April 15th will be here before you know it, and clients usually ask us about some last-minute tax tips to minimize their tax bills. As a result, here are a few of our favorite strategies to save you time, money, and mental stress.

1. Get Some Credit for Retirement
Most young professionals are aware of tax benefits for investing money in a 401k account—your dollars are invested pre-tax, and income taxes are deferred until the money is withdrawn at retirement. However, another tax credit exists which particularly helps younger workers with low to moderate incomes save more for retirement. It's called the Retirement Savings Contribution Credit and can be worth up to $1,000 depending upon your adjusted gross income (AGI). And don't forget, you can continue contributing to your 2007 Roth Individual Retirement Account (IRA) through April 15, 2008.

2. Make it Virtual
Consider filing your taxes online this year. The Internal Revenue Service (IRS) is extending its free E-file system of federal tax returns for individuals with an AGI less than $54,000. Not only will you save money on filing fees, but your tax refund generally arrives faster and the likelihood of filing errors is reduced.

3. Give Thanks, Get a Deduction
Even though you must itemize your taxes to get this one, the tax benefit could be worth it. Contributions of cash and property are deductible if they are made to "qualified organizations" as defined by the IRS. If you contributed more than $250 to any single organization, be sure to ask for a receipt, and when valuing property, you can deduct the "fair market value" of the item at the time of its donation.

4. Recognize Your Small Business
You may not realize it, but you might be a business owner. In 2007, did you receive side income as a computer repair expert, freelance writer, web designer or independent consultant? If so, be sure to deduct all expenses directly related to your operations, marketing, professional services fees…even pens and pencils. These are all qualified business expenses and should be written off.

5. Plan the Entire Year
As financial advisors, our clients regularly bring in piles of tax documents in January and February but rarely pay any attention to tax considerations in August in September. Remember, tax planning is a year-round endeavor and requires your strategic attention during all twelve months of the year. Keep proper ongoing tax records, maintain a special location for stashing your receipts, and throughout the entire year, be sure to clearly document all transactions that will have a tax effect.

Did you know that insurance companies typically consider your credit history--whether positive or negative--when you apply for automobile or homeowners insurance? Insurers may use your credit information not only when deciding whether to approve your insurance application but also in determining the premium you'll pay.

Why Does Your Credit History Matter When You Apply for Insurance?
Studies by independent researchers and industry consultants have convinced insurance companies that a strong correlation exists between your credit history and the likelihood that you'll file an insurance claim. Using information contained in your credit record, an insurer calculates your "insurance score". If this score is low, the insurer may consider you to be less of a risk than if your insurance score is high.

How is Your Insurance Score Determined?
Although methods vary, an insurance company typically calculates your insurance score by applying a mathematical formula to statistically significant factors on your credit record. These factors may include the amount of debt you have outstanding, whether you have serious blemishes on your credit report (such as past-due amounts, collection accounts, and bankruptcies), and the number of times you've applied for credit within the past year.

Will a Low Insurance Score Prevent You From Buying Insurance?
Not necessarily. Because your insurance score is generally just one of the factors insurers use to decide whether or not to offer you coverage, an insurer may decide to approve your application even if you have poor credit. However, a low insurance score often places you in a higher risk category, and you may end up paying a higher premium for insurance.

Keep in mind, too, that every insurance company has its own underwriting standards. Even if one insurance company rejects your application due to poor credit, another insurance company may issue you a policy.

What if You Have Little or No Credit History?
For today's young professionals, having little or no credit history automatically places you into the "average" risk category. Other states prohibit insurers from even using credit as an underwriting factor if you have little or no credit history.

Can Your Insurer Cancel or Refuse to Renew You Based on Credit?
In many states, an insurer can cancel or refuse to renew your insurance policy if your credit has deteriorated. However, some states have passed legislation prohibiting insurers from using your credit report as the sole basis for making decisions about cancellations and renewals.

Is There Anything You Should Do?
Insurers must tell you if they look at your credit history when they consider your insurance application or when they determine the rate you'll pay for insurance. To find out if your credit history has affected your ability to get insurance or your insurance premium, contact an insurance company representative. Here are some other things you can do:

• Since laws vary from state to state, contact your state's insurance department if you have questions about the regulation of credit-based insurance scoring in your state.
  
  
• Know your rights. Under the Fair Credit Reporting Act, insurers must inform you that they've turned down your insurance application based on information in your credit report, and notify you that you have a right to request a free copy of that credit report.
  
  
• Shop around for insurance coverage. Different insurers have different policies regarding the use of insurance scores. The cost of insurance premiums may also vary, so comparison shop for the best deal.
  
  
• Check your credit report once a year. Order copies from the three major credit bureaus and make sure they contain correct information. Dispute any errors with your creditors and with the credit bureaus.
  
  
• Ask your insurance company to rerun your credit score if you feel that doing so would improve your insurance rating (many states allow consumers to request this once per year). But check insurance regulations in your state first--some states allow insurers to take adverse action against current customers based on downturns in their credit scores.

For millions of Americans, group health insurance offers affordable quality health care. To get the most from this valuable benefit, you need to understand what you have, how lifestyle changes can affect your coverage, and what to do if your coverage doesn't meet your expectations.

Understand What You Have
Get your plan's summary plan description (SPD) from your plan administrator. It gives a detailed summary of your plan--how it works, the benefits it provides, and how those benefits may be obtained or lost. Look for information on:

• Physician choice
• Accessibility of doctor's offices
• Deductibles
• Co-payment requirements
• Maximum out-of-pocket expenses
• Lifetime benefits
• Incentives for using the plan's network of providers
• Exclusions
• Waiting periods
• Prescription benefits
• Maternity benefits
• Dental and vision benefits
• Preventive care programs
• Member rights, including the right to appeal
• Quality reports and ratings from member-satisfaction surveys

Ask Questions in the Beginning
Don't wait for a serious illness or injury to learn what to expect from your group health plan. Now is the time to find out. Take the time to learn the answers to the following questions:

• Do you need prior approval to visit a specialist?
• How does the plan define emergency care?
• How do you get care if you are outside the area?
• What hospitals are in the plan's network?
• Is there a time limit on hospital stays?
• Who decides when you will be discharged?
• Will the plan pay for follow-up care, such as nursing home care or home health care?
• If you have a serious medical problem, will the plan provide someone to oversee care and make sure your needs are met?
• Are second opinions required for surgery? If so, who pays?
• How do you get ambulance service?
• Is there an advice hot line to help decide how to handle a problem that may not require a doctor's visit?

Be proactive
Don't be afraid to ask your doctor questions, and insist on clear answers. If you're concerned that you won't be able to understand or follow a doctor's instructions, bring someone with you or take notes. Take responsibility for your own care. Consider:

• Lifestyle choices and changes you can make to lower your risks or prevent illness (e.g., losing weight)
• The risks and benefits of any tests or treatments
• How you would go about obtaining care after hours

What Happens When You Lose Coverage?
The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) allows you to purchase health coverage under your employer's plan if you lose your job, change jobs, get divorced, or upon the occurrence of other qualifying events. Coverage that you obtain under COBRA can last from 18 to 36 months, depending on your situation.

COBRA applies to most employers with 20 or more workers and requires your plan to notify you of your rights. Most plans require you to make an election for coverage under COBRA within 60 days of the plan notifying you. Follow up with your plan administrator if you don't get a notice, and make sure that you reply within the allowed time.

When you buy the insurance under COBRA, you must pay the full premium amount, plus administrative costs of up to 2 percent. If you were accustomed to sharing health insurance premiums with your employer, you may be in for a shocking expense.

However, if you or any family member have pre-existing conditions, you may not have any other choice, at least until you get into a new group plan. You must remember to pay your premiums on time, or you will lose your coverage. The medical coverage under COBRA must be identical to the coverage you had before. However, employers may drop benefits such as dental care and vision care.

As Your Lifestyle Changes, So Will your Insurance Needs
Review your group health insurance benefits and options when you:

• Get married
• Get divorced
• Have a new child
• Have a child who is no longer dependent on you
• Suffer the loss of your spouse

The information provided by your employer should tell you how you can change benefits or switch plans if needed.

What Can You do if a Claim is Denied?
Your plan administrator has a limited time after you file a claim to tell you if you will receive the benefits. If that is not enough time, you must be notified within a specified time why more time is needed and the date you can expect a decision. Many states regulate claims processing and denial notification to members, so be sure to find out your insurance company's time frames for processing claims, issuing denials, and resolving appeals.

If your claim is denied, you must be notified in writing and given specific reasons why it was denied. If you have no answer in the allotted time, the claim is considered a denial, and you can use the plan's rules for appealing the denial. If you disagree with any claims decision or pre-authorization denial, you can request an appeal.

It's important to understand how your plan handles complaints. Check your health benefits package and your SPD to determine who is responsible for handling problems with benefit claims. Keep records and copies of all correspondence.

What if You are Unhappy with Your Health Care?
If you are in a managed care plan, you can change your primary care doctor if you are unhappy with the relationship. If the plan itself does not satisfy you, you may be able to switch plans. If you are dissatisfied with the managed care plan but prefer to remain in the plan because you want to remain with your physician, file a complaint. You have the right to a fair and timely process for resolving your complaint. If you are still unhappy, speak to your employee benefits manager to help you match your needs with the available plans.

Stay Informed

• Ask for a copy of the member handbook, sometimes called the evidence of insurance or evidence of coverage, to review coverage policies.
• Check to see if your plan has a right-to-privacy policy. Make sure that the plan requires your consent to release any medical information about you to outside agencies not involved with your direct health care or the administration of your health policy, especially your employer.
• Does your plan have a magazine or newsletter? Such a publication can give information on how the plan works and on rules that affect your care.
• Ask how you will be notified of changes in the plan's medical providers or covered services and prescriptions.
• Talk to your plan administrator to learn more about your policy.

At the end of the day, it comes down to one simple fact...The more information you have, the easier it will be for you to make quality health-care decisions.

Ask your five-year old where money comes from, and the answer you'll probably get is "From a machine!" Even though children don't always understand where money really comes from, they realize at a young age that they can use it to buy the things they want. So as soon as your child becomes interested in money, start teaching him or her how to handle it wisely. As we stress with our five Keys to SHINE™, it is critical to give your child a solid foundation for a lifetime of informed financial decisions.

Lesson 1: Learn to Handle an Allowance
An allowance is often a child's first brush with financial independence. With allowance money in hand, your child can begin saving and budgeting for the things he or she wants.

It's up to you to decide how much to give your child based on your values and family budget, but a rule of thumb used by many parents is to give a child 50 cents or 1 dollar for every year of age. To come up with the right amount, you might also want to consider what your child will need to pay for out of his or her allowance, and how much of it will go into savings.

Some parents ask their child to earn an allowance by doing chores around the house, while others give their child an allowance with no strings attached. If you're not sure which approach is better, you might want to compromise. Pay your child a small allowance, and then give him or her the chance to earn extra money by doing chores that fall outside of his or her normal household responsibilities.

If you decide to give your child an allowance, here are some things to keep in mind:

• Set some parameters. Sit down and talk to your child about the types of purchases you expect him or her to make, and how much of the allowance should go towards savings.
• tick to a regular schedule. Give your child the same amount of money on the same day each week.
• Consider giving an allowance "raise" to reward your child for handling his or her allowance well.
  

Lesson 2: Open a Bank Account
Taking your child to the bank to open an account is a simple way to introduce the concept of saving money. Your child will learn how savings accounts work, and will enjoy trips to the bank to make deposits.

Many banks have programs that provide activities and incentives designed to help children learn financial basics. Here are some other ways you can help your child develop good savings habits:

• Help your child understand how interest compounds by showing him or her how much "free money" has been earned on deposits.
• Offer to match whatever your child saves towards a long-term goal.
• Let your child take a few dollars out of the account occasionally. Young children who see money going into the account but never coming out may quickly lose interest in saving.
  

Lesson 3: Set and Save for Financial Goals
When your children get money from relatives, you want them to save it for college, but they'd rather spend it now. Let's face it: children don't always see the value of putting money away for the future. So how can you get your child excited about setting and saving for financial goals? Here are a few ideas:

• Let your child set his or her own goals (within reason). This will give your child some incentive to save.
• Encourage your child to divide his or her money up. For instance, your child might want to save some of it towards a long-term goal, share some of it with a charity, and spend some of it right away.
• Write down each goal, and the amount that must be saved each day, week, or month to reach it. This will help your child learn the difference between short-term and long-term goals.
• Tape a picture of an item your child wants to a goal chart, bank, or jar. This helps a young child make the connection between setting a goal and saving for it.

Finally, don't expect a young child to set long-term goals. Young children may lose interest in goals that take longer than a week or two to reach. And if your child fails to reach a goal, chalk it up to experience. Over time, your child will learn to become a more disciplined saver.

Lesson 4: Become a Smart Consumer
Commercials. Peer pressure. The mall. Children are constantly tempted to spend money but aren't born with the ability to spend it wisely. Your child needs guidance from you to make good buying decisions. Here are a few things you can do to help your child become a smart consumer:

• Set aside one day a month to take your child shopping. This will encourage your child to save up for something he or she really wants rather than buying something on impulse.
• Just say no. You can teach your child to think carefully about purchases by explaining that you will not buy him or her something every time you go shopping. Instead, suggest that your child try items out in the store, then put them on a birthday or holiday wish list.
• Show your child how to compare items based on price and quality. For instance, when you go grocery shopping, teach him or her to find the prices on the items or on the shelves, and explain why you're choosing to buy one brand rather than another.
• Let your child make mistakes. If the toy your child insists on buying breaks, or turns out to be less fun than it looked on the commercials, eventually your child will learn to make good choices even when you're not there to give advice.

If you have a 401(k) plan at work and need some cash, you might be tempted to borrow or withdraw money from it. But keep in mind that the purpose of a 401(k) is to save for retirement. Take money out of it now, and you'll risk reducing the amount of money available during your Golden Years.

Additionally, you will most likely face stiff tax consequences and penalties for withdrawing money before age 59½. Still, if you're facing a financial emergency--for instance, your child's college tuition is almost due and your 401(k) is your only source of available funds--borrowing or withdrawing money from a 401(k) may be your only viable option.

Plan Loans
To find out if you're allowed to borrow from your 401(k) plan and under what circumstances, check with your plan's administrator or read your summary plan description. Many employers allow 401(k) loans only in cases of financial hardship, but you may be able to borrow money to buy a car, to improve your home, or to use for other purposes. Generally, obtaining a 401(k) loan is easy--there's little paperwork, and there's no credit check. The fees are limited too--you may be charged a small processing fee, but that's generally it.

How Much Can You Borrow?
No matter how much you have in your 401(k) plan, you probably won't be able to borrow the entire sum. Generally, you can borrow the lesser of $50,000 or one-half of your vested plan benefits. (An exception applies if your account value is less than $20,000; in this case, you may be able to borrow up to $10,000, even if this is your entire balance.)

What are the Requirements for Repaying the Loan?
Typically, you have to repay money you've borrowed from your 401(k) within five years by making regular payments of principal and interest at least quarterly, often through payroll deduction. However, if you use the funds to purchase a primary residence, you may have a much longer period of time to repay the loan.

Make sure you follow to the letter the repayment requirements for your loan. If you don't repay the loan as required, the money you borrowed will be considered a taxable distribution. If you're under age 59½, you'll owe a 10 percent federal penalty tax, as well as regular income tax on the outstanding loan balance.

Disadvantages of borrowing money from your 401(k)
If you don't repay your plan loan when required, it will generally be treated as a taxable distribution.

• You lose the pre-tax advantage of the 401(k) account
• Loan repayments are made with after-tax dollars
• If you leave your employer's service (whether voluntarily or not) and still have an outstanding balance on a plan loan, you'll usually be required to repay the loan in full within 60 days. Otherwise, the outstanding balance will be treated as a taxable distribution, and you'll owe a 10 percent penalty tax in addition to regular income taxes if you're under age 59½.
• Loan interest is generally not tax deductible (unless the loan is secured by your principal residence).
• You'll lose out on any tax-deferred interest that may have accrued on the borrowed funds had they remained in your 401(k).

Hardship Withdrawals
Your 401(k) plan may have a provision that allows you to withdraw money from the plan while you're still employed if you can demonstrate "heavy and immediate" financial need and you have no other resources you can use to meet that need (e.g., you can't borrow from a commercial lender or from a retirement account and you have no other available savings). It's up to your employer to determine which financial needs qualify. Many employers allow hardship withdrawals only for the following reasons:

• To pay the medical expenses of you, your spouse, your children, your other dependents, or your plan beneficiary
• To pay the burial or funeral expenses of your parent, your spouse, your children, your other dependents, or your plan beneficiary
• To pay a maximum of 12 months worth of tuition and related educational expenses for post-secondary education for you, your spouse, your children, your other dependents, or your plan beneficiary
• To pay costs related to the purchase of your principal residence
• To make payments to prevent eviction from or foreclosure on your principal residence
• To pay expenses for the repair of damage to your principal residence after certain casualty losses

Note: You may also be allowed to withdraw funds to pay income tax and/or penalties on the hardship withdrawal itself, if these are due.

Your employer will generally require that you submit your request for a hardship withdrawal in writing.

How Much Can You Withdraw?
Generally, you can't withdraw more than the total amount you've contributed to the plan, minus the amount of any previous hardship withdrawals you've made. In some cases, though, you may be able to withdraw the earnings on contributions you've made. Check with your plan administrator for more information on the rules that apply to withdrawals from your 401(k) plan.

What are the Advantages of Withdrawing Money from Your 401(k) in Cases of Hardship?
The option to take a hardship withdrawal can come in very handy if you really need money and you have no other assets to draw on, and your plan does not allow loans (or if you can't afford to make loan payments).
What are the disadvantages of withdrawing money from your 401(k) in cases of hardship?

• Taking a hardship withdrawal will reduce the size of your retirement nest egg, and the funds you withdraw will no longer grow tax deferred.
• Hardship withdrawals are generally subject to federal (and possibly state) income tax. A 10 percent federal penalty tax may also apply if you're under age 59½.
• You may not be able to contribute to your 401(k) plan for six months following a hardship distribution.

What Else do I Need to Know?
If your employer makes contributions to your 401(k) plan (for example, matching contributions) you may be able to withdraw those dollars once you become vested (that is, once you own your employer's contributions). Check with your plan administrator for your plan's withdrawal rules.

• If you were impacted by Hurricanes Katrina, Rita, or Wilma, or if you are a reservist called to active duty after September 11, 2001 and before December 31, 2007, special rules may apply to you.

With all the media buzz about private equity, clients ask us more than ever about lesser known, riskier investment options. At some point, "hedge funds" usually enter the discussion. In response, here's our quick analysis of this emerging investment option.

What is a Hedge Fund?
Hedge funds are private investment vehicles that manage money for institutions and wealthy individuals. They generally are organized as limited partnerships, with the fund managers as general partners and the investors as limited partners. The general partner may receive a percentage of the assets, additional fees based on performance, or both.

Hedge funds originally derived their name from their ability to hedge against a market downturn by selling short. Though they may invest in stocks and bonds, hedge funds are typically considered an alternative asset class because of their ability to implement complex investing strategies that involve many other asset classes and investment options.

How do Hedge Funds Differ From Mutual Funds?
Quite simply, hedge funds are not available to the public.

Unlike mutual funds, hedge funds traditionally have not been offered for sale to the public at large; they are available only to a limited number of wealthy investors. The demand to participate in the most successful hedge funds can be so high that many funds are able to pick and choose who is permitted to invest.

Middle-Income Investors Need Not Apply
Investors normally must have a significant amount of money available to invest or have a high level of financial sophistication. For example, to invest in a hedge fund, an individual must have at least $1 million or an ongoing income of at least $200,000 in each of the two previous years ($300,000 if a spouse's income is included). Depending on how the hedge fund is structured and the demand to participate, the minimum requirement can be much higher. Also, hedge funds usually require an investor to invest in the fund for a period of one year or longer and may limit transferability, making them a less liquid investment than mutual funds.

By contrast, mutual fund minimums are typically $1,000 or less, and investors may typically sell at any time (though some funds impose a fee for short holding periods).

Hedge Funds are not Required to Register with the SEC
Because they are not offered publicly and have limits on who may invest in them, most hedge funds are exempt from much of the regulation to which mutual funds are subject, though some hedge funds have registered with the SEC. Thought there have been attempts in recent years to increase supervision of hedge funds, their reporting requirements are minimal, though they are still subject to general prohibitions against securities fraud.

As a result, investors in hedge funds do not receive some of the protections that investors in mutual funds enjoy. In particular, hedge funds:

• Are not required to maintain a certain degree of liquidity
• Are not limited in how much they can invest in a single investment
• Are not limited in their use of leverage
• May take great latitude in determining the value of the fund's investments, which does not have to be verified by independent sources
• Are not required to disclose information regarding the fund's management, fees and expenses, holdings, or performance

As a result of this lax environment, hedge funds have a great deal more latitude in how they invest funds. They use a variety of investment types and strategies to try to minimize risk and maximize return including:

• Hedging: buying an investment that has the potential to offset losses in other investments
• Selling short: borrowing shares and selling them immediately, hoping that the price will drop and the shares can be replaced at a lower cost, thereby generating a profit.
• Arbitrage: simultaneously buying and selling the same security to take advantage of different prices
• Leverage: investing with borrowed money to try to maximize profitability
• Concentrating positions: making big investments in relatively few securities that are expected to be highly profitable
• Investing in distressed or bankrupt companies
• Investing in derivatives, such as options or futures contracts
• Investing in privately issued securities

How a given fund employs any or all of these techniques constitutes its unique investing strategy. Many of these techniques involve unique risks and pitfalls, and there have been some spectacular crises with hedge funds--notably Long Term Capital Management in 1998 and Amaranth Advisors in 2006--that used them.

Are Hedge Funds a Good Investment Option?
Since we deal with middle-market consumers, Lightship Mutual does not recommend hedge funds to our clients as an alternative asset class. Actually, even if we did work with a high-net worth individual, we would likely still not recommend investing in this ultra-risky asset class. We would likely construct an aggressive internationally-focused portfolio of low-cost mutual funds to accomplish a similar risk/return model.

The Downside of Hedge Funds
You could easily lose your entire investment.

As mentioned previously, hedge funds are able to use higher-risk investment strategies. Because of these risks and others, investors may lose their entire investment.

Second, because of the lack of regulation, a hedge fund's investing strategy and performance can be difficult to research, verify and compare to other investments. Hedge funds are notoriously private about how they achieve their results, and may not disclose that information even to their own investors.

You may be able to check into the background of a hedge fund's manager--for example, whether the manager has a disciplinary history in the securities industry-by going to the SEC's web site and looking up the firm's Form ADV. Depending on how the hedge fund is registered, you may be able to get information from the National Futures Association's web site, your state securities regulator, or the Financial Industry Regulatory Authority (FINRA).

Third, hedge funds are typically more costly than mutual funds. Management fees for hedge funds are typically higher than actively managed mutual funds or separately managed accounts. Also, unlike mutual fund or other money managers, hedge fund managers generally receive a share of the fund's gains. These added costs are passed on to the fund's individual shareholders in the form of higher management and administrative fees when compared to mutual funds or separately managed accounts.

Fourth, hedge fund investments may lack liquidity. In most cases, hedge fund shares are not traded on any public exchange, so you may not be able to redeem your investment when you want to or at the price you paid.

Alternative Ways to Take Advantage of Hedge Funds
If you still have a burning desire to go forward with hedge fund investing--and have tens of thousands of dollars to potentially lose--then you may be able to invest in a fund that invests not in securities but in multiple hedge funds. In most cases, the minimum investment is lower than that of a hedge fund--as low as $25,000--though that is still higher than the minimum of many mutual funds.

By investing in a variety of investing styles, managers and strategies, a fund of funds may provide greater diversification than a single hedge fund, though diversification alone cannot guarantee a profit or ensure against a loss.

As with hedge funds, a fund of funds may or may not be registered with the SEC; make sure you find out its status. Even if it is registered, remember that any SEC protections apply only to the fund of funds, not to the underlying hedge funds in which it invests.

Even if a fund of hedge funds is registered with the SEC, there may not be a secondary market and you could have difficulty selling your shares readily. Also, a fund of hedge funds is not required to redeem your shares at any time, as an open-ended mutual fund is.

Remember that you will be paying a double layer of fees: one set of fees to the fund of funds and, indirectly, another set of fees charged by each of the underlying hedge funds.

Good luck!

You've grown tired of commuting to a job where you sit in a cubicle and do someone else's bidding. You fiercely believe you've got a better service, a better mousetrap. You have the knack for being in the right place at the right time, and so you're thinking of self-employment. But how do you determine if this is a pipe dream or an idea worth pursuing?

Can You Handle It?
Whether you're running your own business or working as an independent contractor, you'll soon realize that working for yourself isn't just another job, it's a way of life.

Are you someone who likes a nine-to-five routine and collecting a regular paycheck? When you're self-employed, you must be willing to make sacrifices for the sake of the job. You're going to work long hours, which means that in the beginning you won't have as much time as you used to for leisure activities. And if the cash flow slows to a trickle, you're going to be the last one to get paid.

Can you get along well with all types of people? Entrepreneurship is all about managing relationships--with your clients, customers, suppliers, perhaps even with employees, certainly with your family, and probably with your banker, lawyer, and accountant, too. If you're the type who wants to be alone to do the few things that you're good at, then you should do that--for someone else.

The word entrepreneur is from the French entreprendre, which literally means "to undertake". And you will find yourself undertaking a great deal more responsibility when you are the lifeline of the organization.

Are you a disciplined self-starter? There may be days when you'll have to make yourself sit at your desk instead of going for a long lunch, or (especially if you have a home-based business) place those business calls instead of reading the newspaper.

Finally, do you enjoy wearing many hats? Depending on your line of work, you may be involved in handling marketing and sales duties, financial planning and accounting responsibilities, marketing, administrative and personnel management chores--or all of the above.

Your Dream Come True
Think about how great it will feel to get paid to do what you'd love to do anyway. If you're working for yourself, chances are you'll be doing work that you enjoy. You'll get to pick who you'll work for or with, and in most cases you'll work with your customers or clients directly--no go-betweens muddying the waters. As a result, you may have days when it hardly feels as if you're working at all. Such harmony between your working life and the rest of your life is what attracted you to self-employment in the first place.

Being your own boss means that you'll be in control of all of the decisions affecting your working life. You'll decide on your business plan, your quality assurance procedures, your pricing and marketing strategies--everything. You'll have job security; you can't be fired for doing things your way. As you perform a variety of tasks related to your work, you'll learn new skills and broaden your abilities.

You'll even have the flexibility to decide your own hours of operation, working conditions, and business location. If you're working out of your home, your start-up costs may be reduced. You'll also experience lower operating costs; after all, you'll be paying for the rent and utilities anyway. If the location of your work isn't important (perhaps you're a freelance writer or a consultant), you can live wherever you want. At any rate, if you work at home, you'll greatly reduce your daily commuting time and expense.

If all goes well and you're making money, chances are you can make more than you did working for someone else. And since you're working for yourself, you may not have to share the proceeds with anyone else. The fruits of your labor will be all yours, because you own the vineyard.

On the Other Hand . . .
When you're self-employed, particularly if you're starting your own business, you may have to take on a substantial financial risk. If you need to raise additional money to get started, you may need a cosigner or collateral (such as your home) for a loan. Depending on how much or little work you can line up, you may find that your cash flow varies from a flood to a trickle. You'll need a cash backup so you can pay your bills while you're waiting for business to come in or waiting to be paid for completed work. Since you'll have to pay your own creditors first, this means that sometimes you may eat cereal instead of steak.

Remember that you're not making any money if you're not working. You don't have any employer benefit package, which means that it's going to be hard for you to go on vacation, take a day off, or even stay home sick without losing income. It also means that you'll have to provide your own health insurance and retirement plan. Remember, too, that you can choose your clients or customers, but you can't control their expectations or actions. If you don't come through for them, or if you do something that offends them, you might not get paid for your work.

Because you're working for yourself, you're going to have to take care of everything yourself, from calculating your taxes to watering the office plants. You'll probably need some new skills, such as bookkeeping and filing quarterly taxes. You can learn to do these things yourself--many software programs are designed just for this market--or you can hire others (e.g., an accountant) to take care of them for you. If you're not careful, however, you may find that you're spending more time on the business of being in business for yourself than you are on the work that attracted you to self-employment in the first place.

The Bottom Line
If you can work long and hard, tolerate risk and stress, cope well with potential disaster and failure, and work well alone and with others, then perhaps self-employment is right for you. If not, then perhaps you should hold on to your gig in the cubicle.

For many parents, returning to work after a child birth is stressful. Ultimately when you begin looking for child care, concerns revolve around how to locate affordable, quality care. You question whether you are making the right choice, whether you can actually afford to stay at home with your child, and are taking a leap of faith in placing your child's welfare in the hands of strangers.

How Much Does Child Care Cost?
As we talk to our clients, we hear a wide range of prices. But one thing remains constant: The cost of child care will depend upon where you live, how old your children are, how many children you have in day care, and what type of child care you choose.

You'll Likely Pay Different Amounts for Children of Different Ages
In general, the younger the child, the more you'll pay for child care. If you've been looking for someone to take care of your baby, you've probably already experienced sticker shock. The law in many states mandates that child-care centers have one adult for every four infants. This means that the centers must hire more people (or accept fewer infants for care) and this increases the price of care. In addition, caring for infants is labor-intensive, so if you hire a nanny, you may need to pay him or her more to care for an infant.

You'll Pay more for Two Children, but Not Twice as Much
You'll pay more for child care for two children, but not usually twice as much. Many child-care centers (and family day-care providers) will give you a sibling discount for the second child if you enroll both of them. If you hire a nanny, he or she may charge you the same amount for one child as for two. In fact, some families opt to hire a nanny after their second or third child is born because it's suddenly cost-effective to do so; other families (such as neighbors) share a nanny and split the cost.

You'll Pay More for Certain Types of Care
In general, child care provided by a nanny is more expensive than child care provided by a day-care center. Child care provided by a day-care center is usually more expensive than family day care. However, you may find that this really isn't so in your area, because costs vary widely from region to region. In addition, some day-care costs may be subsidized by the government or by your employer, and some providers simply charge less than others. There's not necessarily a correlation between price and quality, either. For instance, a day-care center may charge more because it has a lot more overhead than a family day-care provider, but the family day-care provider may provide care that is just as good as (and sometimes better than) the care at the child-care center.

The Total Cost of Child Care
Many parents who work and pay for child care wonder if it's worth it to work at all, because child-care costs eat up a big portion of their paycheck (particularly if they have more than one child). This is particularly true in families where the second wage earner's salary is relatively low. However, many parents have no choice. Single parents, for instance, usually must work, and both parents in a two-parent family often have to work to make ends meet. If you do have a choice, though, you may want to consider what child care actually costs you. For instance, you must pay:

• The monthly check to your provider
• The cost in transportation to and from the provider
• Incidental costs of using a child-care center (such as food and sick child-care costs)
• If you've hired a nanny, the legal costs involved and the extra tax obligations; see the section on in-home care for these costs
• The costs of going to work: transportation, clothes, incidentals
• If you've hired a nanny, the costs of their upkeep in your home

Example(s): Teresa went back to work after the birth of her twins. Her monthly paycheck was $2,250, and she paid her child-care provider $900 per month for day care for both children. In addition, she had to buy a used car to get back and forth from work every day and paid $200 a month for her car payment, gas, and insurance. She also spent $75 a month on clothing and another $75 a month on lunches and coffee. So, after considering the total cost of working, Teresa was keeping only $1,000, or 44 percent of her take-home pay.

The Benefits of Working
For you as the parent, the satisfaction and commitment you feel to your job may make working worth the cost, even if you barely make a profit. If you've spent years preparing to be a research physicist, you may not want to give up your lab and your tenure to care for your child on a full-time basis. You may value your career advancement at the law firm and expect that dropping out for a three- or four-year period will hamper your chances to make partner. Most important, your job may be so exciting and stimulating that you feel dissatisfied when you're not working.

Financial Aid from the Government and Your Employer
Are you eligible for government-subsidized child care? The 1997 Welfare Reform Act shifted most of the distribution of federal child-care dollars to state agencies, so you'll have to check with your own state to see if you can qualify.

If you meet eligibility requirements, another way the government helps you defray the cost of child care is through the child-and dependent-care tax credit, which reduces your total tax liability by allowing you to take a credit for part of your child-care expenses. Your employer may help you out with child care, too, either by sponsoring a child-care program or by allowing you to contribute pretax dollars to a dependent-care account to fund some of your child-care expenses.

Tip: If you exclude contributions to a dependent-care account from your income, then you cannot include the excluded benefits in your expenses for purposes of calculating the credit. In addition, the excluded benefits may also reduce or eliminate the amount of credit for which you qualify.

Alternative Work Schedules May Reduce Child-Care Costs
You might be able to reduce the size of the check that you write to your child-care provider by changing your work schedule. If you can devise a way to work different hours, you may be able to share child care with another adult so your dollar outlay is lower. Here are scheduling options you can pass by the boss:
Parental and maternity leave

Both Dad and Mom may be eligible for family leave after their child is born. This means that you get some time off to recover from the birth and to care for your new baby. Some companies give as much as three months of this family leave at full pay, and then another three months at half pay, although this is relatively rare. If your company doesn't offer paid family leave, you may be able to take up to 12 weeks of unpaid leave after your child is born (or after you adopt a child) under the Family and Medical Leave Act of 1993. Check with your employer.

Flex Time
Flex time lets you change your arrival and departure times at the office. As long as you're on the site during the core hours, your employer may let you come into work earlier or later than would normally be required, as long as the total number of hours you spend at work remains the same. Flex-time arrangements are becoming increasingly common in areas where traffic tie-ups are common and in industries where attracting and retaining good employees is a top priority.
Flex place

Flex place is telecommuting, or doing your job from home using your computer, your phone, and your fax machine. Everyone flirts with telecommuting whenever a blizzard rolls in, but you can use the system to stay home with your children on a more regular basis. Of course, if your children want to sit on your lap while you're typing, you may not work very efficiently. But you may be able to minimize distractions by working during their nap time, after they're in bed, or before they get up. If all else fails, you may be able to hire the teenager across the street to entertain them after school, or you may be able to put them in part-time day care.

Job Sharing
If you job share, you and at least one other person share the duties of one full-time job. You're basically working part-time, but job sharing may still give you insurance benefits. You'll also be able to keep up with the developments in your field and enjoy the stimulation of the workplace without going in to the office every day. Job sharing requires coordination between you and your partner, and the company has to approve of the idea. But it will also make it much easier for you if your child gets the flu.
Compressed work week

Some parents like to compress their work week by working 10 hours a day for four days and having the fifth day off. You're still putting in your 40-hour week and earning 40 hours of pay, but you have one day off. If you can work it out with your employer and your child-care provider, you'll save on child care and be able to handle your personal business as well. This kind of schedule is especially helpful if you commute a long distance to work and that time is built into your child-care costs.

Part-Time Employment
While your child is in diapers, you may decide to opt for part-time employment. You'll make a part-time check and hand much of it to your provider, but you'll stay in the game and keep the stimulation of the workplace.
Voluntary reduced work time

If child care is too expensive or you're eager to stay home with your child, ask your boss about voluntarily reducing your work time. If you work more than 50 percent of your job for at least a year, you may be able to keep your insurance benefits and seniority and still stay home with your child part-time. These arrangements may not work out on a permanent basis, especially if your company really must have an employee around full-time to get the job done, but they allow you to make an easier transition back to work after your child is born.

Other Ways to Reduce Child-Care Costs
Probably the easiest way to lower your child-care costs is to find a less-expensive provider. If your child is already spending several hours a day in a preschool setting, you may be able to combine this care with a home provider and not use a nanny. If the private day-care center is too expensive, check on family day care.

Is There a Relative or Close Friend Who Will Watch Your Child?
If it takes a village to raise a child, where are the villagers who are eager to take care of your child so that you can go to the office? Sometimes you'll find a grandmother, aunt, or friend who is thrilled to take care of your baby. This usually is the cheapest child care around, but it has other, more implicit costs. First of all, Grandma has already raised one family. Consider the possibility that she may be more eager to work in her garden than watch your child all day. And what if your child-rearing philosophies don't match? How will you negotiate your differences?
Share care with a neighbor or friend

You and your close friend or neighbor may be able to hire one child-care provider and share him or her. This means that your neighbor's child is always in "child care" at your house or your child goes to your neighbor's house for child care. The caregiver stays the same, but the children either move between the two houses or use one. This arrangement can ensure that both your and your neighbor's child will get lots of attention, but the home base of your "center" may also get lots of wear and tear. You also need to be sure that you agree on your child-raising philosophy.

If Your Child is in a Child-Care Center, See if You Can Trade Time for Dollars
You may be able to work early or late hours in the center to save some money on your child's tuition. Especially in community centers, these arrangements are possible. The center needs parental help to meet its ratios and keep its programs running, and you get to save a few dollars a week in child-care costs by giving them time instead of cash.

Try a Swing Shift with Another Adult
If you and your child's other parent work different hours, you may be able to adjust your schedules so your child never goes to day care. However, using a swing shift means you and your partner will rarely see each other, since you're always working and sleeping different shifts. Nevertheless, this sometimes works well when both parents have jobs with flexible schedules.

For years, Congress and the IRS perceived that taxpayers were overstating the value of donations for tax deduction purposes. As a result, the rules regarding valuations of charitable contributions have recently become more stringent, and they include harsher penalties for excessive valuations.

Although the new valuation rules are currently focused on charitable contributions (including conservation easements), it is widely believed that Congress and the IRS will expand the new rules to all tax valuations in general. Cautious taxpayers may want to apply the new rules to any tax-related transactions involving appraisals, such as valuations required for non-charitable gifts or a buy-sell agreement.

New Rules
The new rules generally require that you obtain a "qualified appraisal" from a "qualified appraiser" for donations of property worth over $5,000 (other than cash and publicly traded securities), and you must attach an appraisal summary (IRS Form 8283) to your tax return. These rules apply to valuations for income, gift, and estate tax purposes.

What is a Qualified Appraisal?

Generally, a qualified appraisal is:

• Made no earlier than 60 days before the donation is made, and no later than the due date of your tax return (including extensions), and
• Signed and dated by a "qualified appraiser"

Who is a Qualified Appraiser?

Generally, a qualified appraiser is an individual who:

• Has earned an appraisal designation from a recognized professional appraiser organization, or has otherwise met "minimum education and experience requirements" for valuing the type of property subject to the appraisal, and
• Regularly performs appraisals for pay

"Minimum education and experience requirements" include:

• Successfully completing college or professional level coursework that is relevant to the property being valued, and
• Obtaining at least two years of experience in the trade or business of buying, selling, or valuing the type of property being valued

The Plain English Explanation
More simply stated, to get a qualified appraisal, you must retain an appraiser who holds a professional designation, such as ISA (International Society of Appraisers), ASA (American Society of Appraisers), or AAA (Appraisers Association of America), or someone who has received the requisite schooling and experience.

While these stricter standards are meant to improve the appraisal industry, they have actually shrunk the world of qualified appraisers, for the time being at least. For example, a knowledgeable and skilled expert with years of experience at Sotheby's, but no professional designation or time in the classroom, may no longer be qualified to make appraisals under the new rules.

Further, because the meaning of the new rules needs some clarification, some appraisers may be unsure about whether they're qualified, and they may be unwilling to risk incurring potential penalties. Needless to say, finding a qualified appraiser has become a more daunting task.

Practical Guidance
Your best bet is to hire an appraiser who holds a professional designation related to the property being appraised. Contact the societies listed above for referrals. However, while it may be easy to find such an appraiser for certain types of property, like real estate, it may not be so easy for other types of property.

Here are some other tips:

• Talk to a financial or tax professional for more information
• Obtain documentation about the appraiser's education and experience, and how often he or she conducts appraisals for a fee
• Most importantly, make sure the appraiser is aware of the new appraisal rules, including what is required and the potential penalties

Since their introduction over a decade ago, 529 plans have become to college savings what 401(k) plans are to retirement savings--an indispensable tool for helping amass money for your child's or grandchild's college education. Yet it wasn't until 2006, with the passage of the Pension Protection Act, that the most important federal tax benefit relating to 529 plans--tax-free qualified withdrawals--became permanent. So let's take a look at the overall tax treatment of 529 plans.

Federal Tax Treatment
Income tax--The federal income tax treatment of 529 plans is straightforward. There is no income tax deduction for contributions, but contributions to a 529 plan (prepaid tuition plan or college savings plan) grow tax deferred, which means you don't pay taxes on the earnings (if any) each year. And, in 2006, withdrawals used to pay qualified education expenses (called qualified withdrawals) were made permanently tax free--a huge tax advantage, considering the large sums of money that all 529 plans accept.

However, if you have to withdraw money from your 529 plan for reasons other than qualified education expenses (for medical, housing, or emergency purposes, for example), you'll face a double consequence--the earnings portion of the withdrawal will be taxed at the marginal tax rate of the recipient (either the account owner or the beneficiary) and be subject to an additional 10% penalty.

Gift tax--Contributions to a 529 plan are considered "present interest gifts" that qualify for the annual gift tax exclusion, currently $12,000 per recipient per year. So, annual contributions of less than this amount won't trigger gift tax. And there's a favorable twist: Under special rules unique to 529 plans, you can make a lump-sum contribution up to $60,000, elect to spread the gift evenly over five years (effectively making the gift a series of smaller gifts each $12,000 or less), and completely avoid gift tax, provided no other gifts are made to the same beneficiary during the five-year period.

This feature has made 529 plans a popular tool for estate planning purposes, particularly for grandparents. That's because a married couple can make a lump-sum gift to a 529 plan of up to $120,000 ($60,000 from each spouse), elect to spread the gift over five years, and avoid gift tax--all while removing the money from their estate for estate tax purposes. Plus, if one member of the couple also happens to be the account owner of the 529 plan, they'll have the added bonus of being able to retain control over their money.

State Tax Treatment
Income tax--Unlike the federal government, 31 states offer an income tax deduction (typically capped at a certain amount) for 529 plan contributions--Arizona (starting in 2008), Arkansas, Colorado, Connecticut, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Virginia, West Virginia, and Wisconsin. Kansas, Maine, and Pennsylvania allow a deduction for contributions to any 529 plan; all other states require that the contribution be made to the in-state plan.

As for tax-free qualified withdrawals, all states follow the federal government and offer this tax benefit (except for the nine states that have no income tax). But one state, Alabama, requires that the withdrawal be made from an in-state 529 plan.

Regarding non-qualified withdrawals--those made for purposes other than qualified education expenses--state laws vary, so consult a tax professional who is familiar with the laws of your state. You may owe income tax on the withdrawal. Also, at one time, before the 10% federal penalty was imposed, states levied their own penalties. If a state's penalty isn't officially "off the books," you might be subject to a state penalty too. Finally, gift tax rules differ from state to state, so make sure you understand your state's rules before making a large contribution to a 529 plan.

New Year's resolutions don't all have to be about going to the gym, eating five fruits & veggies a day, or spending less time with Dr. Phil. Here are ten financial resolutions to consider.

1. Get Organized
Set up a records center, perhaps a fireproof file cabinet sectioned into financial categories. Determine how long you need to keep each type of document (it depends on what it is) and make up a master list detailing what's where. Then, tell someone else you trust where to find the list in case of an emergency.

2. Learn More About Your Money
Visit the local library and find the personal finance shelf. While you're at it, pick up a 1-year subscription to a personal finance magazine and enjoy 12 months of education and enlightenment. Also, be sure to frequent the top personal finance websites such as Yahoo Personal Finance, USA Today Money, and Lightship Mutual (a cheap plug, we know.)

3. Analyze Your Cash Flow
Every financial plan begins with a thorough understanding of where money is coming from, and where it is going. In order to be successful--whether you are a struggling young professional or a multi-national corporation--cash flow monitoring is critical. Many banks now provide online spending/budgeting tools for you to use at no additional cost. Actually, it doesn't have to even be that complicated. Many people still use a computer spreadsheet or paper journal to keep track of the money trail.

4. Improve Your "Soft Skills"
This one doesn't seem to fit at first, but your ability to earn income is the lifeline of your financial being. Without income, how can you purchase investments, insurance, and other needs? As a result, you must find ways to increase your professional appeal by improving the skills most employers want. Speak, listen, lead, collaborate...master these traits, and find yourself indispensable to the team.

5. Create an Emergency "Rainy Day" Fund
Aim to establish an emergency fund equal to 3 to 6 months of your living expenses in case you experience a sudden loss of income. You might accomplish this by increasing income with a second job and/or decreasing discretionary expenses. Be sure to find the best savings account to stash this cash.

6. Increase Your Retirement Savings
If you participate in a retirement plan such as a 401(k) or a 403(b), contribute the most you possibly can--particularly if your employer matches some or all of your contribution. Salary deductions are made on a pretax basis, and any investment earnings grow tax deferred until they're withdrawn. And if your 401(k) or 403(b) plan allows after-tax Roth contributions, qualified distributions of your contributions and earnings will be completely tax free.

IRAs also feature tax-deferred growth of investment earnings. Traditional IRAs may help lower your present taxable income if you're eligible to make deductible contributions. Withdrawals (unless you're withdrawing nondeductible contributions) are taxed as ordinary income, however. Roth IRA contributions are not deductible but, like Roth 401(k)s, qualified distributions are entirely tax free.

7. Review Your Investment Portfolio
Is your asset allocation still in line with your investment goals, time horizon, and risk tolerance? Is it time to rebalance your allocation in light of changing market conditions and/or your changing needs? Are you taking appropriate advantage of new investment products? Reviewing your portfolio periodically can help you stay on track.

8. Check Your Insurance
You may want to review the terms of your insurance coverage--not just your life insurance, but also your auto, health, disability, and homeowners insurance. Are you adequately protected, given your circumstances? Is there coverage you really ought to have (such as personal umbrella liability or long-term care insurance), but don't?

9. Update Your Estate Plan
If you have children or a large estate (over the applicable exclusion amount of $2 million for 2008), you should consider reviewing your estate plan. (If your estate is smaller, you should review your plan at least every five years.) Your estate plan should be reviewed in light of certain life events, such as changes in employment, changes in family circumstances (marriages, divorces, births, illness or incapacity, and deaths), or even significant changes (greater than 20%) in the valuation of the estate.

10. Seek Assistance
There are many reasons to work with a financial professional. Ultimately, a qualified financial planner can help you keep all these resolutions--giving you more time to focus on your health, career, friends, and family.