Tag: debt-free

Six Credit Score Myths You Need to Know

If you’re like most people, you know the basics of what a credit score is for and how it works. Your score is a make-or-break determinant of whether you qualify for a loan and there are key things to know, and to avoid, concerning your score. Let’s debunk a few of the myths around credit scoring to put control in your hands, and avoid any potential harm to your score.

CREDIT MYTH #1: There’s only one credit score

There are actually thousands of formulas for calculating credit. Depending on what score your potential lender uses, your score could vary. However, FICO scores are most common, and widely available online.

CREDIT MYTH #2: Checking your credit score can lower your score

Only hard inquiries from lenders can lower your score. When you check your credit score, there is no impact on your credit. Hard inquiries, however, are flags on your account when a lender accesses your credit history, and can lower your score because it indicates you may be increasing the amount of your credit. Do this too often and you can be seen as a risk to financial institutions.

CREDIT MYTH #3: Lowering your debt will immediately raise your score

It depends on the type of debt you pay off, and your credit limits. Paying off debt is important, and often high debt can result in a lower score. Keeping your credit card balances low, for example, can help to keep your score high.

CREDIT MYTH #4: Your job impacts your score

The job you have and how much money you make a month has no direct impact on your credit score. However, the bank or loan company may want to see your proof of employment and a few paystubs to ensure that you have a steady source of income. This can help people who are building their credit score by proving they have the funds available to pay off the loan.

CREDIT MYTH #5: Closing your credit cards will raise your score

Potential lenders are more concerned with how much credit you are using rather than how much you could be using. Closing a credit card could actually lower your score because it decreases the amount of credit you have. Remember, your credit score is all about giving lenders a blueprint for how you manage your money. If you have nothing to show them, they can’t draw up a plan.

As a leading accounting services firm in Cincinnati, Donohoo Accounting Services strives to make our clients feel comfortable discussing their tax situation and finances. Still have questions about your credit score, and how you can improve it? Let’s get you on track! Contact us today or give us a call at 513-528-3982 to schedule a free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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4 Personal Finance Tips To Start The New Year Right

2020 is quickly coming to a close, and many of us will be glad to see it go. Now is the time to get ahead of the game and get your money in order for 2021. Don’t know where to begin? No worries! Here are some helpful tips.

Get Organized

You can file taxes after the new year, so now’s a good time to get all your ducks in a row. In January and early February, you’ll be receiving important documents in the mail including your W2, mortgage interest statement (1098), or student loan interest statement (1098-E.) Most companies, by law, have until January 31 to mail statements, so keep an eye out.

Designate a single location where you’ll keep these documents so they are easily accessible when you’re ready to file taxes. You can use a folder, drawer, box or other container. Put a large “taxes” label on it and use the container for tax-related documents only, not other mail or bills. But you may want to keep it near where you sort mail, so you can immediately put the documents in their home.

Then start gathering other items you’ll need for filing taxes, including charitable contribution and expense receipts. Qualified expenses depend on your situation, but could include expenses related to childcare, medical, work (mileage, supplies, relocation) and education.

Donohoo Accounting Services can help you navigate the complicated tax structure. In addition to income tax preparation, we handle payroll tax prep, tax levies and liens, back taxes, end tax penalties, estate tax return preparation and more.

Make Year-End Charitable Contributions

Many charities do a final fundraising push at the end of the year, so you’ll probably receive solicitations asking for support. If you want to help non-profit organizations while also possibly reducing your taxable income, make your donations by December 31. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year will count in that year – even if the credit card bill isn’t paid until later. You’ll want to make sure the charity is eligible. Many times, the charity will note its “501c3” status, which is IRS speak for tax-exempt. You can also use the IRS Tax Exempt Organization Search. If you live in the Greater Cincinnati area, check out our blog for four great local non-profit organizations.

Take an Assessment of Where You Stand Financially

Now’s a good time to take a hard look at your income, debt, expenses, retirement funds, college and emergency savings. Are you on track to meet financial goals? If yes – great! If no – why are you falling short? To properly move forward into the next year, you need a realistic picture of where you are now. Put pen to paper and write down all the numbers. It helps to see everything in black and white.

Make a Financial New Year’s Resolution (Or Better Yet – Create A Plan You’ll Stick With All Year)

Once you know where you stand currently, you can create a plan for 2021. Perhaps you want an emergency savings fund. You never know when the furnace is going to go out, someone in your family has a medical issue or there’s a company layoff. Experts say you should have enough emergency savings to cover three to sixth months of expenses. Maybe you have all your financial bases covered but want to take an exotic vacation? Set the goal, create a plan and start saving for that overseas beach trip.

Although it’s a busy holiday season, set aside time to get your money in order for the new year. Once you’re ready to file taxes, turn to Donohoo Accounting Services, locally owned and operated by Cincinnati native, Duane Donohoo. Give us a call at 513-528-3982 to arrange your complimentary consultation to see how we can help find the most deductions possible for your personal taxes. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest updates!

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Tips For Budgeting For The Holidays

The holidays are fast approaching and so are the bills associated with them.  Donohoo Accounting has a few tips for budgeting for the holidays.  We are going to start by making a list and then checking it twice, review your receipts from last year to judge spending habits, and shop for bargains once you have an idea of what you must buy and for who you are shopping for.  Should I pay cash or use credit?  Using our tips for budgeting for the holidays will help you decide.

Make a list and check it twice.

A list will help you budget!
A list will help you budget!

Professionals agree that it helps to write down a list of all the people for who you plan to shop before you venture to the stores or turn the computer on. Next, to each person’s name write down your gift idea for that person, and how much you can spend. By doing this you will have a clear idea of your total dollar amount needed to buy the gifts for your family and others.

Review your receipts and bills from last year.  

Don't forget to save your receipts!
Don’t forget to save your receipts!

Reviewing receipts will help give you an idea of the dollar amount you spent last year on the holidays and if you used a credit card how long it took you to pay them off.    Make sure to save your holiday receipts from this year if you do not have the ones from the previous year to watch spending for next year.  The holiday costs add up quickly and being able to see the totals will

Save your holiday receipts from this year and either total them daily or add them up two weeks before the actual holiday.  Expenses add up fast during this busy season.  Seeing your totals will surprise you with a reality check as to how much more you spent this past year on the holidays.

Using credit during the holidays?

Don't go overboard with your credit cards!
Don’t go overboard with your credit cards!

Think twice before you use your credit card this holiday.  If you do decide to use them take only the ones with the lowest interest rates or bonus offers.  After using the credit cards be sure to check for unauthorized charges.  If you do find charges not made by you report these changes to your credit card company immediately.

TIP: Before you go shopping label envelopes with everyone’s name on them and put the appropriate amount of cash into each envelope.  This will help you not to overspend.

Shopping for bargains.

Shopping for bargains can be done earlier than later.  Once you have decided what to buy each person on your list start watching online advertisements and ads.  Shopping from the same retailer can save you money on shipping costs. 

You may have been a last-minute holiday shopper last year, but planning now can help you have a happier, stress-free holiday season this year. If you follow some of these simple tips, you should have a successful and financial stress-free holiday season! Looking for more ways to save money than call Duane Donohoo at 513-528-3982 or visit our website at Donohoo Accounting Services.

 

 

What Are The Basics Of Accounting Methods

What are accounting methods? Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.  These two methods are cash-basis and accrual basis accounting.  These methods both have their own distinctive advantages of keeping corporate record keeping which help keep track of money coming an and out of the business. Donohoo Accounting knows what are the two types of accounting methods and how to utilize the for your business.

 

Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.
Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.

 

CASH-BASIS ACCOUNTING

What is cash-basis accounting? Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account. For example, if a plumber completed a project on December 30, 2018, but doesn’t get paid for it until the owner inspects it on January 10, 2019, the plumber reports those cash earnings on her 2018 tax report. In cash-basis accounting, cash earnings include checks, credit-card receipts, or any other form of revenue from customers.

 

Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account.
Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account.

 

ACCRUAL ACCOUNTING

Does your company use accrual accounting? This method is when you record revenue when the actual business is completed ex. (is when the completed amount of work that was stated in a contract agreement between the company and its client), not when it obtains the cash. The company records income when it produces it, even if the customer hasn’t paid yet. For example, a plumbing contractor who uses accrual accounting records the revenue earned when the job is completed, even if the client hasn’t paid the final invoice yet. Expenditures are handled in the same way.

 

The company records income when it produces it, even if the customer hasn’t paid yet.
The company records income when it produces it, even if the customer hasn’t paid yet.

 

BASIC ACCOUNTING TERMS

  • Equity: The net worth of your company. Also called owner’s equity or capital. Equity comes from investment in the business by the owners, plus accumulated net profits of the business that have not been paid out to the owners. It essentially represents amounts owed to the owners. Equity accounts are balance sheet accounts.

 

  • Assets: Things of value held by your business. Assets are balance sheet accounts. Examples of assets are cash, accounts receivable and furniture and fixtures.

 

  • Liabilities: What your business owes creditors. Liabilities are balance sheet accounts. Examples are accounts payable, payroll taxes payable and loans payable.

 

  • Debits: At least one component of every accounting transaction is a debit amount. Debits increase assets and decrease liabilities and equity.

 

 

While all these terms may seem a foreign language or a little overwhelming they can keep your business finances in order and make tax time a lot easier when it comes time to file.  Making the everyday accounting run smoothly can be done with Donohoo Accounting Services. Call us today for your free evaluation and let us take the stress out of your day-to-day money functions.