People Worried About Debt 'Should Not Panic'

People Worried About Debt 'Should Not Panic'
The first two months of the new year may see an increase in
the number of those seeking help with their finances, an
industry expert claims.

According to Heather Choudhary, a specialist debt adviser
for the Bradford branch of Citizens Advice, the weeks
following the festive period often see a rise in the number
of people concerned about the various constraints on their
money management. The representative claimed that after
using credit cards to fund their spending over the
Christmas period, this is the time of year when people are
now having to face up to their borrowing.

She told the Telegraph & Argus: "The first wave of people
contacting us about debt is towards the end of January and
February, when the credit card bills start coming through."

Meanwhile, figures reveal that 879 people were declared
bankrupt at Bradford county court over the course of last
year, up from the 843 recorded in 2006. In 2005, however,
such consumers numbered just 671. Ms Choudhary went on to
claim that a couple of years ago a typical person in
serious debt would owe somewhere between 20,000 pounds and
25,000 pounds. However, now the advisory service claims
that it is unsurprising should people come seeking advice
on debts of up to 45,000 pounds.

Such figures suggest that demands for payment on utility
bills, personal loans, credit and store cards, groceries
and other expenses are putting an increasing amount of
strain on homeowners.

For those who are concerned about their ability to meet
various demands on their finances, Ms Choudhary stated that
"the first piece of advice we give is for people not to
panic and not to bury their heads in the sand". She claimed
that there is a sufficient amount of monetary advice that
people who may be worried about being able to make payments
on loans and credit cards can access for free.

The Citizens Advice worker added: "Debt is never just about
owing money, it's connected to bereavement, employment or
relationship break-ups. When people are in debt they feel
full of shame and out of control. People need to be
reassured that when they come to the bureau they aren't
going to be judged."

Matt Barlow, chief executive of Christians Against Poverty,
added: "Christmas is undoubtedly a time of overspending for
many people across the UK and this statistic supports the
testimony of many clients we have helped over the past." He
also said the first thing those who find that they are now
in financial difficulties following the festive season "is
not to panic".

Upon seeking out money management advice, Britons who are
looking to get their finances back on track and get into
the red as soon as possible may wish to consider applying
for a debt consolidation loan. This type of loan could be
particularly useful for those struggling with living costs.
In research conducted by Sainsbury's Finance last year,
day-to-day expenses were revealed to have increased by 4.2
per cent in the week between October and November.

For such consumers, debt consolidation may be a useful in
merging numerous financial constraints into a single
low-rate repayment.

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Payday Loans - The Hidden Trap

Payday Loans - The Hidden Trap
Payday Loans are possibly one of the easiest forms of
credit to obtain but with this 'ease of credit' comes with
a high price tag - interest!!

Originally the form of lending known as "Payday Loans"
originated in the USA and has now landed on the shores of
the UK - spreading at an alarming rate.

A Payday Loan is typically a very short term loan which is
repaid, in full, when you get paid from your employer.
Payday loans are really designed to get you out of a 'fix'
when you find yourself short of money before payday but
they do have an extremely high interest rate attached to
them.

A typical example of this would be that you borrow
£100 but repay £130 or £140!!

Considering that Payday loans are very short term loans
then this rate of interest is exceptionally high indeed.

Now it may just be that you find yourself in desperate need
of a small loan and a Payday loan will fit your
circumstances. What you will need to bear in mind is that
if you are short of money one month and you borrow money in
the form of a Payday loan then you will need to pay the
original amount that you borrowed, plus the interest.

This may have a 'knock-on' effect of then leaving you short
of money again. When faced with that situation you may be
tempted to turn to the Payday Loan option again and this is
where the hidden danger is waiting for you.

Let's say that you borrowed £200 one month and on your
payday you paid back £260. This would leave a
£260 hole in your wages which could temp you (or leave
you no other option) but to use the Payday loan option
again and borrow another £200.

This is the start of a vicious circle that many people find
themselves trapped and the payday loan hidden trap will
have snagged another victim.

Each month when you repay the £200 loan you are paying
£260 out of your wages - this leaves a £260 hole
in your wages - so you borrow £200 again to 'fill the
hole'.

Then the process repeats itself again when you have to
repay £260 on payday - you're trapped in the Payday
loan circle of debt.

The loan company lend you £200 once - it's the same
£200 the re-lend you each month - and for this
pleasure you are paying them £60 each month when you
repay the loan.

Over a 12 month period you will have paid the loan company
£1,200 for basically borrowing one lot of £200.

It is a very harsh reality for many people who
unfortunately have no other option and are unable to get
out of the circle. If you are considering a payday loan
then carefully think about what you are getting in to
before borrowing any money.

If you have no other option and are 100% certain that you
will have enough money to repay the loan without it
affecting the next months finances then a payday loan could
be your only option.

Otherwise don't fall into the payday loan trap. Try and get
through or ask a friend to lend you some money - even if it
isn't as much as a Payday loan company - it will be cheaper
when it comes to paying it back.

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Business Start-Up Costs

Business Start-Up Costs
When you launch your business and incur expenses before
your business is "open for business," then you have
start-up costs. Start-up costs are not deductible until
your business begins. Your business begins when it is
first open for business - meaning it is ready to service
customers.

First, make sure you actually have a business. Here are
nine (9) factors to determine if you really own and operate
a business:

1. You carry on the activity in a businesslike manner.

2. The time and effort you put into the activity indicates
that you intend to make it profitable.

3. You depend on income from the activity for your
livelihood.

4. Your losses are due to circumstances beyond your control
(or are normal in the start-up phase of your type of
business).

5. You change your methods of operation in an attempt to
improve profitability.

6. You, or your advisors, have the knowledge needed to
carry on the activity as a successful business.

7. You were successful in making a profit in similar
activities in the past.

8. The activity makes a profit in some years, and how much
profit it makes.

9. You can expect to make a future profit from the
appreciation of the assets used in the activity.

It's also important to remember that when they begin, most
new businesses lose money. In fact, the average business
will lose money for the first three years. You will want to
make sure you can take advantage of those losses by
offsetting them against your other income. If that happens,
you can roll the loss forward into the future until you
start making money. This is referred to as a net operating
loss.

What are start-up costs? Planning to get the most out of
any new business venture begins with making sure you get
the greatest possible tax advantages for your investigation
costs, start-up expenses, and other organization costs.
These include costs such as advertising, salaries and wages
of employees-in-training, travel and other expenses of
lining up customers, suppliers, and distributors, and fees
paid for consultants and professional services.

How are start-up costs deducted? You may assume that all of
these start-up expenses are deductible as business expenses
in the year you pay them, but that is not the case. Such
expenses are not considered to be business expenses because
they are not incurred in a business that has actually
started. Instead these start-up costs have special rules.

A taxpayer may elect to deduct up to $5,000 of start-up
costs in the tax year that the business opens for business.
The catch, however, is that the $5,000 amount must be
reduced by the amount of start-up expenditures that exceed
$50,000. If an election is made, start-up expenses that are
not deductible in the year the business opens for business
as a result of the phase-out must be ratably amortized over
180 months (15-years) beginning in the month that the
business opened for business.

Who can deduct start-up costs? Another complication with
start-up costs is that they are deductible or amortizable
only by the person who incurs them. If your new business is
going to be a sole proprietorship, that won't be a problem.
However, if the venture is to be a corporation, you can't
personally deduct the costs you incur before incorporation.
Those costs are part of your investment in the
corporation's stock, which is not a great tax position.
This can be avoided through proper planning. For example,
you may want to contribute the funds to the corporation and
let the corporation incur the expenses so that it can
deduct or amortize them.

Are any expenses excluded from start-up costs? It's also
important to know that some expenses are treated more
favorably than the regular start-up costs we have been
talking about, and some less favorably. Start-up costs for
interest, taxes, and research costs usually can be deducted
in the year paid. The cost of tangible property purchased
for use in the business can be recovered by way of
accelerated depreciation deductions over various periods,
depending upon the type of asset, but generally faster than
if considered under the general start-up cost umbrella.

Expansion costs are not start-up costs. If you are
expanding an existing business, rather than starting a new
one, you may be able to deduct the expansion costs
currently.

Important note about start-up costs An election must be
made on the business tax return to properly claim start-up
costs. Be sure to discuss this with your tax preparer.

Warmest Regards,

Tom

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Tom Wheelwright is not only the founder and CEO of
Provision, but he is the creative force behind Provision
Wealth Strategists. In addition to his management
responsibilities, Tom likes to coach clients on wealth,
business, and tax strategies. Along with his frequent
seminars on these strategies, Tom is an adjunct professor
in the Masters of Tax program at Arizona State University.
For more information, visit http://www.tomwheelwright.com