Welcome to the Healthy Life Supplement
In this issue:
-- Why a Home Based Business?
Whats the best Home Business for me?
Why Start your own Home Based Business?
In today's rapidly changing economy, many people are realizing that their dream of “having a job with a company forever" is an illusion. Companies continue to downsize and capsize and they are doing it more now than ever before. Even government jobs are not “safe” as federal and state agencies are getting into the act with layoffs and attrition of jobs.
Management positions are shrinking and there is no such thing as loyalty between companies and employees anymore. So sitting around in the same job with the same company does not guarantee any kind of financial stability or security. These workplace circumstances aggravate the already tryingly long commutes in rush hour traffic and the long hours spent trying to advance your position and pay. This doesn’t even take into account the rules, policies and sometimes unfavorable boss you have to comply with everyday.
Finally, if all this isn't bad enough, under recent tax laws employees are shafted more than ever with limits and thresholds for their employee deductions and higher social security tax limits. All this has resulted in more couples working than ever before and, on many occasions, working more than one job. It is now almost impossible to have only one job in the family and make ends meet! Today, many households need two if not three incomes just to survive.
Sadly, having more than one job does not always increase the size of your bank account in the amount that is necessary. Why? Mainly because of tax laws. A good example of this was well illustrated in 2004 by Jane Bryant Quinn in her Woman's Day article on "How to Live on One Salary."
Where the Money Goes
Ms. Quinn's example assumed that one spouse was earning $40,000 per year and this was the only income for the family. The situation wasn't working. The couple had more month than money. (Sound familiar?)
For our example let us assume the husband was the one working outside the home and the wife was working at home taking care of the house and 2 kids. To make life easier let’s call him Jim and her Barb.
To try and make things work financially, Barb went out and got an administrative job for $15,000 per year. You would think this would improve the family's financial situation, but when Ms. Quinn examined the economics of getting this extra income, the results were startling!
Barb had to pay federal and state taxes on her new income. Since they filed jointly, the family's combined income was what established their tax bracket. She paid $4,500 in new taxes, most of which was non-deductible, for federal and state income tax.
Barb had social security withheld from her paycheck at the rate of 7.65 percent, which amounted to an additional nondeductible amount of $1,148 being extracted from her salary. She also had to commute to work 10 miles a day round trip, which is probably conservative for most people. This resulted in nondeductible commuting costs of $696. (Ms. Quinn’s story was from 2005 so just think how much more this would be with today’s gas prices.)
Barb also had some child care expenses, which give a partial tax credit. Ms. Quinn figured that the amount spent over and beyond the tax credit was $4,250 per year. (Again, this figure is fairly low for the area of the country I live in. For me, daycare for 2 children is at least $1000 a month. Even with the tax credits this adds up to more than $4,250.)
Barb also ate out each day with colleagues, spending an average of $5 per day, five days a week. This results in a nondeductible expense of $1,250 per year. (I would love to know where she ate for only $5!)
Now that Barb has a job, she has to have professional clothing; this means a hefty dry cleaning bill. Ms. Quinn assumed that Barb's increased expenses here amounted to an extra $1,000 per year, nondeductible, of course.
Finally, with both spouses working, Barb wasn't in the mood to cook dinner every night. They bought more convenience foods and ate out more frequently. This resulted in increased food costs of a nondeductible $1,000 per year in minimum.
Add it all up and Barb's take home pay was a paltry $1,156 a year, for which she had to put up with a daily commute, an unpleasant boss, and corporate hassles.
No wonder more and more people are starting home-based businesses. In fact, there are currently over a hundred million people working from their homes and the number is growing every day. Working from home has become and will continue to be one of the greatest mass movements in the U.S. in the coming years.
A Home-Based Business Makes more than "Cents", it can make dollars too!
There are many reasons why so many people are favoring home-based over traditional business.
There is no commute (you work out of your home), you are your own boss, there is much lower overhead compared to starting a traditional business, no employees (or few), tax advantages instead of tax increases, and far fewer government restrictions. It is for these reasons, according to Entrepreneur magazine, that 95 percent of home-based businesses succeed in their first year and achieve an average income of $50,250 per year with many earning much more.
There are really two sets of tax laws in this country.
One is for employees, and it allows deductions for individual retirement accounts, 401(k)s (if you have one set up by your company), interest and property taxes on your home (which some in Congress want to do away with ), and charity.
Then there are the laws for home-based business people who conduct their business either full-time or part-time. They can deduct, with proper documentation, their house, their spouse, and even children (by hiring them), their business vacations, their cars, and their food with colleagues. They can also set up a pension plan that makes any government plan seem paltry by comparison.
For Barb—and for you—the meaning of all this is simple:
Barb earned $15,000 in salary as an employee, but took home only $1,156. She could have netted the entire $15,000 had she earned it in a home-based business!
This is an increase of almost 13 times her take-home pay as an employee.
By having a home-based business many of your everyday expenses become deductible. This concept is known as "redirecting expenses." With a legitimate home-based business, you can now deduct some of the expenses that you incur anyway.
What does this mean for you?
If You Don't Have a Home-Based Business, Start One!
In addition to all the benefits mentioned above, you can subsidize part of your home business with your tax savings. So while you are growing your home-based business you can use tax savings to grow it bigger. If your home-based business produces a tax loss in the first year or so, you can use that tax loss against any other income you have. It can be used against wages earned as an employee, dividends, pensions, or interest income-or you can use the loss against your spouse's earnings if you file a joint return.
If the tax loss exceeds all your income for this year, no problem. You can carry back the loss two years and get a refund from the IRS for up to the last two years of income taxes paid, or you can carry over the loss twenty years. You read it right: You can offset up to 20 years of income!
For example, if you earn $50,000 in your current job with some company and you start a home-based business that generates a tax loss of 10,000, you only pay tax on $40,000.
You can never lose a properly documented business deduction as long as you run your legitimate business like a business with a bona fide business purpose and have an honest expectation of profit. Make also sure that all your expenses are ordinary and necessary and reasonable. If its required for you to do business it can be deductable.
A home based business is a great financial opportunity and the light at the end of the tunnel for many of us. The tax advantage alone can make a home-based business the single best financial move you could ever make.
Now for you next question,
Can You Succeed In a Home-Based Business?
Research has constantly shown that it is rarely the business that determines success or failure. It is usually the business owner. Why does one person succeed and another fail at the same business?
The answer is usually very simple and can be summed up with just two words: Knowledge and Action.
Some people love the benefits of having their own business, but they don't take the necessary action to maintain a business. The result is business failure.
Some people believe the hype that they see on the internet or late night TV about having a business and making money without doing any work. Money just magically shows up. Again lack of knowledge and ACTION. And again business failure.
Then there are the people who are always working. They take action but still fail. The reason is that they are not taking the correct actions, the knowledgeable actions that will bring the desired results. Again, business failure.
If you want to grow palm trees, you don’t set up your business in Alaska. No matter how hard you work at it you won’t have great success. But move to Florida and things will definitely improve.
The point is that most people get very excited about starting their own home-based business. They see how it has made some other guy a millionaire and so they jump without looking. They start a business without all the necessary knowledge.
Quite often you can start a home business with very little upfront money so its easy to ‘jump’. But imagine you were going to open a restaurant or a daycare. These are large undertakings and you would do some research upfront to make sure it would work and you would stick with it even when it started out slow. (As all new businesses do).
You would stick with it because you took the time to do your research and you have invested time and money into it so you can’t just quit at the first rough patch.
However, since many home businesses are so easy to start, many people quit before they acquire, through experience, the knowledge they need to really make it work. All businesses take time to grow and make money. The advantage of many home businesses is that they allow you to start with little money down, and without quitting your current job. You have the time to grow and learn.
You just need to determination to stick with it. And don’t forget, you are getting substantial tax breaks so even when it doesn’t seem like you are making money you really are.
And now to the BIG question…..
What Business Should I Start?
Network Marketing or MLM are one of the best ways to produce a great income.
An MLM business opportunity is quite often misunderstood.
Did you know that it is possible start an MLM business and create a major second income that continues to increase over time while working at home? How about doing this with a small initial investment and even doing it while only working part time?
I can tell you honestly that it is possible. In fact, with persistence and commitment, this income could soon replace your current full time income. It could even create a lifestyle of the rich and famous.
What if it worked for you like it has worked for so many others?
When was the last time you recommended a good book, restaurant or movie to a friend? How often do you do that? Probably pretty often, right?
But, when was the last time the publisher, restaurant or movie producer sent you a "royalty" check for the referral?
Well, despite the way things usually are, the idea behind what is now the fastest growing home based business trend in America and around the world, Network Marketing, is that if you get paid for recommending things you like, use and believe in, you'll do this more and more! And, you'll probably find some others that want to do the same thing.
That's it in a nutshell.
What if you found a great product or service and you loved it so much you decided to go into business marketing it?
You earn a small commission for the ongoing purchases of those you refer to this product or service, and you're also paid a small commission when you introduce this concept to others, and they refer people.
Pretty ingenious, huh?
And, the best part is that this concept can create true, passive, residual income for you and your family. And, you can touch the lives of hundreds and even thousands of other people.
Many people just don't understand the concept of Network Marketing. Let me explain the way this works and then think about this a little as you evaluate your options within our industry, or, as you explain the concept to others.
The concept of a MLM business opportunity consists of three major components:
Time Leverage, Residual Income, and A System of Duplication
This is the ability to get paid month after month on the work that you do plus the work that others do.
A good analogy that you are already familiar with is the franchising industry. In franchising, the franchisee, or one who purchases the rights to do business using a well-known business name such as McDonald's, pays a royalty fee every month to the franchiser, or parent company. It's always a percentage of the profits earned.
The parent company, or McDonald's, has incredible time leverage. The more McDonald's stores they have around the world, the more money they make.
But, the parent company certainly doesn't do all of the work. If they have 5,000 stores, each open 18 hours a day, 90,000 hours are worked daily on their behalf.
The concept works in much the same way with our business system, except you don't have to pay a royalty fee each month!
For instance, let's say you start your own Network Marketing business and begin by investing five hours per week into your business. You introduce your business system to Mike and begin working with him. He also puts five hours a week into his business. You now have 10 hours per week working on your behalf, although you are only putting in five hours yourself.
If you and Mike each bring in a new partner, who each commit to five hours, you will soon be benefiting from 20 hours per week. Remember, your actual time involvement is only five hours each week.
Repeat this process every week and by the end of the first month, you have forty hours each week working on your behalf. At the end of the second month, over 640 hours will be invested into your business each week, but not all by you. You are only putting in five.
Do you see the beauty of time leverage?
In network marketing, we are paid for opening "outlets" and teaching those "outlets" to be successful.
And, remember, franchising was thought to be a scam in the '70s, when it first began.
This is the ability to get paid over and over for the work that you do one time. It's also called "royalty pay."
There are very few businesses or industries today that pay residual income.
Musicians, authors and insurance sales people are a few professions that do earn a residual income.
If you were to write or record a popular song, each time that song played on the radio, or a CD was sold, you would receive a commission, or royalty payment.
Residual income in Network Marketing is income you continue to earn based on efforts you put forth initially. This income is based on the sale of products and services. And, these products must continue to generate repeat sales.
This is one reason why "consumable" products are the most effective in Network Marketing. Consumable products are those items that are bought, used up and then replaced, over and over again.
If you are marketing a product that is a onetime purchase product, you will have a harder time generating residual income.
Residual income is desirable in Network Marketing, because this is what allows you to put forth a lot of effort in the beginning, and reap the rewards of that for months and years to come!
And, by building an organization of people working toward a common goal, you can ensure a strong residual pay-out that will last for years. This is why it is important that you understand this pay advantage, and invest your effort, energy and time in other people.
Earning residual income requires a few things - first that you take action to get momentum going in your organization.
Second, you continue building on that momentum, and teach others to do the same.
Finally, you learn and develop leadership skills that will provide the foundation that supports your entire organization.
People follow people, and leadership skills are developed. Leaders are created, not necessarily born.
In the beginning, you have the "privilege" of working lots of hours for a little pay. In the end, you have the "joy" of working little hours for lots of pay.
Get started and then build on your efforts each and every month. Be a leader of others and watch the residual income roll in.
Duplication and Geometric Growth
Another exciting concept, and probably the most exciting concept!
Have you heard the "Penny a Day" story? This is a good illustration to get you thinking about the power of this geometric growth.
Let's say you start on the 1st day of the month with 1 penny in your bank account. Now, you are going to double it every day for the rest of the month.
Any guess about how much you will have in your account on day 30, or, day 31?
Well, here you go -
Day 1 - 1 cent
Day 2 - 2 cents
Day 3 - 4 cents
Day 7 - 64 cents (hmmmm)
Day 14 - $81.92 (getting a little more interesting)
Day 21 - $10,485.76 (getting A LOT more interesting!)
Day 30 - $5,368,708 (I'm definitely interested!)
and you can do the math on Day 31!!
See the power of geometric growth and duplication?
Duplicating yourself means teaching someone else to do what you do. When the two of you each teach another person, you duplicate it again, only twice. And so on, and so on, and so on!
Think back to time leverage and see how duplication multiplied the time that was being invested into your company. Now not only can you multiply time but also earnings. This is how network marketing truly pays off.
By yourself you can only do so much, earn so much. But as a team working towards the same common goal you can go as far as you want. Take a look at the penny story one more time to see how fast things can add up.
Learn to duplicate the success of others.
Duplicating the strategy of others is much quicker and more effective than going to the school of hard knocks.
It is also known as modeling, which is well-illustrated by the way The McDonalds Corporation blazed a trail to success that many have since followed.
In the early 1950's McDonald's and other start-up companies discovered that they could grow many times faster than the conventional firms through franchising. Instead of the company investing millions of dollars to build new stores, they let independent franchises do it for them.
It seemed like a great idea, but at first no one figured out how to make it succeed on a consistent basis; therefore, the media attacked relentlessly and continually. News articles featured destitute families who had lost their life savings through franchising schemes. Virtually every state attorney general in the U.S. condemned the new marketing method. Some congressmen even tried to outlaw franchising entirely.
Over the years, however, Ray Kroc and his management team at McDonald's developed a turnkey franchise business team at McDonald's franchise. The newfound success-from the system-turned public perception of franchising around. Today, virtually every franchise business models-to some extent-the franchise business system created by McDonald's, making franchising one of the most respected ways of doing business in the world.
Modeling is simply learning what other successful people have done to achieve success in a specific area, and then doing the same thing. Someone said that "education is the shortcut to experience." With modeling, you literally leverage your own learning with the collective years of learning through experience of many others. Modeling the success of others saves both time and money and reduces frustration and stress.
The light at the end of the tunnel, for you and millions of others today, is the financial opportunity that starting your own business offers. If you have one going already, then make sure you are enjoying the many financial advantages to which your smart choice entitles you. The tax advantage alone can make a home-based business the single best financial move you could ever make.
If this sounds good to you and you would like to know more about creating a home office, contact me. I can help you and train you. You are not alone.
I hope you were able to find something interesting or useful in the newsletter and you leave a little better educated than you came in.
If you would like to know more about anything you read today please contact me. I would love to help.
I look forward to hearing your comments and questions. If you have a topic you would like addressed in future HealthyLife Supplements, please let me know.