely to put money into a business unless they look at a balance sheet first.

    In the long term, balance sheets are essential tools that managers can use to determine profitability, liquidity, and other metrics for their company.

    Once they have this information, they can make wise decisions, such as paying down company debts instead of expanding during a costly, risky period of time.

    What might you need beyond balance sheets?

    Balance sheets are excellent financial documents to have and understand, but you can’t just use these to understand the company thoroughly. There are some limitations and drawbacks to balance sheets.

    For example, balance sheets are static, so they have to be updated regularly. Because of this, an out-of-date balance sheet may not give an accurate picture of a company’s financial health. A company might look financially healthy on one day and appear to be heading toward insolvency on another.

    Because of this, it’s a good idea for investors, business owners, and managers to also acquire cash flow statements, income sheets, and other financial documents if they want to determine a company’s holistic, comprehensive health.

    Balance sheet example

    The best way to truly grasp balance sheets is to look at concrete examples. While you can create balance sheets using Microsoft Word and other word processors, you can also check out premade sample balance sheets from Accounting Coach.

    These example balance sheets include fake corporations with real numbers and equations. They also include balance sheets in different forms, such as account form balance sheets and report form balance sheets.

    Check out these example balance sheets to see how these documents should look when correctly filled out. Try filling in a balance sheet template like your company’s balance sheet to get a practice picture of your company’s financial position.

    So, what are the takeaways about balance sheets?

    Balance sheets are relatively easy to scan once you know what to look for.

    More importantly, balance sheets can tell you a lot about the company’s financial health and help you make wise business or investment decisions depending on your goals.

    Running a business means more than just reading your balance sheet accurately, though.

    Interested in learning more about professional finances? Check out Entrepreneur’s other guides and financial resources today.

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  • Is Real Estate Investment Trusts a Good Career Path in 2023?

    Is Real Estate Investment Trusts a Good Career Path in 2023?

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    Getting into real estate is often considered to be a lucrative career path. But you don’t have to buy and sell properties to join this industry as a professional. You can enter a real estate investment trust (REIT) company or become a REIT investor.

    Keep reading for the info you need to consider to decide if real estate investment trusts are good career paths for professionals like you.

    Real estate investment trusts explained

    A real estate investment trust or REIT is a group of funds or securities for real estate. REIT management companies oversee real estate acquisitions, sales and diversification.

    Think of a REIT similarly to a mutual or exchange-traded fund (ETF). With a mutual fund, several stocks or securities are gathered together into a group. Investors can then purchase mutual fund shares rather than individual shares in the fund itself.

    Similarly, with a real estate investment trust, investors can purchase partial ownership or shares of the trust, thus gaining the financial benefits of simultaneously investing in multiple pieces of real estate or other securities.

    Through REITs, investors can invest in portions of real estate projects or properties and generate profits. Most real estate investment trusts are collections of properties such as hospitals, shopping malls, apartments and other large properties rather than single-family homes, though this is only sometimes true.

    Related: The Most Stable REIT to Buy for a Recession

    Real estate investment trusts are often attractive to investors because they don’t require those investors to finance, purchase or manage any properties by themselves. Instead, REIT companies and their employees handle all the details.

    What does a REIT company do?

    A REIT company acquires real estate properties and securities for its clients. It monitors the market, sells properties when necessary and continues to grow the collected trust and portfolios under its control for the financial prosperity of its clients.

    A REIT company is similar to a mutual fund manager. They take care of the day-to-day monitoring of properties of investments for their clients, plus give out dividends to those clients every month.

    REITs in more detail

    Only some companies that invest in real estate qualify as REITs.

    For a company to be a legitimate REIT, it must:

    • Invest 75% or more of its total assets in real estate and U.S. treasuries for cash.
    • Derive 75% or more of its gross income from interest on mortgages, real estate sales or rent payments.
    • Pay at least 90%of its taxable income as shareholder dividends each fiscal year.
    • Be a taxable corporation.
    • Be managed by a board of trustees or directors.
    • Have at least 100 shareholders or more after the first year of operations.
    • Have no more than 50% of its shares owned by five or fewer people.

    Related: 3 REITs That Could Be the Backbone of Your Portfolio

    Do REITs pay investors dividends?

    Yes, which is part of what makes them so desirable for investors. Both residential and diversified REITs pay monthly dividends to their shareholders and investors. This monthly income comes from rent and mortgage payments from the people who own the properties in the REIT.

    Most REITs have an average rate of return of about 10.5%, similar to the rental rate of return landlords can expect in their first years of operation. Unlike landlords, however, REIT investors don’t need to spend much time and money maintaining or managing properties.

    Note that REIT managers or companies collect a small commission from accrued mortgage and rent payments as the cost of their services. This is what pays the workers of real estate investment trusts, their managers and other professionals.

    So, should you get involved with real estate investment trusts?

    That depends on your career ambitions and prospects. REIT management is a complex and even potentially risky field for many.

    If you get into REIT, you’ll often need to start at the bottom and work your way to the top, so your salary may not be exceptional in the first years of your career. However, the potential rewards of sticking with this career for several years could be pretty enticing.

    You should consider getting into real estate investment trusts as a career path if:

    • You are already interested in investing in real estate. Joining a REIT company could be the best way to learn about this unique investment field and how best to operate within it.
    • You are interested in acquiring real estate and learning more about the real estate market.
    • You have strong management skills.
    • You are comfortable with a certain level of risk — not for yourself, of course, but for your clients.

    What will you do in a REIT company?

    That depends on your exact job title and responsibilities.

    For most in the REIT industry, career paths begin by obtaining a position at a REIT company’s headquarters. You may start with essential maintenance or secretarial work, but gradually learn more about how a REIT company chooses its assets, communicates with its clients, and advertises its services to acquire new clients.

    Real estate investment trusts career paths

    There are multiple potential career paths you can pursue in any REIT industry. Here are just a few examples.

    Related: The Best Careers for Your Personality Type (Infographic)

    Property manager

    You might work as a property manager. Many REIT companies work with third-party property management companies. In a nutshell, property managers maintain rental properties, like apartment complexes or multiple homes throughout the same neighborhood.

    If you work for a property management company, you might eventually be able to work for a REIT. Alternatively, if you work for a REIT, you might work as a property manager for that trust. In this case, the trust takes care of various rental properties, which it maintains and oversees on behalf of its clients.

    Asset manager

    You could also pursue a career as an asset manager. REIT asset managers decide which properties they should purchase and how much debt they need to take out in terms of loans or other financing arrangements to purchase those properties.

    Asset managers also oversee all the aspects of owning and operating properties and ensure property expenses align with projections. This mid-level management job requires a lot of experience in real estate, investing and similar areas.

    Development executive

    Development executives are chief executives for these funds. Thus, they have a lot of sway regarding what properties the REIT purchases, its profit and debt targets, and how the fund evolves.

    Development executives identify opportunities to purchase new properties for the fund’s clients to improve financial prosperity for everyone involved.

    This position pays well and is an excellent stepping stone to senior management positions in other real estate investment industry companies. However, expect to acquire lots of experience in the REIT arena before qualifying for this position.

    Acquisition analyst

    Acquisition analysts are closer to the entry-level or middle manager position than development executives. That said, they are critical.

    REIT acquisition analysts plan, implement, coordinate and identify properties that the fund they work for should acquire. For instance, they may find an attractive apartment complex that needs new investors, then recommend that the REIT company purchase it to diversify the portfolio further.

    Related: 3 REITs to Buy and Hold for the Long Term

    Because of this, acquisition analysts need skills and experience in the real estate investment industry. They need to know how to recognize and understand market trends, spot available properties and know what properties are worth.

    It is also beneficial to have contacts in the real estate or investment industries before applying for these positions in a REIT. For instance, if you are friends with local realtors, you can get an early scoop about up-and-coming properties or new listings from your friends, allowing you to recommend properties to your REIT company or more quickly than other analysts.

    Summary

    Ultimately, you might enjoy working for a REIT company if you like investing, real estate, analysis and similar topics. If you’re successful in this field, you’ll also make a pretty fair salary.

    Check out Entrepreneur’s other resources and guides today to learn more about real estate, investments, and related topics.

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  • 401(k) Contribution Limits for 2023: Everything You Need to Know

    401(k) Contribution Limits for 2023: Everything You Need to Know

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    Contributing to a 401(k) may be one of the smartest things you can do to set yourself up for a comfortable retirement in your golden years.

    However, unlike simply stashing money in a savings account, you can only put so much into your 401(k) retirement plan each year due to 401(k) contribution limits.

    Unfortunately, things get a little more complex because the government changes the contribution limits for 401(k)s yearly. Here, you’ll get all the necessary information about 401(k) contribution limits for 2023.

    What are 401(k) contribution limits?

    Put simply, 401(k) contribution limits are federally capped maximum contribution amounts that you can put toward a 401(k) retirement plan. In other words, you can’t funnel every extra dollar you have in your salary toward your 401(k) plan beyond your annual contribution limit.

    There are tax advantages for retirement plans, and higher-paid workers can afford to allocate more funds toward 401(k) and other plans. Limits are put in place to prevent these wealthy individuals from disproportionately benefiting from these plans, which offer tax advantages at the expense of the U.S. Treasury.

    When you invest in a 401(k), you put money toward your future by:

    • Giving your money to the managers of a 401(k) retirement plan.
    • Those managers then use that money to invest in various stock market assets, like mutual funds.
    • 401(k) managers traditionally invest in relatively safe, slow-growth assets that aren’t ideal for earning a lot of money quickly. But they are beneficial to you in ensuring you have enough money to enjoy your golden years.

    Plan limits prevent individuals from gaming the system, especially by taking advantage of employer-matched contributions.

    The IRS also does this to prevent highly compensated employees (HCEs) from taking advantage of employee contributions to inflate their after-tax savings or to scheme the income tax system.

    Many 401(k) plans allow your employer to match your contribution to a set limit (usually a certain percentage or dollar amount).

    Related: 401(k) – Entrepreneur Small Business Encyclopedia

    For instance, if an employer volunteers to match your 401(k) contribution up to 3%, and you earn $2,000 every month for your salary, you can put 6% of that salary’s value toward your 401(k), or about $120.

    If there weren’t any compensation limits, people could try to take more money from their employers by contributing more and more money into their retirement accounts.

    To recap, 401(k) contribution limits stop people from taking advantage of 401(k) plans and their monetary benefits. However, contribution limits for 401(k)s don’t usually stay the same. Instead, they change continuously to keep up with inflation and other economic circumstances.

    Do These Limits Apply to Other Retirement Plans?

    Yes. Generally, 401(k) contribution limits apply to any other “defined contribution plans.”

    These are plans that have defined contribution limits or policies, and they include:

    • 403(b) plans, which are retirement plans typically used by nonprofit and educational workers.
    • 457 plans, which local and state government employees use.
    • Thrift Savings Plans, which the federal government offers.

    401(k) contribution limits for 2023

    With that said, it’s essential to know the 401(k) contribution limits for 2023 so you can plan for how much you’ll invest or how much you’ll deduct from your employment paychecks.

    Here’s a breakdown of the 2023 401(k) income limits:

    • $22,500 — maximum salary deferral or automatic contribution limit for workers.
    • $7,500 — maximum catch-up contributions for any workers aged 50 and up.
    • $66,000 — total contribution limit for the year overall.
    • $73,500 — total contribution limit, including the catch-up contribution mentioned above.

    In other words, you can divert a certain percentage of your salary with each paycheck up to $22,500 plus $7500 if you are 50 or older. However, your employer can contribute extra money to your 401(k) up to a maximum of $66,000.

    How did 401(k) contribution limits change from 2022?

    Because inflation has affected the US economy, the 401(k) contribution limits above have changed from 2022.

    For instance, the 2022 salary deferral limit for workers was $20,500, representing a $2,000 increase in 2023. Similarly, the catch-up contribution limit for all workers 50 and older was previously $6,500 but is now $7,500.

    The total contribution limit was $61,000 and $67,500 for total contribution limits and total contribution limits plus catch-up contributions, respectively. As you can see, the 401(k) contribution limits changed for 2023 by adding a few thousand dollars here and there.

    It’s not a massive change, but if you invested early and wisely, that money could be worth hundreds of thousands or millions of dollars by the time you withdraw it after retirement.

    Employer contribution limits for 2023

    In most 401(k) plans, employers contribute to their employees’ retirement plans up to a certain amount. Employers have much higher maximum contribution limits.

    The maximum amount you can contribute to a 401(k) plan (between you and your employer) is $66,000 in 2023. This limit was $61,000 in 2022.

    Because of this, employers can contribute much more money to your 401(k) plan than you can, but this isn’t typically what happens. Instead, most employers offer relatively meager or moderate 401(k) matching contributions.

    Related: 4 Questions Entrepreneurs Should Ask Their 401(K) Providers

    Don’t expect to add $66,000 to your 401(k) plan yearly. However, if an employer does offer a retirement benefit to this effect, consider taking them up on a job offer to maximize your retirement savings.

    Are there differences between traditional and Roth 401(k) contribution limits?

    No. Whether you have a traditional 401(k) or a Roth 401(k), your contribution limits are the same. The only difference between these two types of 401(k) retirement plans is whether you are taxed on your contributions or tax on your withdrawals.

    Related: Pros and Cons to Choosing a Roth 401(k) Over Traditional 401(k) — and Vice Versa

    Your contributions are tax-deferred with a traditional, employer-sponsored 401(k) plan, and you can deduct those contributions from your gross income each tax year. This elective deferral may let you max out your contributions each year.

    However, when you withdraw money from your traditional 401(k), you must pay taxes on those contributions.

    If you end up in a higher tax bracket when you retire because of how much money you have saved up, you could have to pay much more in taxes than if you had initially paid taxes on your deductions.

    Roth 401(k) plans are the opposite. With a Roth 401(k), you pay taxes on any of your retirement plan contributions in the tax years you earn them. In exchange, you don’t have to pay any taxes on your Roth 401(k) withdrawals later down the road.

    Therefore, Roth 401(k) plans are usually more profitable and affordable in the long run, but they place more of a financial burden on you in the short term. But remember, there aren’t any changes or differences in contribution limits between both plan types.

    What is the ideal amount to contribute to your 401(k) plan?

    Generally, you should contribute as much to your 401(k) plan as possible up to the contribution limit. But the ideal retirement contribution percentage can vary depending on your age, the cost of living, and your personal finances.

    For example, it may be a good idea to contribute between 10% and 15% of all your gross income toward retirement. You can contribute this amount toward a 401(k) or a 401(k) combined with an IRA (individual retirement account) in your 20s and 30s.

    If you are behind in retirement savings in your 40s or 50s, consider contributing more to your 401(k) account. If you’ve already hit your 401(k) plan limit, look into alternatives like IRAs or Roth IRAs.

    Related: 4 Reasons to Look Beyond a 401(k)

    Both IRAs and Roth IRAs also have contribution limits. But IRA contribution limits are separate from your 401(k) contribution limits. For instance, if you can only contribute $22,600 to your 401(k), you can still contribute another $6500 toward your IRA (the contribution limit for traditional IRA and Roth IRA accounts in 2023).

    Don’t forget Social Security, too. Depending on how many calendar years you worked and your taxable income, you could receive additional funds in retirement.

    Summary

    Contribution limits for 401(k) plans have increased since 2022. Since these limit changes are meant to keep up with inflation, that’s a good thing for millions of Americans who rely on 401(k)s to help them save money for retirement.

    Still, there’s much more to saving successfully for retirement than simply putting cash in your 401(k).

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  • What Is a Roth IRA? How It Works and How to Get One Started

    What Is a Roth IRA? How It Works and How to Get One Started

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    When it comes to retirement, saving sooner is better than saving later. But if you’ve already maxed out your 401(k) or don’t have the option to use a 401(k), you’ll have to turn to an IRA or individual retirement account.

    Traditional IRAs are just one of your options, however. You can instead put money into a Roth IRA. Financial advisors can help you navigate the ins and outs; however, knowing about Roth IRA withdrawal restrictions and annual contribution limits is essential before investing in this type of account.

    This article will explain a Roth IRA, how it works and how you can start one at the earliest opportunity.

    Related: When converting from an IRA to a Roth, do I have to file self-employment tax?

    What is a Roth IRA?

    A Roth IRA is a type of individual retirement account. As a tax-advantaged individual retirement account, Roth IRAs allow you to contribute after-tax dollars. The best way to understand a Roth IRA is to compare it to a traditional IRA.

    A traditional IRA is a tax-deferred account. You contribute money to a regular IRA pre-tax, so you don’t have to pay income taxes on any of those contributions (lowering your gross income).

    You can deduct contributions from your IRA each tax year. However, when you withdraw money from your regular IRA, you must pay taxes on those withdrawals since they are no longer tax-deductible.

    A Roth IRA is the opposite. You contribute money to the Roth IRA and are taxed on those contributions, just like the rest of your regular income.

    However, since that money is taxable income, you don’t owe any taxes when you withdraw money from your Roth IRA. You walk away with more money in Roth IRA income than traditional IRAs.

    You can still only take penalty-free withdrawals (or qualified distributions) after you are 59 1/2 years old, according to the SIPC. Still, Roth IRAs are excellent for securing tax-free income when you’re older, regardless of filing status. Roth IRAs are also FDIC-insured in most cases, usually up to $250,000.

    Roth IRAs are primarily advantageous if you think you’ll be in a higher tax bracket when you withdraw your money (which is true for many Americans). For instance, if you don’t have much money in your 20s and 30s but earn much more in your 60s, you’ll have to pay more taxes on your withdrawals if you use a traditional IRA.

    A Roth IRA allows you to circumvent this downside and have more retirement savings for your golden years. Thus, opening a Roth IRA at a trusted brokerage could be a great way to enjoy tax-free growth of your savings.

    How does a Roth IRA work?

    A Roth IRA works very similarly to a traditional IRA. You sign up for a Roth IRA account at a financing institution, like Fidelity or Vanguard, and regularly contribute to the account.

    Depending on your preferences, you can select your investments individually or have a fund manager take care of them. You can find a Roth IRA from many different financial sources, including:

    You have access to many different investment options through a Roth IRA, even if you do a Roth IRA conversion from another account.

    Note that all standard Roth IRA contributions have to be made in cash. Therefore, you can’t contribute money to your Roth IRA in the form of property or securities; you have to report those contributions, so they’re taxed according to your tax rate.

    Just like regular IRAs, Roth IRA investments grow tax-free. Notably, Roth IRAs are much less restrictive compared to other retirement accounts. You can maintain your Roth IRA indefinitely, and unlike traditional IRAs, there aren’t any required minimum distributions (RMDs).

    The early withdrawal penalty for this type of IRA is the same as with a standard IRA, even if you have a brokerage account handle it.

    Related: Do You Know the Difference Between a Traditional IRA, a Roth IRA, and a 401k?

    Are Roth IRAs insured?

    It depends. If your Roth IRA is at a bank, it may be classified under a separate insurance category compared to regular deposit accounts. Because of this, insurance coverage for most IRA accounts isn’t as comprehensive or robust.

    That said, the Federal Deposit Insurance Corp. (or FDIC) does provide insurance protection worth up to $250,000 for both traditional and Roth IRAs. Note that account balances are combined instead of protected individually, however.

    Contribution rules for Roth IRAs

    Roth IRAs, like other IRAs and retirement accounts like 401(k)s, have contribution limits. Roth IRA contribution limits prevent account holders from investing too much money into their accounts at once.

    For instance, in 2023, the total yearly contribution you can make to a Roth IRA is $6500 if you are under 50. If you are 50 or older, you can contribute another $1500 to your account as a catch-up contribution.

    Withdrawing from a Roth IRA

    Just like a traditional IRA, Roth IRAs have specific rules around withdrawals. Specifically, you cannot withdraw any earnings from your Roth IRA without incurring fees unless you are 59 ½ or older.

    Note that that’s not the same thing as contributions; you can withdraw contributions (such as the original amount of money you put into the account) at any point. This earnings withdrawal limit prevents people from using their Roth IRA as a traditional investment or stock trading account.

    Since most people retire around 59 ½, the government charges a 10% penalty and other taxation fees if you withdraw any earnings or gain money from your Roth IRA early.

    In addition, there’s a “five-year rule” to keep in mind. If you start your Roth IRA late in life, you can withdraw your earnings tax-free only if you withdraw that money five years after your first contribution to any Roth IRA under your name.

    The five-year time clock begins with your first contribution to any Roth IRA, not just the one from which you want to withdraw funds.

    Of course, there are some exceptions to these rules. You could avoid the 10% taxation and penalty rate if you use the earnings from your Roth IRA to buy a home for the first time. But in this case, you can only take out $10,000.

    Furthermore, if you have a permanent disability or pass away, you or your beneficiary can take money out of your Roth IRA.

    Bottom line: Try to plan that won’t be withdrawing money from your Roth IRA until you retire.

    Related: Should I Use a Roth IRA to Pay for College?

    What can you invest in with a Roth IRA?

    Once you open a Roth IRA, you can invest in a wide range of funds, stocks, assets and other investments. You can invest in the following:

    • Stocks

    • Mutual funds

    • Bonds

    • Exchange-traded funds or ETFs

    • Certificates of deposit or CDs

    • Money market funds

    • Cryptocurrencies, but remember that the IRS does not let you contribute cryptocurrency directly to your Roth IRA (unless you use a new type of Bitcoin IRA)

    Related: Best Retirement Plans – Broken Down By Rankings

    What are the benefits of Roth IRAs?

    Many people open Roth IRAs in conjunction with a 401(k) or instead of traditional IRAs, as Roth accounts offer particular advantages. Some of these include:

    • No minimum distributions are required: You don’t have to contribute a certain amount each year when you have a Roth IRA.

    • No income tax for inherited Roth IRAs: Therefore, if you pass your Roth IRA to an error or beneficiary, they can also get tax-free withdrawals (provided that you meet the five-year rule).

    • Easier withdrawals: With a Roth IRA, you can withdraw any contribution money without taxes or penalties (though you may face penalties if you withdraw investment earnings before the age of 59 ½).

    • Flexible contribution schedules: You can decide how much you contribute to a Roth IRA and when.

    • Plenty of time to add contributions: You have until the tax deadline each year to contribute more money into your Roth IRA to reach the $6500 limit.

    • Extra savings for retirement: You can combine your Roth IRA contributions with a 401(k) retirement plan.

    • Tax-free distributions: After you’ve held your Roth IRA for five years and are 59 ½ years old, you can take any distributions, including investment earnings, from your Roth IRA without paying federal taxes.

    • Open at any age: Anyone can open a Roth IRA at any age, provided they have earned income.

    How can you start a Roth IRA?

    Knowing how to start one for yourself and your retirement future is essential, given the benefits and importance of a Roth IRA.

    Check eligibility

    Your first step is ensuring you are eligible to open a Roth IRA account. Note that you must have earned some income for the current tax year — this does not include any inheritance money you may have received from others.

    Furthermore, income limits may prevent you from opening a Roth IRA. For instance, in the 2023 tax year, the income “phase-out” range (the income bracket allowed to make reduced contributions) is $138,000 and $153,000 as an individual or $218,000-$228,000 as a couple filing jointly.

    Remember, too, that there are limits on how much you can invest into your Roth IRA each year.

    Related: Learn How to Invest Beyond Stocks, FDs, Property And Gold

    Find an investment platform

    Your next step is finding the right investment platform to open a Roth IRA. Practically every stock investment company offers Roth IRA accounts. If you already have a 401(k) or traditional IRA account, you can open a Roth IRA at the same organization, which may be easier than finding another organization.

    Regardless, if you find a good platform or financial institution, ask questions like:

    • Whether there are fees to open or maintain your account (such as annual fees).

    • What kind of customer service the company provides.

    • What types of investments the company offers for your Roth IRA.

    • Whether it costs money to trade with your IRA, which could be important if you plan to buy and sell stocks or securities with your account.

    Examples of institutions that offer Roth IRAs include Fidelity Investments, Vanguard and Charles Schwab.

    Apply for a Roth IRA

    Now it’s time to complete the necessary paperwork and apply for a Roth IRA. You can usually do this online or in person if there’s a local branch of your financial institution nearby.

    In any case, you’ll need a few pieces of key information to complete the process:

    • Your Social Security number or SSN.

    • Your driver’s license or some other type of photo ID.

    • The bank routing number and checking or savings account number that you want to use to contribute money to your account.

    • The name and address of your employer.

    • The name, address and Social Security number for your plan beneficiary; this is the person who can receive money in your Roth IRA if you die.

    Choose your investments

    After opening your Roth IRA, you get to pick your investments. Most financial institutions have advisors to help you choose suitable investments for your portfolio based on your goals.

    For instance, if you want to grow your Roth IRA slowly but surely, your investment advisor may recommend that you choose safe investments.

    If, on the other hand, you are young and looking to save aggressively, they may recommend more aggressive, risky investments since you have time to make up for any lost income.

    Because many people live longer than before, it may be wise to keep many stocks in your portfolio as you age. Since you live longer, it could be wise to continue holding assets in your Roth IRA even after you retire so you can continue making money to pull from.

    Related: Roth IRA – Entrepreneur Small Business Encyclopedia

    Make contributions

    Now, you have to make regular contributions to your Roth IRA. Remember, there are no limits on when you can make contributions; you just have to contribute up to the limit to maximize your portfolio’s growth.

    As you can see, there’s a lot to like about Roth IRAs, and getting one started is just as easy as starting a traditional IRA. Consider your options carefully before contributing to any retirement account, as the penalty for withdrawing ahead of retirement can make switching your plans more costly than you think.

    Looking for more? Explore Entrepreneur’s vast library of professional and business resources here.

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  • Is Energy a Good Career Path Going Into 2023?

    Is Energy a Good Career Path Going Into 2023?

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    You might feel a little overwhelmed if you’re a young professional or looking to start a second career. After all, there are dozens of different options and fields you can go into, whether you want to pursue a specific degree or start job hunting right off the bat.

    With all the news buzz surrounding green energy in recent years, you might wonder about entering the energy industry.

    Is energy a good career path going into 2023 and beyond?

    The importance of energy in the future

    The world runs on power, and energy will only become more critical in the future as the industry shifts, global warming accelerates and more people are born. According to Stanford University, fossil fuels such as coal, natural gas and oil make up 80% of the world’s energy.

    However, renewable energy technologies and extraction techniques will need to be developed soon.

    If the planet is to avoid the worst effects of climate change, global emissions must be reduced by half by 2030 and reach net zero by 2050. In other words, the world will need lots of people working in the energy industry in the near to long-term future.

    People won’t stop using lights, heaters, vehicles and other technological advances. Instead, global society must develop new ways to harness and extract energy from the environment. Energy is sure to be even more critical in the years to come than it is now.

    So, is energy a good career path?

    Therefore, it’s a no-brainer to suppose that getting into energy could be a wise career choice. This is true whether you are starting your professional life or looking to change careers.

    Related: The Best Careers for Your Personality Type

    Working in the energy industry could have you learn skills or tackle problems like:

    • Solar panel installation
    • Energy research
    • Energy technology development
    • Climate control solutions
    • And more

    You’ll have to determine whether you want to work on these problems and solutions for your professional future. Entering the energy industry may set you up for long-term success and plentiful career opportunities.

    But it’s a far cry from the arts or more creative pursuits. Consider your degree major, personal and educational interests, and other factors before committing to this path.

    Advantages of choosing energy as a career path

    There are many advantages to choosing energy as your career path going into 2023.

    Work Environment

    For starters, you’ll likely get to work in a wide range of different job environments, not just in a cubicle or the same office daily.

    For instance, as a wind turbine technician, you’ll sometimes work in an office, a garage, and outdoors at different wind turbines the rest of the time.

    The same is true if you become an energy consultant or a similar professional. Energy consultants help businesses determine how they can maximize their green energy consumption and minimize their carbon footprints.

    Related: How to Start a Consulting Business: Your One Page Business Plan

    As a result, they travel around the country, visit many different people and places, and develop novel solutions in terms of architectural setup or energy grid access.

    If you’re craving a little variety in your professional life, the energy industry could be the place to find it. Of course, keep in mind that if you become an administrator in this industry, you may work primarily in office or corporate professional environments instead of “in the field.”

    Job security

    In addition, the energy industry is home to many secure jobs. If you get a career in the energy industry, you likely won’t have to worry about your job being cut or downgraded soon.

    Why? The world will continue to need energy in 2023 and beyond. That means it will need knowledgeable, highly trained professionals to efficiently access, harness and distribute that energy.

    This could be a refreshing difference if you’ve already worked in an industry where your job was constantly on the line.

    Job security is important to many Americans. When you get an excellent job in the energy industry, you can work that career for decades, providing much-needed financial stability for you and the future family you hope to raise.

    Possibilities for advancement

    On top of that, the energy industry will provide ample opportunities for advancement for go-getters and rockstar employees. For instance, you can start working for a local energy company, become a supervisor or manager, and become an administrator.

    On the research side, the world will always need new inventions and ways to access clean energy. This will give creative, bright individuals a chance to prove themselves and make a significant difference in this industry for years to come.

    Put another way, getting into the energy arena will allow you to distinguish yourself and make a real career, not just hold down a job. That’s important for many Americans, particularly those who get much life satisfaction from their professional achievements and accolades.

    Do good for the world

    Perhaps most importantly, getting into energy as your career path will let you do some good for the world.

    As noted, the effects of climate change are already being felt, and things will likely get worse before they get better. Increased storm frequency, flooding, animal species extinction, and more are all minor side effects compared to what the world likely faces over the next few decades.

    But if you join the energy sector, you have the chance to do some good and mitigate those effects. With the right technologies and energy advancements, the world can reach carbon-neutral by 2050 or even earlier.

    Joining the industry will let you contribute to this great project and help keep the planet as comfortable and beautiful as it is now.

    If you’ve always wanted your work to mean something beyond a paycheck and job stability, good news — the energy sector is a place where you can find work like that.

    Related: 4 Reasons Following Your Passion Leads to Success

    Good paying jobs in the energy sector

    Should you choose to get into energy as your career, you’ll have a plethora of well-paying jobs to choose from.

    Take wind turbine technicians, for example. According to some sources, wind turbine technician is America’s fastest-growing job. It should grow by up to 108 percent by 2024; in other words, there will be plenty of open positions in this field over time.

    As a wind turbine technician, you’ll work to build, repair, and maintain wind turbines to facilitate the collection and distribution of clean energy across the electrical grid.

    But that’s not the only high-paying, in-demand job in the energy sector you can pursue. Here are some more examples:

    • Architectural manager: Such professionals make plans, direct and coordinate projects, and design eco-friendly buildings that facilitate lower energy costs by gathering more natural light or conserving heat. Architectural managers earn upwards of six figures annually, usually around $140,000 annually.
    • Petroleum engineer: Petroleum engineers will still be needed in 2023 and beyond as the world pivots from fossil fuels to renewable energy. Petroleum engineers devise new ways to extract fossil fuels from inside the earth. They may also be needed to do this in as clean and efficient a way as possible. They earn over $137,000 a year on average.
    • Chemical engineer: Chemical engineers produce energy, develop metallurgical solutions to industrial problems, and much more, often making well over $100,000 per year.
    • Wind farm site manager: These experienced professionals earn around $100,000 per year, and they oversee wind farms and wind energy generation operations. They often work closely with wind turbine maintenance technicians and engineers, as described above.

    Related: Why the Tide Is Turning for the Energy Sector

    Of course, you can also get into this industry as a scientist. The world will need knowledgeable scientists coming up with new solutions and ways to collect green energy in ways that maintain the expected electrical grid consistency.

    The primary challenge to renewable energy, after all, is consistency and collection. The sun emits plenty of energy for the world multiple times, but it’s not always shining in the sky. Furthermore, there are limits to how much solar energy modern batteries can store.

    Joining this industry could allow you to solve these problems by designing better batteries, coming up with new energy collection methods, or something else entirely. The sky is literally the limit.

    Who should work in the energy industry?

    Many may find that the energy industry is an excellent professional fit.

    You might consider working in the energy industry if:

    • You are interested in solving climate change and global warming challenges and want to leave the world better off than it was when you were a child.
    • You want to pursue a stable job with ample opportunities for promotions and advancement. If you join the energy industry and do a great job in your position, you won’t need to worry about cuts or job downgrades in all likelihood.
    • You are already interested in one of the related fields, like chemistry, physics, and energy science.

    Note that most jobs in the energy industry are heavily based on math and science. These are STEM jobs, so it may be wise to acquire a degree from a technical college or institution before applying to open positions.

    Related: 7 Myths About Career Transitions That Are Keeping You Stuck | Ellevate

    Summary

    Ultimately, getting into the energy industry could be an excellent choice for your career and your professional ambitions in the long term.

    Getting a job in energy could lead to excellent job security, opportunities for advancement, and fantastic pay. Plus, there are many different jobs you can pursue.

    Want to explore your options before settling on a career? Visit Entrepreneur for more info on the energy sector and everything else you need to help you build your career or business.

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  • What Is Artificial Intelligence (AI)? Here Are Its Benefits, Uses and More

    What Is Artificial Intelligence (AI)? Here Are Its Benefits, Uses and More

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    Companies, commentators and even sci-fi movies can’t stop talking about artificial intelligence (AI).

    Indeed, AI in the real world is far from the artificial intelligence villains you might recall from your favorite sci-fi flick.

    This article will break down what artificial intelligence is, how it works and how it’s used in the real world. It will also explore AI technology’s benefits and potential downsides now and in the near future.

    Artificial intelligence explained

    Artificial intelligence is the computer simulation of human intelligence. It’s programming one or more machines to act in a way that mimics or replicates human behavior. AI breakthroughs are tied to computer science and programming languages, and applications of AI are scalable to simplify workflows across various industries.

    Depending on the AI program or software used, it can more or less act similarly to someone doing the same task when viewed from the outside as an observer.

    In general, AI is about creating software that is “smart” enough to do complex tasks without excessive human intervention or direction.

    Indeed, AI researchers want to program computers to rationalize and think semi-independently. In this way, AI computers and software will likely be able to solve problems faster and better than humans can.

    Artificial intelligence is closely connected to machine learning models, a technology that allows machines and computer programs to learn from and adapt the data without human assistance.

    For example, a software program could be created (in theory) to run several tests, take the results from those tests, and come to conclusions or better processes without a human having to interfere or direct it.

    Artificial intelligence is not about building anything you may have seen in science-fiction stories, like killer robots, war machines and similar constructions. Rather, it’s usually about maximizing efficiency, productivity and profit. Most AI research and AI development focus on use cases in the financial, business, supply chain, cybersecurity and healthcare industries.

    Related: 3 Ways Machine Learning Can Help Entrepreneurs

    What does AI really mean?

    For most people, AI means that computers are becoming more intelligent and capable without human direction.

    It’s all based on the idea that human intelligence can be defined and then mimicked so that software can reliably emulate it, even to the point where humans can’t tell whether they are talking to a machine or a real person.

    In some cases, this is already true. Many people get fooled by ordinary customer service chatbot messaging or similar intelligent systems, which have enough preprogrammed sentences and responses that they can feel relatively lifelike.

    However, AI researchers and machine learning software programmers are focused more on making types of artificial intelligence that can do more profound, more complex work and emulate human intelligence more comprehensively.

    In a certain sense, humanity has reached the pinnacle of simple machine technology and inventions. With machines that can do precise tasks and carry out complex commands (if programmed correctly), the next phase in machine development is creativity, initiative and complex “thought.”

    This doesn’t mean that AI will replace humans in all aspects, nor will artificial intelligence spell the end of the human race. It does, however, mean that many new technological advancements could be in the future.

    These AI system advancements include:

    • Neural networks that mimic the activity of the human brain.
    • Deep learning algorithms.
    • Natural language processing and speech recognition AI algorithms.
    • New ways to automate systems.
    • Decision-making capabilities.
    • Real-time computer vision overlays or screens.

    Related: 5 Ways Artificial Intelligence Is Already Influencing Your Daily Life and You Don’t Even Know It

    Why is AI important?

    In a practical sense, artificial intelligence is essential for various specific goals and objectives.

    For example, artificial intelligence software may allow enterprises to understand the enormous quantities of data they collect on their target consumers and customers. In this way, businesses can make better decisions about their marketing campaigns, their products and much more.

    Alternatively, artificial intelligence could be critical because AI-powered machines could do some tasks better than humans, especially when it comes to repetitive or detailed-oriented tasks.

    For instance, a computer can read mountains of legal documents much more quickly and accurately than even the savviest legal mind, and it can come to some conclusions to provide to lawyers later on.

    AI is important because:

    • It represents the ability to improve or innovate in industries without much innovation.
    • It may allow humans to exceed current productive capacities even further, meaning more significant profits and more efficient production for businesses and industries.

    Related: What Is AI, Anyway? Know Your Stuff With This Go-To Guide

    How does artificial intelligence work?

    AI works, in essence, like this:

    • A programmer writes a software program using complex, comprehensive and clever language.
    • That software program includes the capability to “learn” from experience, usually by recording event outcomes and changing its behavior in response. This is essentially what machine learning is.
    • The software program then tailors its behavior according to its experience, its predictions for future events and what it needs to do.

    AI programming uses separate cognition skills to facilitate this behavior. Learning processes allow the AI program to acquire data and make rules for using that data to do actions.

    Artificial intelligence programs use reasoning processes to use suitable algorithms and reach specific objectives or outcomes. Self-correction processes are leveraged to rework or fine-tune algorithms and constantly strive for more accurate or desirable results.

    Naturally, this software process is highly complex and resource intensive. Therefore, artificial intelligence technology is only possible in specific contexts and for certain organizations.

    Generally, real AI (as far as it has been developed) is only available to large enterprises and institutions like the government. AI technology uses specially designed hardware, such as special chips, servers and processors, to facilitate its actions.

    In theory, as technology and hardware get better, and people develop new ways to write software creatively, the capabilities of artificial intelligence will continue to grow and expand.

    Artificial intelligence types

    Technically, artificial intelligence can be classified into several different types. The two broadest types are:

    • Narrow or weak AI. Narrow AI is artificial intelligence designed to complete or accommodate very specific tasks. Some examples of limited artificial intelligence include weather app assistants, chatbots and other digital aids, as well as specialized software intended to analyze data and optimize business functions.
    • General or strong AI. General artificial intelligence is closer to the imagined version of AI in sci-fi flicks. It’s not yet fully realized, but it’s intended to be more versatile and flexible than its narrow counterpart. In theory, general AI can do anything necessary, not just one or two tasks very well.

    However, artificial intelligence can also be categorized differently based upon intended function and specific capabilities. These types include:

    • Reactive AI uses algorithms to optimize objectives or outputs based on specified inputs from human users. Examples include chess-playing AIs.
    • Limited memory AI adapts to past experiences and updates itself based on new data or observations. Examples include autonomous vehicles (or the programs that drive them).
    • Theory of mind AI is supposedly fully adaptive and can learn from past experiences. It includes some of the most advanced chatbots that can pass the Turing Test (named after the inventor of the computer, Alan Turing), though they are not self-aware. The Turing Test classifies any machine capable of engaging in conversation with a human without being detected as a machine as demonstrating human intelligence.
    • Self-aware AI is theoretically conscious and aware of its existence, like humans. Self-aware AI has yet to be created.

    How can artificial intelligence be used?

    There are practically no limits to how you can use AI solutions as they are developed and implemented in organizations.

    Nowadays, AI gets used in various industries, and not just as publicity machines like IBM’s Deep Blue or Watson, which famously won a game of Jeopardy! as an artificial general intelligence.

    Related: 5 Ways Artificial Intelligence Is Radically Transforming Creativity in Business

    Healthcare

    In the healthcare industry, artificial intelligence is used to assist with healthcare diagnostics, such as identifying diseases or ailments in patients. That’s because AI can often rival humans at locating and identifying anomalies or issues in diagnostic scans.

    In the healthcare industry, AI is also helpfully utilized to track and maintain patient records, handle health insurance claims and even classify hospital patients quickly and efficiently.

    Driving and machine operation

    Autonomous vehicles like those from Tesla also heavily use modern artificial intelligence programs.

    With self-driving cars, AI may eventually learn from other drivers, fine-tune its own safety practices and drive more safely than even the most experienced human, all while maintaining faster response times due to its computerized nature.

    In addition, the manufacturing and industrial sectors often use limited machine learning or AI software to operate machines requiring incredible precision and repetition.

    Related: What’s Under the ‘Hood’ of Self-Driving Cars?

    Financial applications

    The financial industry can use artificial intelligence to analyze stocks, market trends and other economic activity, thus allowing brokers and fund managers to make better decisions on behalf of their clients. This is similar to algorithmic trading and has been increasingly common in recent years.

    AI is good at this because it can take a lot of information, analyze it quickly and come to accurate conclusions based on past data sets. AI uses expert systems to improve pricing and similar actions over time.

    Gaming

    You can use artificial intelligence programs to make gaming bots or nonplayer characters, also known as NPCs. AI intelligence is getting better in this arena all the time — modern bots can simulate some of the motions or behaviors of human players very realistically by simulating the human mind.

    Related: 3 Surprising Ways That Video Game Companies Leverage AI

    User assistance

    Naturally, artificial intelligence programs are already being used for general user assistance purposes, such as Amazon Alexa. Siri, Cortana, and other basic AI programs will likely become even more sophisticated and intelligent as time goes on.

    Virtual assistants are already among the most commonly used types of AI computer systems and maybe eventually replace personal assistants.

    Data analysis

    You can use artificial intelligence for general data analysis across various industries. Many large organizations already leverage machine learning or AI platforms and programs to understand their data sets. Google famously uses artificial intelligence to understand its billions of users’ queries and search patterns.

    The benefits of AI

    Many people are excited for artificial intelligence technology to grow even further, primarily because of its potential advantages.

    For example, artificial intelligence programs tend to be much better at detail-oriented jobs than humans, as there is less of a chance that these programs would miss details due to fatigue or human error. This can significantly reduce the time needed for data-heavy tasks, and artificial intelligence programs are already better at analyzing big chunks of data than humans.

    In addition, AI can deliver more consistent results with fewer errors than human counterparts. Machines like AI don’t break or make mathematical errors as often as humans, plain and simple.

    Some businesses are also looking into AI to replace specific jobs because AI-powered chatbots, virtual agents and customer service agents are always available 24/7, allowing them to respond to customer complaints quickly and easily, around the clock.

    In a broad sense, AI will allow businesses to make more money, save more and deliver better customer results. The same is true for hospitals, governments and other large organizations that have a lot to do and rely on taking advantage of big data sets.

    Related: AI Gives Outdated Industries a Makeover

    The downsides of AI

    That all said, AI does have some downsides that it needs to overcome.

    For starters, artificial intelligence is universally expensive. This is why only some organizations, like the U.S. government, Google and other big enterprises, can fully take advantage of its technology and benefits.

    In addition, AI usually requires deep technical expertise to leverage it effectively. This requires having the staff on hand to use, edit and repair AI software or technology from time to time, which only adds to its operating expenses.

    Furthermore, since AI is still relatively unproven and still being developed, only a limited number of workers have the qualifications to build AI tools or monitor AI programs.

    Since artificial intelligence hasn’t reached its full potential, it can’t maintain or repair itself, meaning it is liable to have issues or “break down” in specific contexts.

    Given all these flaws, it’s no surprise why artificial intelligence hasn’t yet taken over many industries and sectors, despite its purported importance and power.

    Summary

    Artificial intelligence isn’t a computerized bogeyman out to ruin the world. AI is also not a one-size-fits-all solution for the world’s problems. Rather, artificial intelligence is a valuable software tool that businesses and individuals can leverage for their goals.

    In the future, artificial intelligence may evolve in a somewhat unpredictable direction, offering even more benefits to organizations that take advantage of it.

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  • 19 Best Skills to Put On a Resume That Employers Will Love

    19 Best Skills to Put On a Resume That Employers Will Love

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    The best resumes have comprehensive lists of desirable key skills to make employers look twice and choose one candidate over another.

    If you want to ace your next job interview and make your job application stand out from other candidates, you need to put the best details possible on your resume to impress a prospective employer right from the get-go.

    But what job skills should you write down? This article will break down 19 of the best skills for a resume that any hiring manager will love.

    Soft skills employers love to see

    So-called “soft skills” are usually people-focused, generalized or applicable to various industries and situations. Nevertheless, employers like to see plenty of soft skills in their candidates.

    Related: How to Make a Resume That Gets You the Job

    Leadership skills

    Leadership skills have always been in demand, and that’s even truer today. Anyone can be a good worker, but only a few employees can successfully run and manage teams, especially when the time comes to knock out complex projects.

    If you have successfully led teams in the past, note those experiences on your resume and explain what exactly you did, your responsibilities and other relevant factors.

    The more leadership skills you can mark down on your resume in the skills section, the more attractive a candidate you will be, even if you aren’t expected to lead anyone soon. This is true even if a job description requests more technical skills.

    Leadership skills make you a better choice for potential management positions or promotions in the future. Because many companies hire long-term candidates, not just short-term workers, listing leadership skills can make you stand out relative to your competition in a big way.

    Communication skills

    Communication skills are also critical. You need to be able to communicate with your fellow team members and workers to get along well at your new company. This might seem like a waste of space to put down, but don’t discount it.

    Noting that you have communication skills tells your employer two things:

    • You are confident about your ability to be a team player, which says a lot about your personality.
    • You know that employers are looking for this skill, which means it’s something you think about.

    Both can indicate that you are an excellent potential hire for an open position. Good interpersonal skills, like demonstrated emotional intelligence or active listening skills, are even more critical if you apply for an administrative or management job posting.

    Sometimes, they’re better than computer skills or other specific skills, such as graphic design.

    Related: 9 Best Practices to Improve Your Communication Skills and Become a More Effective Leader

    Writing skills

    Writing skills are an essential subcategory of communication skills, which are in demand for many new jobs.

    Specific jobs in marketing and communications value writing skills highly, and (an added plus) you can explicitly demonstrate your capabilities in your resume writing. Using polished, engaging and succinct language in your resume will support your inclusion of writing in your list of skills.

    Problem-solving experience

    General problem-solving skills can also be good to put down on any resume. In most jobs, you’ll need to solve complex problems at one point or another, either because you run into an unexpected situation or because employer policies and procedures don’t cover all possibilities.

    Good problem-solving, therefore, is seen as a must-have skill for many organizations and industries. Be sure to put this on your resume no matter the job or industry you apply.

    It shows that you can think critically (and critical thinking skills are just as essential) and that you’re not afraid to face a challenge. It’s also an indicator of adaptability: another relevant skill ideal for any job search.

    Try not to put down problem-solving and critical thinking skills simultaneously. There’s a lot of overlap between these two types of skill sets, so just put one or the other.

    Organizational skills

    Organizational skills reflect your ability to handle lots of resources and moving pieces. It’s an important skill to put on your resume when applying for a leadership or management position, but it’s good to put it down regardless just because it shows you are a hard worker and won’t be overwhelmed by many things on your plate.

    Time management skills

    Time management skills are wise to put on your resume, whether you are applying for an entry-level or management position.

    Good time management is a much rarer skill than you may think, particularly in this day and age where there are ample digital distractions in people’s pockets at all times.

    By them noting that you have good time management skills, your employer will feel more confident about letting you work on your own and unsupervised. This is important since it means they can focus on other aspects of running a business instead of worrying about your productivity.

    Teamwork skills

    Solid teamwork skills are must-haves for most positions and workers these days. Being able to work with others is crucial if you are to become a part of any new team, so be sure to note that you have strong teamwork skills regardless of your prior work experiences.

    If you need to be specific, write down some anecdotes about how you were an excellent team member on your cover letter. You should tie that experience into a moment when you overcame a challenge or solved a problem.

    Add people skills to your resume skills section, and you’ll be a more successful job seeker overall.

    Related: How to Acquire Soft Skills and Measure Them Successfully

    Customer service skills

    Good customer service skills are necessary for any industry — especially if you apply to a service industry or entry-level position. Basically, if your job requires you to interact with the general public frequently, you must have good customer service skills.

    Mention any specific skills or tools you may have used to this effect.

    For instance, if you previously worked at a call center, note that your customer service skills came from learning to speak to dozens or hundreds of people over the phone and provide meaningful assistance, no matter their problems.

    Marketing skills

    It is also wise to put down any marketing skills on your resume. Good marketing skills are highly desirable for specific marketing positions and general employees.

    Marketing skills can involve using particular tools or tactics or just understanding how to phrase things to make products seem more appealing to customers.

    This is closely related to sales experience; put down either sales experience or marketing experience if you are applying to a sales or commission-based job.

    Related: 5 Skills Every Marketer Should Have on Their Resume When Applying to Startups

    Hard skills employers seek

    Hard skills are technical, specific and usually related to a specific skill or talent instead of being generalized. Here are some of the most in-demand hard skills to consider putting on your resume.

    Related: Technical Skills Interviewers are Looking for in Job Candidates

    Project management skills

    Project management skills are incredibly in demand and closely tied to leadership skills. Many organizations have complex projects they need to be headed by talented individuals.

    If you can accurately claim that you have successfully led other projects through your management style, you’ll be well-positioned to take open job positions from other candidates.

    Project management skills can be particular and reflect proficiency in specific programs and processes. For instance, scrum project management may make you a perfect choice for an IT company.

    Data analysis skills

    Data analysis skills are also highly in demand these days and for good reason. Many companies must analyze the data they collect from their customers and clients.

    You’ll be a desirable candidate for many industries and companies if you can do this, both generally and with specific programs and equations.

    Be sure to reference specific data analysis experience and techniques you are familiar with when listing this on your resume. The more specific you can get, the better; most hirers and recruiters will know what exactly to look for if they are trying to fill a data management or data analyst spot.

    Enterprise resource planning skills

    Enterprise resource planning skills, or ESP skills, are good to put on any resume, especially if you’re applying for a closely related position. ERP is crucial for large-scale organizations to not waste valuable equipment, time, people or other resources.

    As with many other hard skills, be specific regarding your prior work experience and whether you know certain tactics, tools or techniques.

    Computer proficiency

    Generalized computer proficiency is now expected in a majority of positions. After all, everyone should know how to use computers to a basic degree.

    However, you can take this a step further and break down other types of computer proficiencies, such as

    • Programming proficiency
    • Computer repair or hardware maintenance proficiency

    This skill can be beneficial both in non-computer-related industries and in the computer industry itself.

    Related: Coding in the Classroom: Learning the Future Language of Business

    However, keep in mind that mere computer proficiency will only be desirable to employers in the IT industry if you can get more specific about what exactly you do and the value you can provide to a company.

    Program proficiency

    Program proficiency is any proficiency you can list with a specific program. Don’t be humble or think too little of yourself; even proficiency with Microsoft Office 365 is valuable, particularly when many people don’t know how to use those collected programs to their maximum effectiveness.

    If you are applying to a job that requires the use of specific programs, such as AWS, mention that. Be clear about your proficiency and mention times when you have used the tool or program effectively for business goals.

    Programming language proficiency

    Also nice to put on your resume are programming language proficiencies in languages like C++, CSS, Python and HTML.

    The more language proficiencies you can list, the better positioned you’ll be to take a job in the IT or programming and web development industries. It may be wise to research what programming languages are most in demand for a specific position before listing them on your resume.

    SEO proficiency

    SEO or search engine optimization proficiency is highly valued in many professions, especially social media and marketing managers.

    Note that this proficiency doesn’t just mean you understand what SEO is or how it works. It also means you know how to use related SEM tools, like SEMrush, to research keywords and understand how to leverage them for maximum content effectiveness.

    Related: 7 Reasons Why SEO Matters for Every Startup

    CRM proficiency

    Customer relationship management (CRM) software proficiency means you’re proficient in using popular CRM software platforms like Salesforce. This skill is most desirable and essential for marketing and customer relationship positions or fields.

    Budgeting experience

    If you have experience using budgeting software or running budget teams — mention it, and, as always, be specific about the kinds of tools or software platforms you previously used to get the job done.

    Bookkeeping skills

    Like the above, if you have bookkeeping skills using programs like FreshBooks, QuickBooks and similar platforms, mention that on your resume.

    Note any educational accounting experience or licenses you may have acquired, like certificates or degrees. You can list these experiences and certifications in a dedicated section, usually toward the bottom of your resume. This is most important if you apply for a financial or accounting-related position.

    Related: Why Skills Shouldn’t Be Just a P.S. on a Resume

    Web development skills

    Specific web development skills, such as using web development tools to outline pages, make frames and place widgets, are vital for many jobs in the IT sector.

    However, it’s desirable in any field because most companies have online sites. They may want to know whether you can help them improve those websites and experiences for their customers.

    Summary

    Now you have 19 top skills to put on your resume, provided you have the real-life aptitude to back them up. Remember to tweak the description of each skill based on the job or industry you’re applying for to make them seem as relevant as possible.

    Check out Entrepreneur’s other articles to present yourself as effectively as possible the next time you sit for an interview

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  • Subsidized vs. Unsubsidized Student Loans: What to Borrow?

    Subsidized vs. Unsubsidized Student Loans: What to Borrow?

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    Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other financial professional to determine what may be best for your individual needs.

    A college education in the U.S. might be expensive, but it’s still accessible to many American students thanks to federal student loans. The only problem: It can be tough to know which student loans to choose from, mainly subsidized vs. unsubsidized student loans.

    If you’re unsure what to borrow or the difference between these student loan types, you’ve come to the right place. Read on for more information about subsidized and unsubsidized student loans.

    What are subsidized student loans?

    A subsidized student loan, also called a direct subsidized loan, is a federal student loan available to undergraduate students if they show sufficient financial need.

    Being subsidized means interest rates are temporarily paid for or halted by the government, and are generally much lower than unsubsidized loans. This allows students to focus on education without worrying about interest accruing on them for some of their terms.

    More specifically, the US Department of Education pays all of the interest on subsidized student loans so long as the borrower is enrolled at least half-time in school. This arrangement continues for six months after graduation and during other applicable deferment periods.

    What are unsubsidized student loans?

    An unsubsidized student loan is also a kind of federal student loan. But unlike subsidized loans, the interest rates for unsubsidized loans begin accruing as soon as money is distributed to a borrower’s school.

    However, this doesn’t mean that students need to pay the interest right off the bat. Students can choose not to pay the interest while in school and throughout a six-month grace period after graduation. However, unpaid interest accumulates during this time and constantly adds to the borrower’s total balance.

    Main differences between subsidized and unsubsidized student loans

    To recap: Subsidized student loans’ interest is paid for by the government while students are in school and for six months after graduation.

    The government does not pay for unsubsidized student loans’ interest at any point, so it consistently accumulates. Graduate students only have eligibility for unsubsidized loans, and only in some cases.

    However, there are many differences between subsidized and unsubsidized student loans aside from the above basic breakdown. Here’s a closer look at those differences.

    Loan limits and qualifications

    Direct subsidized student loans have lower annual loan limits than direct unsubsidized loans. For example, first-year dependent undergraduate students can borrow $3500 in subsidized loans and $5500 in unsubsidized loans. Both contribute to a total federal student loan limit of $23,000.

    Furthermore, students must demonstrate sufficient financial need to qualify for subsidized types of loans. You can apply via the FAFSA or Free Application for Federal Student Aid. In contrast, unsubsidized student loans are available to any student borrower, no matter their financial need.

    Interest and fees

    As mentioned above, the most significant difference between subsidized and unsubsidized student loans is how interest is handled. Subsidized student loans have their interest paid by the government for a while, but unsubsidized loans do not.

    There are other differences as well, however. Subsidized federal student loans have fixed annual percentage rates or APRs of 4.99% for all loans disbursed from July 1, 2022, through June 30, 2023. These apply to loan payments (usually monthly payments) required over the life of the loan.

    Unsubsidized federal student loans have fixed APRs of 4.99% for undergraduate loans, 6.54% for graduate or professional student loans, and 7.54% for PLUS loans. These rates apply for the same timeframe as subsidized loans.

    Meanwhile, subsidized and unsubsidized loans have fees of 1.057% for all loans disbursed between October 1, 2020, and October 1, 2021.

    Grace periods and deferment

    Subsidized and unsubsidized federal student loans have six-month grace periods, or periods of deferment, meaning student loan repayment won’t begin until six months after graduation.

    However, unsubsidized loans’ interest capitalizes, meaning that it is added to the original loan amount. That’s because, as stated above, the federal government doesn’t pay the interest fees for unsubsidized student loans.

    Unfortunately, this can lead to a spiraling and costly effect. The larger the principal loan balance gets, for example, the more each successive interest charge adds to the pile. Therefore, prospective students should be careful about using too many unsubsidized federal student loans.

    As far as deferment is concerned, the Education Department pays interest for all subsidized loans during deferment periods, like the recent one for Covid-19. Unsubsidized loans, of course, have their interest continue to be collected during deferment.

    Recently, the U.S. government released a student loan debt relief program. U.S. citizens could qualify for loan forgiveness. However, this program is currently blocked.

    How much money can you borrow?

    Now that you know the significant differences between subsidized and unsubsidized student loans, you might wonder what the maximum amount you can borrow is.

    Dependent first-year undergraduate students can borrow $5500 in student loans, of which no more than $3,500 can be subsidized. Independent students, meanwhile, can borrow up to $9,500. Again, only up to $3,500 can be in subsidized loans.

    The loan rates increase for each successive year of schooling. Here’s a breakdown:

    • Dependent second-year undergraduate students: $4,500 in subsidized loans, $6,500 total.
    • Independent second-year undergraduate students: $4,500 in subsidized loans, $10,500 total.
    • Dependent third-year and beyond undergraduate students: $5,500 in subsidized loans, $7,500 total.
    • Independent third-year and beyond undergraduate students: $5,500 in subsidized loans, $12,500 total.

    As you can see, you can only take out a certain amount of money in loans per year from the federal government. If you have more financial needs, you’ll have to seek financial aid through scholarships, grants or loans from private lenders or other institutions.

    Which should you use: subsidized or unsubsidized student loans?

    Given all this information, you might ask yourself whether you should prioritize subsidized unsubsidized student loans.

    For most American students, the answer is clear: Subsidized student loans are superior because you don’t have to worry about interest accruing while you are at school and through any grace or deferment periods.

    In this way, you’ll pay less for subsidized loans over their lifespans than unsubsidized loans. However, you can’t take out as much money in federal direct subsidized loans as you can in unsubsidized loans.

    The most followed strategy is this:

    • Apply for as many federal student-subsidized loans as you can. Take out as much money through this system as possible, as it is the most cost-effective way to pay for your education and benefit from plentiful repayment options.
    • Then, only if you still need a little more money, take out extra unsubsidized federal student loans for the remainder of the academic year to pay for the cost of attendance.
    • Alternatively, pursue other means of financial aid, like scholarships, grants, and other loans with low-interest rates from secondary financial institutions and lenders like banks or credit unions.

    If you do this, you’ll negate as many of your future interest payments as possible and walk away with as much financial aid as possible.

    Related: Don’t Be a Victim: 4 Ways You Can Take Charge of Your Student Loans

    Should you take out federal or private student loans?

    Given the potentially high costs of unsubsidized federal student loans, some students might wonder whether private loans are better.

    It’s almost always better to borrow federally first. Why? Private loans, even those offered by trustworthy financial institutions, usually have higher interest rates. They also usually require cosigners if student borrowers don’t have credit histories, which is very common for first-time college students.

    Related: Private and Federal Student Loans for College: Which Works Best for Your Child?

    Meanwhile, subsidized and unsubsidized federal student loans offer more forgiveness and refinancing options, borrower repayment plans and extra flexibility compared to private loans.

    In the worst-case scenario, if you default on your loans and have a ton of student debt, you’ll have an easier time resolving things with federal student loans than with private student loans.

    You should only use private student loans if you have to fill unexpected payment gaps to meet college expenses or if you find an excellent deal with a low-interest rate. In that case, a private student loan might be slightly better compared to an unsubsidized student loan, but that’s rarer than not.

    Summary

    In many ways, subsidized student loans might be superior to unsubsidized loans. Still, both could allow you to acquire a college education and open up new professional pathways for your future.

    If you qualify for student loans, it may be best to take them, provided you plan to pay them back once you graduate. Additionally, consult your college’s financial aid office to receive more personalized counseling.

    Looking for more resources to expand your financial knowledge? Explore Entrepreneur’s Money & Finance articles here

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  • What Is SQL and How Does It Work?

    What Is SQL and How Does It Work?

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    Out of all the programming languages you need to learn in the IT industry, SQL is one of the most important. SQL is so integral to modern big data access and organization processes that it’s never a bad idea to grasp the basics of this language, even if you don’t work in the IT industry.

    This article will break down what SQL is, how it works and when this language is used for everyday operations.

    What is SQL?

    SQL stands for “structured query language.” This core programming language is primarily used to manipulate or communicate with information databases.

    For example, when a computer requests information from a local library, SQL facilitates information transfer between that terminal and the library’s database.

    However, SQL is also frequently used by businesses. SQL enables enterprises to access and organize the mountains of data they collect from their customers, which is increasingly common and important today.

    Related: Learn How to Manage Data Like a Pro with This SQL Course

    SQL was created in the 1970s by IBM laboratories. Scientists at IBM created SQL to take advantage of a new database software system called System R. SQL was needed to manage all the data stored in System R.

    SQL was initially called Sequel, which is where the language got its acronym and spoken name. SQL was then updated in 1979 by Relational Software, a company that later became Oracle. Oracle changed SQL into Oracle V2, a modified version of SQL.

    Today, SQL is still widely used around the world for a variety of purposes.

    To be more specific, SQL allows users to:

    • Execute precise queries against a database or collection of data as a “relational database.”
    • Retrieve or update records and data in a database.
    • Insert new records into a database.
    • Delete old records in the database.
    • Make new databases or create new tables in the same database for further optimization and organization.
    • Make stored procedures and views for a database.
    • Set user permissions for procedures, views, tables and database data sets.

    In other words, SQL allows users to accurately access and manipulate their data sets in an efficient, streamlined way.

    SQL servers and relational database management systems or RDMS, are available from organizations like Microsoft in their Microsoft SQL Server (MS SQL). It’s a standard of the American National Standards Institute (ANSI) and the International Organization for Standardization (ISO).

    What is SQL used for?

    At its core, SQL is used to access and manipulate database information.

    For example, businesses may use SQL to modify, add to, remove or otherwise organize data stored in private databases.

    In addition, businesses can use SQL programs to create and alter data tables: an essential part of data analysis and understanding.

    Note that a “database” is any tool used to collect and organize dense information in these circumstances. Databases, for example, can store customer information, transaction information and much more.

    SQL is often needed for other programs or programming languages to interface with databases stored on remote or on-site servers.

    Python, Javascript or some other standard language can interact with an SQL database, which uses its own data manipulation language (DML)/data definition language (DDL). An SQL protocol can access the data before retrieving it and translating it into an output or format that Python can understand/render to an end user.

    Overall, SQL is essential for the following:

    • Accessing or removing data.
    • Editing data in databases.
    • Assisting with data analytics.
    • Connecting different programs or programming languages with databases.

    Given its versatility and importance, SQL is one of the best programming languages to learn. If you want to join the IT industry at any point, becoming fluent in SQL standards will bolster your resume and career prospects.

    Related: Transform Data Into Game-Changing Insights with This SQL Training

    Major elements of SQL

    The SQL language has several vital elements that dictate its language syntax and format. All language commands in database management systems or databases are executed through specialized SQL command line interfaces or CLIs.

    The significant elements of SQL include:

    • Clauses — which are components of SQL statements or queries.
    • Expressions — which make scalar values or tables and which usually consist of rows and columns of data.
    • Predicates — which specify conditions and are used to limit statement effects or queries.
    • Queries — which are actions to retrieve data based on specific criteria.
    • Statements — which are used to control transactions, perform diagnostics, make connections, and adjust program flow or sessions.

    Very broadly, when a database system uses SQL, SQL statements send queries from a client program or server where data is stored. The server then processes SQL statements and gives replies to the client program or terminal.

    In this way, SQL lets users execute many data manipulation operations quickly and efficiently using direct data inputs.

    Common SQL commands

    To better understand SQL and how it works, it helps to understand some of the most common SQL commands.

    Here are just a few examples:

    • Create database — a command used to create a database.
    • Create table — which is used to create tables.
    • Select — which is used either find or extract data from a database.
    • Update — which allows users to edit or make adjustments to data.
    • Delete — which enables users to delete some data.
    • Drop — which is used to remove databases or tables.
    • Insert into — which lets users insert fresh data into a database.

    SQL is such a comprehensive and versatile language that it also includes many more complex commands. As a data control language, data analysts spend a lot of time learning the ins and outs of its database tables, database objects, relational models and data types.

    How does SQL work?

    While there are different versions or frameworks for SQL, the most common framework used is MySQL. MySQL is an open-source version of this programming language that facilitates the primary role of SQL, enabling organizations to manage their backend data and web applications quickly.

    For instance, companies like Instagram, Facebook and more use SQL for data processing and backend data storage.

    So, how does this all work? When a user or programmer writes an SQL query, it is written and run (or “parsed” according to the official terminology) and a query optimizer then processes it. Once the SQL query reaches the SQL server, it goes through three distinct phases: parsing, binding and optimization.

    Put very simply:

    • Parsing is an SQL process that checks syntax for the query.
    • Binding is an SQL process that checks the query’s semantics or details.
    • Optimization is an SQL process that generates the query execution plan or that carries out the requested command.

    If you want to know more about this, you can take some SQL courses for your personal knowledge or your company.

    Related: How to Become Master of Your Data with Microsoft SQL For Only $40

    Many of these courses are reasonably affordable, so it doesn’t take much to learn SQL, even for beginners, to data science or SQL syntax.

    The SQL compiling process explained

    Here’s a breakdown of the SQL compiling process in a little more detail.

    First, parsing takes place. This tokenizes the SQL statement into different words, checking them for verbiage, clauses and specific symbols. Next, the SQL server will check semantics. This means it validates the statement to ensure it is legitimate or understandable.

    In other words, the server ensures that the SQL query makes sense. Many servers also provide that the data the user requests exists and the user has the appropriate privileges to execute a specific query.

    Then comes binding. The SQL server makes a query plan for the received statement during this stage. This forms a binary representation of any steps needed to carry out the query or statement in byte code.

    This renders the compilation as a command-line shell, a program that can read SQL statements and send them to a database server for optimization and execution.

    At this stage, the SQL server optimizes the query plan and chooses the ideal algorithms for searching or storing data. Depending on the server or program, it may use a feature called query optimization or a “relational engine.”

    Last, the server executes the SQL statement by running the query plan depending on what exactly needs to be done.

    Related: Learn How to Manage Data Like a Pro with This SQL Course

    Summary

    SQL is one of the most crucial programming languages, and businesses use it daily.

    Now you know how SQL works, why it’s essential and how to leverage it for your advantage: a critical skill whether you need to build a business website or want to get into the IT sector.

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  • 9 States With No Income Tax: Everything To Know

    9 States With No Income Tax: Everything To Know

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    Income tax can take a big bite out of your wallet and your business’s bottom line. But not every state in the union charges income tax. Some states, like Texas, have become well-known as business havens for budget-minded entrepreneurs partly because they don’t charge income tax.

    For comparison, here are the nine states with the highest income tax rates:

    1. California – 13.30%
    2. Hawaii – 11.00%
    3. New York – 10.90%
    4. New Jersey – 10.75%
    5. Oregon – 9.90%
    6. Minnesota – 9.85%
    7. Vermont – 8.75%
    8. Iowa – 8.53%
    9. Wisconsin – 7.65%

    This article will look at nine states with no income tax and explore everything taxpayers need to know about these tax-reduced territories.

    What is income tax?

    Income tax is a crucial source of revenue for state and federal governments worldwide. There are several types of income tax that you might have to pay depending on where you live.

    An individual income tax is levied on individuals’ wages, salaries or other income. States usually impose these.

    Corporate income taxes are levied against businesses and their income from business operations.

    Meanwhile, state and local income taxes are other forms of income tax that states have more power over. These are distinct from federal income taxes and subject to each state’s specific tax code. Some states, such as California, impose significant income taxes, while others levy no additional income tax.

    Related: States With the Lowest Corporate Income Tax Rates

    Why do some states charge income tax?

    Income tax is a very reliable source of income. People have to earn money to spend money, which means that levying an income tax provides local and federal governments with enough funding to build schools, maintain roads, pay law enforcement officers and fund all other types of government operations.

    Related: Plan Ahead to Avoid Tax Time Surprises

    Which U.S. states don’t have to pay taxes on income?

    Only some states charge income tax to their citizens.

    Nine states either don’t have an income tax or are set to phase out income tax shortly. These states are:

    • Alaska
    • Florida
    • Nevada
    • New Hampshire — technically, New Hampshire makes tax investment and interest income, but those taxes will be gone in 2023.
    • South Dakota
    • Tennessee
    • Texas
    • Washington State — note that Washington does charge income tax for investment income and capital gains taxes, but only for those who earn a certain amount of money.
    • Wyoming

    If you live in any of these states, you’ll take home more of your money from most sources of income, like your salaries and tips.

    Related: Taxes on Small Businesses Across the Globe, Mapped: See Where Rates Are High, Low — and Nonexistent

    Comparing states with no income tax

    Does that mean you should immediately pack your bags and try to move to one of the above states? Not necessarily. Keep reading to review each state with no income tax and compare them based on their total tax burden and other factors.

    Alaska

    Alaska is both a cheap and expensive place to live. For instance, it has no state income tax or sales tax. The total tax burden for Alaska is 5.10% — the lowest of all 50 states. On top of that, all Alaskan residents get an annual payment from the Alaska Permanent Fund Corp.

    Still, the cost of living in Alaska is higher than average because of its distance from manufacturing centers and the relative remoteness of its cities. So you can expect to pay more for things like groceries and gas.

    Florida

    Florida is a popular snowbird state thanks to its population of retirees and its warm temperatures. While the excise and sales taxes in Florida are higher than the national average, the total tax burden on Florida residents is 6.97%.

    It does have higher-than-average housing costs, but on the plus side, Florida is a relatively cheap state to live in if you want to go to school.

    Related: An Underwater Property in Florida Is Going for $43 Million. The Developer Calls It a ‘Unicorn.’

    Nevada

    Nevada’s total tax burden is 8.23%. Citizens don’t have to worry about income tax because there are high sales taxes on alcohol, gambling, purchasing groceries, buying clothes, casinos and hotels.

    New Hampshire

    Then there is New Hampshire. As mentioned above, New Hampshire doesn’t charge general income tax, but it does charge income taxes on certain things. The total tax burden for New Hampshire residents hovers at around 6.84%, which is relatively low compared to other states.

    New Hampshire is a relatively small state, and the cost of living can vary depending on where you live.

    South Dakota

    South Dakota has a total tax burden of 7.37% for its filers. Even though it doesn’t charge income tax, it does charge heavy taxes on things like cigarettes and alcohol.

    It also charges very high sales taxes and has higher than average property tax rates, making it costly to live here if you don’t have a good source of income.

    Tennessee

    Tennessee’s total tax burden on its residents is 5.74%. Due to legislation passed in 2016, Tennessee lowered taxes for unearned income for its citizens. But this only resulted in a higher sales tax rate and the overall highest beer tax rate for any state in the union, measuring in at $1.29 per gallon.

    Texas

    Texas has a total tax burden of 8.19%. Most of its taxes come from excise taxes and sales taxes because the residents hate the idea of income taxes. Note that sales taxes can be up to 8.25%in certain jurisdictions.

    Furthermore, property taxes in Texas are higher here than in most other states. Even with all that, there’s no denying that Texas has a relatively low tax burden compared to other conditions.

    Related: A Texas farmer offers Elon Musk 100 acres of land to move Twitter offices from California to Texas

    Washington

    Washington has a relatively young population and an average tax burden of 8.34%. Many residents pay high sales and excise taxes, and you’ll find that gasoline prices at the pump are also higher than average.

    Combine that with higher-than-average living costs and high housing costs, and it’s clear that Washington is not among the most affordable states, even if it doesn’t charge income tax (for most).

    Wyoming

    Lastly, Wyoming is a very unpopulated state. It charges a total tax burden of 6.14% on its citizens, which includes excise, sales, (some) income and property taxes.

    While Wyoming might be cheap, keep in mind that it’s only suitable for those who are fans of the frontier lifestyle. This empty state has little going on in terms of metropolitan areas or tourist attractions besides national parks.

    Should you move to a state with no income tax?

    Moving to a state with no income tax is an attractive prospect. No one likes getting a check from their work only to see what the government takes to pay for necessary services.

    While you might rationally understand the purpose of income taxes, you might instinctively feel despondent to see your hard-earned money taken away right as you get it.

    But while it can be tempting to move to a state with no income tax, you should consider the total tax burden each state levies on its residents before proceeding. You should also consider what each state has to offer.

    Related: 4 Effective Strategies to Reduce Your Income Taxes

    For example, many people move to California, which is widely understood to be one of the most expensive states to live in. Why? It’s a beautiful state, with lots to do and job opportunities, particularly in the entertainment and tech industries.

    Similar states, like New York, Hawaii or Minnesota, might have high federal income tax rates for all taxable income and additional taxes to boot but counteract that with low local sales tax rates.

    In contrast, Wyoming might place a low tax burden on its residents. But you must have a job in farming, ranching or mining. There isn’t much to see and do in Wyoming if you aren’t a fan of the great outdoors.

    Then you have to keep business taxes in mind. Self-employed individuals might find some states better than others regarding the final tax bill or their state sales tax brackets.

    Factors like healthcare, pensions and dividend income can make states like Alabama, New Jersey, Illinois and others throughout the United States attractive places to live and work.

    Therefore, don’t immediately pick one of these states and move just because it doesn’t have personal income tax on your earned income. Income taxes are valuable and vital for the government, and in many cases, they can help to fund some of the most enjoyable and profitable parts of state economies.

    What’s the bottom line on states with no income tax?

    There are plenty of states you can move to throughout the US without an income tax. These might be ideal states to move to in the future or states in which to start a business.

    But remember that these no-income tax states have advantages and disadvantages; consider the total tax burden imposed on you and future businesses in each state before setting out for “greener” pastures.

    Looking for more helpful articles to expand your financial knowledge? Check out Entrepreneur’s Money & Finance resources here.

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  • What Is a Recession and How Do You Prepare for One?

    What Is a Recession and How Do You Prepare for One?

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    The news is abuzz with rumors of the next recession coming in 2023 or 2024. But for most Americans, all of that triggers a sudden panic and a desperate need to look at one’s bank account.

    What is a recession, what does it mean, and how can you prepare yourself and your family’s finances for one? This article will answer each of these questions and more. By the end, you’ll know what to expect and how to prepare for a recession.

    What is a recession?

    According to economists working for the National Bureau of Economic Research, a recession is a prolonged period of economic downturn or declining economic activity.

    It affects a nation’s or the world’s entire economy and lasts for a few months or more. In some ways, the best way to understand the recession is to compare it to “regular” or positive economic activity and GDP.

    GDP (gross domestic product) is essentially the combined value of the goods and services made by an economy, like the American economy. The country’s GDP grows a bit each day/week/month in a standard economy.

    When a recession kicks in, there is no economic expansion. Instead, the GDP is negative — the value of goods and services in the economy decreases — for more than two quarters or approximately six months. People stop spending as much money when this happens because the dollar’s value decreases.

    Related: Are We in a Recession? Here’s What Economists Say

    This decrease in consumer demand triggers a decline in industrial production, exacerbating the spiral effect and making a recession last longer. A significant decline in the business cycle, characterized by many consecutive quarters of lower consumer spending, may lead to job losses or a high unemployment rate.

    Several past recessions have stalled economic growth and led to the depletion of the Federal Reserve or the “Fed.”

    These include the recession leading into World War II, the Great Recession financial crisis, which occurred in 2008 from speculation on real estate, and the most recent recession brought on by the Covid-19 pandemic and the necessary cutback/slowdown on retail sales in the U.S. economy.

    Signs of a recession

    Aside from this recession indicator, some typical economic indicators also have other signs and symptoms to pay attention to.

    These signs include:

    • More layoffs than average, a tighter labor market.
    • A general, widespread decline in stock market stock prices.
    • More businesses are going bankrupt than usual.
    • Fewer raises or promotions for workers.

    Related: Are We Headed for a Recession? It’s Complicated.

    As for GDP? According to some sources, the American GDP was -1.6% in the first quarter of 2022 and -0.9% in the second quarter of 2022. Technically, this means there is currently a recession, regardless of what people say.

    Note that a recession differs from a depression, which is much more severe. In a depression, the economy tanks significantly, and many more people may lose their jobs and money.

    In contrast, a recession is usually relatively short-lived. Some people may not feel a recession’s impact, depending on how much money they have saved up and their financial situation before the recession occurs.

    In any case, a recession is never good news, which could signify that you must prepare accordingly.

    How to prepare for a recession

    Fortunately, there are multiple ways in which you can prepare for a recession. Good recession prep can keep your finances secure until the recession recedes, allowing you to maintain your investments, keep your savings account intact and provide your family with peace of mind.

    Knock out as much debt as possible (and avoid new debt)

    Your priority should be to get rid of as much debt in your name as possible. You should already be trying to clear debt aggressively. The longer you leave it hanging around, the worse your credit will be and the more interest fees you’ll pay over time — it’s lost funds.

    As you put more of your money toward knocking out your debt, prioritize high-interest debt, such as credit cards and loans with high-interest rates. When you get rid of as much debt as possible, you set yourself up for financial success during the potentially turbulent economic times ahead.

    Avoid taking out any unnecessary loans or opening up new credit accounts during this timeframe. If you avoid further debt, you’ll have more money to spend on savings or necessities, which may be necessary soon.

    Related: How to Recession-Proof Your Business

    Keep saving aggressively

    Speaking of saving, you should continue to save aggressively or even save more money than you were previously.

    You might not get an unexpected promotion or pay raise during the recession. Even worse, your job could be at risk if you recently joined a company or are at the beginning of your professional career.

    In these cases and others, your income streams could dry up unexpectedly. If you save aggressively before that happens, you’ll be well-positioned to get back on your feet and weather this economic storm until clear skies return.

    Try to save as aggressively as possible and put that money into a secure savings account. That way, you’ll earn interest on those savings and avoid accidentally spending the money.

    Diversify investments

    Plunging numbers and red lines on charts are not reasons to withdraw all of your investments or blow up your portfolio if you’re invested in the stock market. You should keep your money in the market; after all, the stock market will eventually rebound just like it always does.

    Instead of panicking, diversify your investments by distributing your money into different stocks, funds, and other securities and assets. When you diversify your portfolio further, you protect it from economic damage, even from recessions.

    Plus, if you diversify your investments instead of withdrawing from the market, you’ll prevent yourself from losing money in the short term.

    Every time a recession occurs, some Americans invested in the market sell all of their securities, which only lowers prices for those securities. Then they regret this panicked decision as the market inevitably rebounds, with many stocks achieving higher prices than they reached previously.

    Bottom line: keep your investments in the market and keep your eye on the prize, particularly for long-term gains. A recession will eventually pass. Your current positions may be unattainable the next time you have money to invest in the market.

    Related: Worried About a Recession? Do This to Prepare Your Company.

    Bump up your credit

    Your credit score is also essential during a recession. You should improve your credit score before and during a recession whenever possible, primarily by eliminating high-interest debt such as credit card debt.

    If necessary, move any high-interest debt to a new credit card with an introductory 0% APR offer for any balance transfer funds. This can be an excellent way to quickly pay down any other debt in your name (in keeping with the tip above) without paying extra interest.

    In any case, try to improve your credit so you can take out emergency loans if necessary, and so any other fees or financial strain you face over the next few months, reduce your credit by as little as possible. Many people feel the aftereffects of recessions for years to come, primarily because it damages their savings accounts or credit scores.

    Don’t panic

    Do not panic if and when a recession occurs or when the news anchors start talking about it. Contrary to what some may believe, recessions are standard parts of the economic cycles inherent in capitalism.

    Simply put, recessions are inevitable declines in economic activity that eventually fade away. Once people stop panicking about the effects of a recession, economic activity should return to normal, and businesses will start to boom again.

    Just thinking of a recession in this light — a regular element of the economy and not something to necessarily be feared — will help you keep your head straight as you plan.

    Not panicking is crucial, so you keep spending and saving money, which are essential actions to do your part to prevent the economy from spiraling downward even further.

    Summary

    Recessions might be financially uncomfortable, but they are far from devastating if you take the right steps beforehand. The proper prep and patience will go a long way toward shoring up your bank accounts and protecting your finances throughout the upcoming recession until the market upswings again.

    Looking to expand your financial knowledge with more articles like this one? Explore more of Entrepreneur’s Money & Finance articles here.

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  • How To Fill Out a Money Order: Step-by-Step Guide

    How To Fill Out a Money Order: Step-by-Step Guide

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    When you can’t send a check but don’t want to rely on something as insecure as cash, a money order could be just the ticket.

    It’s essential to know how to send and fill out a money order step-by-step in case you ever need to pay a bill, send money to a relative or transfer money discreetly from one place to another.

    What is a money order?

    A money order is very similar to a check. It allows you to send or receive payments securely, unlike cash.

    However, money orders are prepaid. Instead of money leaving your account when someone catches a check, money leaves your account the minute you fill out a money order and deposit it at an appropriate institution.

    When should you use a money order?

    It can be wise to use a money order whenever you need to pay someone securely but can’t use a smartphone app like MoneyGram, online platform, check or cash (or you don’t want to use any of those methods).

    Related: This is How We Can Transfer Money Online Without Hassle

    This form of payment is accepted practically anywhere because they are automatically prepaid, so there’s no risk of the money “bouncing,” which can happen with a check. Furthermore, there’s no identity theft risk, like when you wire money from a checking account.

    You can use a money order when you need to:

    • Send money to a family member or friend.
    • Pay a bill for your business.
    • Receive money from your workplace or someone else.

    However, remember that you can only send $1,000 in a single money order. You can send multiple money orders in the same shipment, though.

    Banks and other financial institutions can offer this personal finance service, just like they can send cashier’s checks and personal checks. Other financial institutions also provide money orders, including credit unions such as Western Union or anywhere you can have a bank account or get a credit card/debit card.

    Related: Business plan, business – Money Order

    How to fill out a money order

    Fortunately, filling out a money order is very straightforward and not at all difficult. You can get a money order from a location that sells them, such as pharmacies (including Walmart and CVS) or, more commonly, any of the 31,300 United States Postal Service retail offices. Conveniently, you can also send money orders from U.S. Postal Service offices.

    Note that purchasing a money order involves a fee. The fee can vary from place to place; for instance, Walmart usually charges one dollar to send a money order, whereas the USPS can charge anywhere from $1.65 to $2.20 depending on how much you need to send.

    You’ll need a few pieces of information to fill out a money order:

    • The payee’s name.
    • The payee or recipient’s address.
    • The payment amount.
    • Your name and current mailing address.
    • The reason or billing account number for the money order.

    You don’t need to list the issuer of the money order or the location of the post office/convenience store from which you send it on the memo line.

    Step 1: Fill in the recipient’s name

    Once you have a money order, write the name of the person to whom you are paying money in the “pay to the order of” or “pay to” fields, depending on which field your money order has. You should include the full name of the recipient or the full name of the business you are paying.

    Step 2: Add your address

    The next step is to add your address to the purchaser’s address field. This is the address of the person purchasing the money order — in this case, you. You’ll also add the payee’s address.

    Step 3: Fill in the “memo” field

    Then you need to fill in the “memo” field. This is a line or field where you can describe what you’ll use the money order for. If you’re using it to pay a bill, you’ll put the billing account number in this field.

    Step 4: Sign your name

    Last, you must sign your name on the front of the money order where it is indicated. When signing the purchaser’s signature, leave the back of the money order blank. That’s where the payee or recipient will endorse it, similar to endorsing a check.

    There you have it — it should only take you a few minutes to fill out a money order from start to finish, provided you have all the necessary information.

    Where and how to deliver a money order

    After you have filled out the money order, detach the receipt. The receipt is vital for your records and allows you to track whether the recipient ever cashed the money order.

    Hand-deliver the money order to the recipient or mail it to your recipient using the postal service of your choice. Only the recipient will be able to cash it.

    Remember that, unlike a check, whatever money you have designated for the money order will be gone from your account before the recipient cashes the money order.

    Can you cancel a money order?

    Yes. To do this, you should immediately contact the person or party that issued the money order (i.e., USPS or Walmart). Ask for a cancellation request form and fill it out.

    You’ll need to have your receipt from the money order and show it to do this. Then you’ll have to pay a fee to cancel the money order. This process is the same if you want to replace the money order or get a cash refund.

    What else do you need to know about filling out money orders?

    Now you know how to fill out a money order step-by-step. Money orders can be critical financial tools from time to time, and they can come in handy if you need to send funds securely and quickly from one place to another.

    Looking for more informational articles like this? Explore Entrepreneur’s Money & Finance articles here

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  • Why Do You Want to Work Here? Here’s How You Can Ace the Question Every Time

    Why Do You Want to Work Here? Here’s How You Can Ace the Question Every Time

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    Job interviews are not exactly everyone’s idea of a good time. They can bring about stress, anxiety and a bit of nerves. However, stress often comes from a sense of being unprepared. So what if you discovered that being as prepared as possible could reduce your stress on the big day?

    Whether you’re a brand new job seeker or a seasoned professional, this article will walk you through the interview process, help you show potential employers why you want to work for their company and how to ace their questions every time.

    One of the toughest questions you’ll get is also probably the most obvious. Why do you want this job? Why are you interested? However straightforward the question seems, it can be surprisingly challenging to come up with a good answer.

    Should you focus on your career path and aspects of the company’s mission and business practices that resonate with your goals, such as eco-friendly products or community service initiatives? Or should you talk about something else entirely?

    There isn’t a cookie-cutter answer here. However, we will review tips to help you navigate the murky waters of the dreaded “why do you want to work for this company?” question.

    Related: Interviews Are a 2-Way Street: How to Make the Most of Them for Mutual Success

    Applying for the right position

    Before learning how to ace common interview questions, you should know how to apply for a job opening that is right for you.

    Work-life balance has been a hot topic lately, and a big part of that has to do with actually feeling fulfilled in your job. Applying for jobs that genuinely interest you is important because it will come through in the interview, and working in a job you enjoy does wonders for your mental health.

    Here are five points to consider when assessing if you’re applying for the proper position.

    1. Motive

    Money is essential. However, it should not be your sole reason for applying for a job.

    When you are solely driven by money, you may quickly feel unfulfilled with your work. When browsing job boards, look for jobs with a healthy balance of salary and something you genuinely find interesting.

    Related: How to Be Authentic in an Interview

    2. Passion

    Passion and motive go hand-in-hand. To determine whether or not you’re passionate about this potential position, ask yourself:

    • Will you look forward to telling your friends and family about this job?
    • Will you look forward to doing this job each day?
    • Do you care about the work you are doing?
    • Will the work stimulate you?

    3. Work-life balance

    The need for work-life balance varies from person to person. When applying for jobs, it is vital that you know yourself and what level of work-life balance you require.

    Most job descriptions will tell you the required hours and whether nights, weekends or untraditional hours are required. Keep those details in mind when making your decision.

    4. Work environment

    The work environment is another aspect that varies from person to person. As you consider what kind of work environment you’d like to experience, ask yourself:

    • Do you want an in-person, hybrid or remote job?
    • Do you prefer solo work or collaborative work with team members?
    • What kind of workload are you prepared to take on?
    • Does company culture matter to you? If so, does this company culture match your core values?

    You should answer these questions for yourself, but you can also ask more specific questions on this topic during your interview process. In addition, complete your due diligence by researching the job and company via sites like Glassdoor and LinkedIn, where you can find job postings, salary calculations, company reviews and other relevant information.

    Related: How to Master Virtual Job Interviews

    5. Opportunities for growth

    Whether you are applying for a job at a small or large company, if your career goals involve growing with that business, you need to make sure there are opportunities. Sometimes, this can be difficult to tell simply by the job description, so you’ll have to ask follow-up questions in your interview.

    Some of the best questions to ask to find out if there are growth opportunities include the following:

    • What kind of mentorship opportunities, formal or informal, does the company provide?
    • Are there available opportunities for career development and skill development through this position?
    • What qualifications are required for promotion opportunities, and how can you work toward acquiring said qualifications in this position?
    • Could you provide an example of a senior role, its qualities and required skills?
    • What improvements would you like to see in your industry and at your current company?

    But one easy way to tell is by the job title. For example, if you are applying for a position called “assistant manager,” there is likely a position above it called “manager.” Look for hints during the job search to clue you in on growth opportunities.

    How to prepare for a job interview

    Once you’ve applied to a great job and scored an interview, it’s time to prep.

    Take a look at these tips and tricks to bring your A-game.

    Related: Job Interview Preparation Checklist

    1. Know the job

    At this point, you should know the job you want. “Knowing the job” includes in-depth research about the day-to-day responsibilities of the position, the characteristics of successful employees working that role and how you align with those work habits and personality traits.

    However, once you’ve secured an interview, you should take your knowledge of the job description one step further.

    The job description will likely guide the hiring manager’s questions, so you should be prepared to demonstrate how you can perform the job duties or show your performance history of similar previous job functions.

    Be prepared to answer situational questions about how you would react to a situation or examples of how you have handled similar scenarios.

    Situational questions: Examples and sample answers

    1. Describe a situation where you went above and beyond at a previous job.

    Answer: My boss was on vacation, and my team got an order for 500 additional shipments of XYZ. I regrouped and helped motivate the team, and we fulfilled the order ahead of schedule. The client then signed on to purchase more XYZ in the following year.

    2. Talk about a time you had to collaborate with a difficult coworker.

    Answer: One of my co-editors had a very different work style from my own. She was much laxer, whereas I preferred to follow the procedures to a tee. We collaborated to develop a new editorial protocol, which allowed us to turn around 50% more articles per week.

    In these questions, the best practice is to keep in mind a simple answer formula: problem, solution and benefit. If you can articulate how your work addressed the problem and the impact of your actions, you are more likely to impress interviewers.

    2. Know the company

    This is part of preparing for the big question. You’ll need to study and grow your knowledge of the company, including:

    • You should know the company’s story, background and founders.
    • You should understand the company’s mission statement and purpose.
    • You should have some general knowledge about the company, such as work examples or campaign history.

    This is a considerable part of preparedness. The company will want to know that you chose them on purpose, so be ready to show them you did.

    3. Know yourself

    During your interview, you must show confidence in your answers (even if you’re forcing your confidence through a layer of anxiety at that moment). The following are some aspects of yourself that you should be ready to share:

    • The specific personality traits and attributes that distinguish you from other candidates.
    • Your work history, track record and any gaps in your background.
    • Your particular work style.
    • Any strengths and weaknesses relevant to the position.

    Practice going over sample answers with yourself for job interview questions you might be asked.

    A good practice for discussing your strengths and weaknesses is another simple formula: mention a strength/weakness, then provide a story for context.

    Here are a few examples:

    • I’m a strong public speaker. My last position required me to give presentations at conferences such as X, Y and Z, and at each of these conferences, we closed sales contracts with multiple clients in attendance. I received multiple internal shout-outs while at my previous company and was chosen to serve as our media spokesperson for the XYZ product rollout.
    • One of my greatest weaknesses is that I don’t always express myself, even when I have strong feelings about a subject. However, I’ve recognized this limitation, and I’m working to grow. I’ve joined a local public speaking group to overcome my hesitancy to voice my thoughts, and I’m becoming more confident in expressing myself to others.

    4. Create questions

    Even though most of the interview will be about you, it’s essential to ask your interviewer about themselves and the company. You can certainly ask follow-up questions about anything you have learned during the interview, but you should also go in prepared.

    Consider questions like:

    • What are some expectations of this role, and what projects might I take on?
    • What are some challenges I might face in the role?
    • Can you tell me more about how the team functions and the chain of command?
    • What are some opportunities for growth?
    • What is your favorite part about working at this company?
    • What are you excited about for this company’s future?

    Related: 15 Interview Questions You Should Be Prepared to Answer This Month

    5. Send a thank you note

    Even though this won’t happen until after the interview, you should go in knowing that you’ll need to send a thank you note after. In the email, you should include the following:

    • Include an introduction.
    • Include three things you enjoyed or learned during the interview.
    • Include a call to action.
    • Include a sign-off.

    The big interview question: Why do you want to work here?

    You’ve snagged the job interview and prepared as much as possible, and now the time has come — interview day.

    The interview will likely start with questions like:

    • What can you tell me about yourself?
    • Can you tell us about your skill set?
    • Why should we hire you?
    • Can you tell us about a time when…?

    But the most critical question is one that is more about their company than you.

    Why do you want to work here?

    All of your preparation will pay off at this moment. Companies want to know that you have done your research by:

    • Look at the company’s website.
    • View company social media accounts.
    • Understand their mission and company values.

    Demonstrating your knowledge of their company shows that you care and have a genuine interest in the position. To show you have done your research, you should answer the question as precisely as possible.

    For example, don’t just say, “I love your company’s mission and think I’d be a great fit because I align with it.” Instead, get specific. Tell a relevant short story or give an example or give an exact answer about why their mission matters to you.

    Be specific by answering with something like:

    “I saw the campaign you did about X. That is something very near to my heart, and I would love to be a part of a company that values Y. I want to help continue the mission of X by Z.”

    Relate their mission to your values. Show them the connection between their company and you. If you can tell a story and create a relationship, you will ace the question every time.

    Bottom line? Interviews are tough. The market is full of competitive job candidates, and the process can be stressful. The best way to tackle interviews is to be as prepared as possible.

    When entering into an interview process, remember:

    1. Apply to the proper position for you.
    2. Prepare for the interview by doing your research.
    3. Know why that company matters to you, and show them.

    Now that you’ve got the rundown, it’s time to put yourself out there and snag a job offer.

    Looking for more advice to support your professional growth? Explore all of Entrepreneur’s vast and ever-growing wealth of helpful articles here

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  • How Much Does an Oil Change Cost? That Depends.

    How Much Does an Oil Change Cost? That Depends.

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    Keeping your car maintained and working well is crucial to saving money in the long run. After all, if you don’t take your car into the shop from time to time, it’ll eventually break down and require much more costly fixes — or a replacement.

    One of the most important regular maintenance tasks is changing your car’s oil. But if you’ve never done this before, you might wonder how much an oil change costs. Read on for the answer to this question and more.

    Why do you need to change your vehicle’s oil?

    Simply put, the oil for your vehicle’s engine is a lubricant that prevents all metallic and mechanical parts from grinding against one another, causing corrosion, damage and malfunctions. Without engine oil, your vehicle wouldn’t run very smoothly, if at all.

    However, your engine oil gradually accumulates debris, grit, dirt and other bits of matter. Furthermore, your engine oil loses some of its lubricity or its state of slipperiness. This can accelerate wear and tear on the internal components of your engines.

    When you replace your vehicle’s oil, the fresh oil minimizes friction and allows all the mechanical parts inside the engine to spin around without issues. In addition, new oil helps fuel economy by allowing your vehicle to run more efficiently (thus expending less gasoline per mile driven).

    So, in summary, you must change your vehicle’s oil regularly to avoid engine wear and tear and ensure your vehicle runs as smoothly as possible. It’s about car care, engine protection and a healthy automotive maintenance schedule.

    What does an oil change service include?

    An oil change service may include a variety of specific actions or services depending on who you hire and what’s involved.

    At a bare minimum, an oil change involves:

    • Removing the drain plug from the bottom of your vehicle’s oil pan.
    • Allowing gravity to drain oil completely into another pan called a catch pan. This old oil is then discarded in a legal, environmentally safe way.
    • Replacing the drain plug.
    • Changing the oil filter.
    • Replacing the old oil with new oil. The majority of car engines take about 5 quarts of oil.

    As you can see, a conventional oil change service is relatively straightforward. That said, it’s not a good idea to do this crucial maintenance task if you are unprepared for it or if you don’t have any experience.

    Related: Automotive Repair & Maintenance Services Franchises

    How much is an oil change?

    There’s no universal price for an oil change service. Your oil change will typically cost anywhere between $30 to $100 if you take it into a lubricant shop or a car dealership. Alternatively, it will typically cost anywhere between $30 and $50 if you change your oil yourself.

    Generally, the higher cost of an oil change will come from a higher cost of labor (which is dependent on where you live), differences in filter quality and any additional services being performed (tire rotation, etc.). For the most part, oil costs won’t differ between locations for the same vehicle.

    Factors that affect oil change cost

    The price of an oil change can vary depending on several important factors:

    Oil type

    First, the type of oil used will affect how much it costs to change your oil, whether you take it to an expert or do it yourself.

    There are two basic types of oil used for most oil changes:

    • Conventional oil is standard and more affordable but is more common for older vehicles. It’s the traditional type of oil used to lubricate engines and mechanical components.
    • Synthetic oil is required by most modern vehicles and is more expensive. A synthetic blend oil is typically seen as better than conventional motor oil because it is specially formulated to improve lubricity and engine quality over time. You can get a full synthetic oil change at most service centers, and it’s also included in many car warranties.

    If your car does not explicitly require synthetic oil, you can pick between them when you take your vehicle into the shop or change your oil personally.

    Synthetic oil is almost always better for your car, however. It wears down your engine less harshly and lasts longer. Therefore, depending on how often you need your oil changed in the first place, paying a little extra for synthetic oil could save you more money in aggregate.

    The most significant price difference between conventional and synthetic high-mileage oil is about $32, so it doesn’t break the bank. What should you do? Go synthetic whenever possible, and read your vehicle’s owner’s manual to know which type of oil your car needs.

    Car type

    Vehicle type can also impact the cost of an oil change. Some vehicle models require a specific type of oil to be used, such as a particular brand of synthetic oil. This is more frequent with luxury vehicles.

    In addition, your car type can impact how much oil you need for a full oil change. For instance, a large truck that drives hundreds of miles daily will need much more oil per change than a small sedan that only goes a few miles daily.

    Location

    Lastly, the location where you get your oil changed can impact its cost. If you live in a more expensive area, an oil change will also be more significant since the car dealership or lube shop service has to pay more for its rent and related costs.

    Note that if you change your oil yourself, location is unlikely to affect the overall price you’ll pay.

    Quick lube shops vs. dealerships

    When you need professional help to change your oil (recommended if you don’t have any experience doing this), you have two options: Take your car to a lube shop or a dealership.

    A dealership may know more about your vehicle’s make or model, mainly if you take it to a dealership for your vehicle’s brand. Therefore, it could be wise to take your car to the dealership to get its oil changed.

    As a side benefit, the dealership can look at other aspects of your car and tell you whether you need to change your tires or other replacement parts. It may be wise to go to the dealership for a biannual checkup on the health of your vehicle in general.

    In contrast, a quick lube shop might be a more cost-effective, fast solution. You can find quick lube shops in most major metropolitan areas; some are even mobile.

    These don’t specialize in any specific type of vehicle, but they can change your car’s oil in a matter of minutes if you come at the right time.

    A quick lube shop might be the best solution if you need your oil changed more frequently due to long commutes or other factors. Many quick lube shops also sell the right oil you need for your vehicle, but you should call ahead to check just to be sure.

    How often should you change your oil?

    That depends on the make and model of your vehicle, as well as the type of oil you have. Generally, better oil varieties allow you to change your oil less frequently. But it’s still a good idea to change your oil after about 5,000 to 7,000 miles, depending on your vehicle’s manufacturer recommendations.

    You should get your oil changed twice yearly, assuming you drive your car daily. If you drive your vehicle many miles daily, you’ll need the oil changed more frequently.

    When in doubt, speak to the local dealership or oil change expert you hired to do this service. Based on the oil they provide and the make and model of your vehicle, they should know how often you need to change your oil to prevent significant issues.

    How to lower the cost of an oil change

    Although an oil change shouldn’t be too much of a burden on your wallet, you can lower the cost of that oil change with a few smart tips and strategies.

    Firstly, look up coupons or discounts in your local area, particularly if you just need an oil change and don’t need all the bells and whistles from a related car maintenance service. If a quick lube shop has a discount, you can visit that shop and get your oil changed on the cheap.

    Secondly, look into learning how to change your oil yourself. Knowing how to change your oil is an important life skill and will help you get back on the road if your car breaks down in the middle of nowhere.

    Furthermore, it’s not very difficult; once you learn how to do it, you can save yourself $50 or more by changing your own oil instead of taking your car to a shop or dealership.

    Related: Startup Helps Fend Off Car Repair Ripoffs

    Thirdly, take care of your vehicle in general. If you run your vehicle all the time or don’t take care of it, the oil will need to be changed more frequently.

    But if you take care of your vehicle, get it inspected by a maintenance technician regularly, and practice good driving habits, your oil will only need to be changed once in a while, saving you money.

    Summary

    Ultimately, an oil change will cost you anywhere from $20-$100 or more, depending on the quality you expect, the type of oil you need, and a handful of other factors.

    Even if it is an inconvenient expense, get your car’s oil changed when needed; otherwise, you’ll set your car up for a more expensive fix later down the road.

    Looking for more informational articles like this? Explore Entrepreneur’s other resources here

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  • How To Craft the Perfect Professional Letter

    How To Craft the Perfect Professional Letter

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    While the business world has evolved over the years, there are a few things about it that haven’t: elements of formality and respect. When you are addressing someone in a professional setting, especially a superior, there is a certain way to go about it. The same goes for addressing a professional letter. And while business letters might seem old school, they still play many different roles in the industry.

    If you’re looking for a guide on professional letter writing, look no further. We’ve got the tips and tricks to help you draft and address your best letter yet.

    Why Should You Write a Professional Letter?

    If you need to evoke formality and professionalism, physical letters are a great avenue to take. While internal company communication can be done via email, writing to other businesses via a letter shows an air of class and polish.

    Reasons to write a professional letter include:

    • Announcements
    • Official requests
    • Cover letters
    • Networking
    • Thank yous or follow-ups
    • Resignation

    No matter which reason is right for you, the format of your letter should follow a pattern. Keep reading to learn more about the structure of your business letter.

    How To Write a Professional Business Letter

    Letter writing is an art. And when you combine it with business, it is an art combined with a process. When it’s time to write your letter, use our step-by-step instructions to guide you from the inside contents of the letter to what goes on the outside of the envelope.

    Related: The Business Benefits of the Handwritten Letter

    1. Inside the Letter: The Header

    Before you begin writing the letter, you need to include a header that provides important contact information. If you are using a professional letterhead that provides that information, you can skip ahead to the next step.

    The header should be located in the upper left-hand corner of the envelope and include the address format:

    • Your full name
    • Your full address (home or business, depending on the situation)
      • Sender’s address (your address)
      • City, State Zip Code
      • Country name
    • Your phone number (your most reachable number)
    • Your email address

    Skip for separation and include:

    • Full date (July 19, 2023)

    Skip the next line and continue with the second line:

    • Recipient’s full name (if you know the person’s name)
    • Recipient’s job title
    • Name of the company (if applicable)
    • Recipient’s address or the address of the company
      • Street address
      • City, State Zip Code
      • Country

    Once you’ve got the labels set up, it’s time to get drafting.

    2. Inside the Letter: The Contents

    When writing a professional letter, you need to find the balance between being eloquent yet direct — friendly yet formal.

    The contents should be:

    The Salutation

    A salutation is the first line of your letter. It is a way to open your letter by directly addressing your intended recipient. How much you know about your recipient will dictate how you can greet them with the salutation.

    Greeting options include:

    • Dear Mr., Mrs., Miss, and Ms. (only use these abbreviations if you are sure)
    • Dear Sir or Dear Ma’am (only use these titles if you are sure)
    • Dear Professor
    • Dear Recruiter
    • To Whom It May Concern

    Once you have decided which salutation to use, you need to make sure you format it properly in your letter.

    The salutation should be left-aligned, followed by a comma, and standing alone on a line. For example:

    Dear Professor,

    The Message

    Now it’s time to get to the body of the work. Professional letters should not exceed one page. To make sure you stay on topic, constructing your letter in three paragraphs is a helpful structure to live by. Make sure that each of your paragraphs is indented to show separation.

    The contents should cover:

    • Paragraph One: opening statement with the letter’s purpose or intent
    • Paragraph Two: elaborate on your point with background information, supporting details, and reasoning
    • Paragraph Three: reinforce the letter’s purpose and end with a CTA (call to action)

    A call to action shows the recipient that you are expecting a response. A CTA can be something like:

    • I look forward to hearing from you.
    • Please reach out with any questions you may have.
    • I am looking forward to your response.
    • Please keep me informed of the process.

    The Sign-Off

    Once you have said what you needed to say and included your call to action, you need to include a formal sign-off.

    Closing phrases can be things such as:

    • Sincerely
    • Best
    • Thank you
    • Regards
    • Cordially

    After the sign off you should include a comma, move down a space, and sign your name.

    A Template

    Even though we’ve given you all of the information, it might be helpful to have everything in one place. Next time you need to write a professional letter, use this letter to guide you.

    Your name

    Your full address (home or business, depending on the situation)

    Your phone number (your most reachable number)

    Your email address

    Full date (July 19, 2023)

    Recipient’s name (if known)

    Recipient’s job title

    Name of company (if applicable)

    Recipient’s address or the address of the company

    Dear [Recipient],

    My name is [your name], and I am reaching out because [your reason]. [Continue with your reason for one to two more sentences].

    To provide you with more information on the subject, [background information]. In addition to that, [provide supporting details in one to two sentences]. This is significant because [provide reasoning in one to two sentences].

    Again, [reinforce the letter’s purpose in one to two sentences]. [Include your CTA in one sentence].

    Sincerely,

    Your name

    3. On the Envelope

    Once you’ve got your letter just the way you want it, it’s time to prepare it for the mail. What you put on the envelope is just as important as what you put inside the envelope.

    On the outside, include a return address in the top left corner of the envelope, including:

    • Your name
    • The company’s name (if necessary)
    • Your mailing address

    In the middle of the front of your envelope is where you will include the recipient’s information in this order:

    • Professional title of the recipient and their full name
    • Name of company
    • Accurate street address

    Once you’ve properly formatted and included the necessary information, it’s time to apply postage. If you aren’t sure what kind of postage you’ll need, a good rule of thumb is:

    • 1 oz (4 sheets of regular 8-1/2″ x 11″ paper and a business-sized envelope) for 1 First-Class Mail® Forever® stamp (currently $0.60)

    You can purchase postage stamps on the United States Postal Service website or at any post office location. Most grocery and drug stores also carry USPS stamps.

    Related: How to Write a Cover Letter That Gets You an Interview

    Other Things To Consider

    Now that we’ve got the basics covered, it’s time to go over the little details that make a big difference.

    The Font

    When sending a professional letter, you need to make sure your font is professional. For formal font options, stick to:

    • Times New Roman
    • Arial
    • Cambria
    • Georgia

    As for font size, 11-12 point font is acceptable.

    The Proofread

    This might sound like common sense, but this is your official reminder — proofread your letter! Errors in your letter are unprofessional and do not provide a strong impression on the recipient.

    Proofreading means reading your letter aloud to yourself. Reading out loud will help you hear the tone and rhythm of your letter. It will also help you catch errors you wouldn’t have when you read only by sight.

    The Email Address Line

    Providing a personal email address as part of your contact information is perfectly acceptable. However, you need to make sure it is professional-sounding. Try to avoid nicknames or slang terms. Steer towards using an easy-to-read version of your real name, so recipients can easily recognize you in further interactions.

    The Stamp

    This is a tiny detail, but the stamp on the top right corner of the letter adds to the overall aesthetic of your letter upon arrival. The USPS offers many choices when it comes to stamps, but try to stick to something standard when you mail it. Avoid “happy birthday” and things to that effect, as that sentiment does not match your intent.

    The Penmanship

    If you are addressing your letter by hand, make sure your penmanship is neat and legible. This is another small detail, but it speaks to the impression of your work, itself. If you are not confident in your handwriting, then you can always type your letter address.

    The Takeaway

    The art of professional letter writing is still very much alive. When it comes to formal letter writing, remember these three things:

    1. The contents of your letter should be clear, concise, and easy to read
    2. Your letter’s envelope should provide sender information, recipient information, and proper postage
    3. It’s the little things that will set your letter apart from the rest.

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    Entrepreneur Staff

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